Leading MEPs propose VAT, carbon tariff for EU budget

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Three prominent MEPs proposed to completely revise the structure of the EU budget yesterday (6 April), replacing national contributions with the EU's own resources, primarily through a 'carbon tariff' on imported products and a value-added tax. EURACTIV France reports.

Proponents included the chair of the European Parliament's budget committee, Alain Lamassoure (European People's Party; France), the head of the liberal group, Guy Verhofstadt (Belgium), and the chair of the special committee for the post-2013 budget, Jutta Haug (Socialists & Democrats; Germany).

Their objective is to support the idea of a European budget, included in the EU treaties, which for the most part would not be based on contributions from the member states.

The MEPs argued that the current system leads to acrimonious debates between national governments regarding the "return on investment" on their respective contributions.

In short, they want to replace the debate over taxation with one over the "right level" to apply a tax, that is, whether it is most appropriate at the local, national or European level.

Lamassoure, who has spearheaded previous budget reform efforts, complained that "the distribution of national contributions is nine pages long and has 41 exceptions".

"Not one elected official, not in the European Parliament nor in the national parliaments, is able to explain why contributions have reached this level. The system is obscure, completely undemocratic," he added.

No change in tax burden or MEPs' role

The MEPs co-authored with scholars from Centre for European Policy Studies and the think-tank Notre Europe a detailed report on how to finance EU own resources.

Their proposed scenarios aim to maintain the EU budget at its current level (€126.4 billion per year), but replacing national contributions with EU taxes. Suggestions include a 1% value-added tax on consumption (to raise €50 billion per year) and a 'carbon tariff' on imported products (€48.5 billion).

Beyond this budget, the three MEPs also propose to finance EU investments through 'project bonds'.

According to them these proposals have the merit of leaving all fiscal competency with the member states while not increasing the budget. There was no suggestion of allowing the European Parliament to impose a new budget.

"Any new financing system for the EU should not increase the fiscal burden on citizens. We will need on the contrary to introduce new instruments that will substitute existing mechanisms," Haug stressed in a statement.

In 1957, the European Coal and Steel Community was financed by contributions from these industries. Today 75% of the EU budget relies upon sums provided by member states.

The budget of the EU has a legal ceiling of 1.24% of GDP but, projected to be valued at €126.4 billion in 2011, this will be just under 1% of the EU's GDP.

The European Commission will make proposals in June for the financing of the 2014-2020 period. It seems highly unlikely that the Commission will propose a budget entirely financed by own resources.

  • June 2011: Expected proposal of European Commission on financing for 2014-2020 period.

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