EC proposes EU-wide tax program

RIGA - The European Commission on June 29 proposed introducing EU sales and financial services taxes as part of an overhaul for the next EU budget, reports AFP. The suggestion received instant criticism from Britain. A Downing Street spokesperson slammed the trillion-euro 2014-2020 budget for an “unrealistic” increase and emphasized that Britain will also oppose the new EU taxes which will introduce additional burdens for business and damage EU competitiveness.
The bombshell proposals from EC President Jose Manuel Barroso aim to allow the bloc’s executive arm to raise its own funds rather than depend so heavily on funding from the EU member states.

The European Union needs “an innovative budget” where “every euro spent reaches its target,” pointed out Barroso as he presented the outline of the next seven-year budget, totaling 1.02 trillion euros in commitments.
According to the plan, the revenue raised directly through new measures such as EU VAT and a financial transactions tax would reach 30 billion euros per year and cover more than 40 percent of the EU budget, said European Commissioner for Financial Programming and the Budget Janusz Lewandowski.

Contributions from member states, which currently account for 76 percent of total revenue, would drop to around one-third. The remainder is funded through customs tariffs at the EU borders, a portion of VAT gathered by member states, and taxes paid by EU civil servants.
The new VAT would be levied across the 27-nation bloc, with a fixed one percentage point raised by governments and transferred directly to the EU from 2014.

To top up the EU executive’s ability to levy resources, the commission suggested a ‘Tobin’-style tax on financial transactions in Europe - likely to be opposed by Britain, France and Germany, which favor an international, rather than European, tax.
“We think that this should be done on a global level,” said a British diplomat.
Rowing over the budget is likely to continue until 2012, with the European parliament also likely to step in with its opinion on spending.

Compared to the current 2007-2013 budget, Brussels is suggesting a five percent hike.
Barroso, who also announced a change in spending priorities, said “all governments want Europe to do more.” He said that less cash would go to the Common Agricultural Policy, in favor of trans-EU networks, telecommunications and transport.
The proposed budget “contains some good ideas on simplification, re-prioritization of spending and new sources of revenue,” said analyst Sony Kapoor.

But the Commission also stepped into contentious ground by suggesting a sweeping reform of EU ‘rebates,’ the system of paybacks to certain member states which notably include a huge rebate to London negotiated decades back by Margaret Thatcher.

She had argued in the mid-1980s that “I want my money back” because Britain was paying too much in comparison to its wealth, while much of the budget went to farmers on the continent, especially in France, with little to London.
Scrapping rebates for “a lump sum” would also affect Germany, the Netherlands, Austria and Sweden. “London will continue to protect the rebate. Without it, the UK’s net contribution as a percentage of national income would be the largest across the EU, twice as large as France’s and Italy’s, and almost one and a half times bigger than Germany’s,” said the representative of Downing Street.