Member States Reject EU Tax

by Ulrika Lomas, Tax-News.com, Brussels

11 August 2010

European Union member states have come out against the European Commission's latest proposals for some forms of taxation to be levied and collected directly by Brussels.

The European Budget Commissioner Janusz Lewandowski intends to present ideas next month which are intended to reduce EU member states' contributions to the EU budget, and he has suggested that Brussels could levy direct taxes on financial transactions, carbon emissions or aviation to raise additional funds. However, his comments, made in an interview with Financial Times Deutschland, have prompted familiar worries from governments over tax sovereignty.

Unsurprisingly, UK Treasury Minister Lord Sassoon has said that his government "is opposed to direct taxes financing the EU budget." But even the more euro-enthusiastic countries of Germany and France have been quick to reject the idea of direct EU taxes; the German finance ministry has said that such an idea would contravene the German government's coalition agreement which forbids "an EU tax or EU involvement in national taxes," while a French government minister said the proposal was "ill-timed."

Currently, the EU's budget, which this year is set at EUR122.9bn, is funded through a combination of value-added tax receipts, import duties and direct contributions from member states, a system which has led to resentment in some of the larger member states, which don't see why they should end up indirectly subsidizing public projects in the newer and poorer member states.

In a Berlin speech late last year, EU President Herman Van Rompuy suggested that the possibility of financial levies at European level "needs to be seriously reviewed."

The UK, France and Germany have announced a degree of coordination in the levying of taxes on the banking industry, but these countries are likely to want to retain control over the revenues that these taxes generate.

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