28 June 2017

New Europe: EU-27 tax could limit Brexit’s budget hole

Brexit, according to Budget Commissioner Günther Oettinger will tear a €11 billion financing hole in the budget of the EU. The European Commission is already assessing its strategy on how to address the issue.

According to the European Commission’s take on the strategy that the bloc should follow, the EU should consider introducing EU-wide taxation in an attempt to overhaul its budget and cover a more than €10 billion annual hole in its common account.

But according to the EU executive, things are not black and white, as Brexit is expected to “remove some obstacles to reform on the revenue side of the EU budget,” along with the loss of an important financial contributor to the EU budget.

The Berlaymont has therefore published an EU reflection paper, complementary to what the European Commission president Jean-Claude Juncker presented last March, examining new sources of revenue for the EU-27 era. Such sources should be conceived “not only to finance part of the EU budget but also to accompany its core policies,” said the Commission.

Furthermore, with the departure of the UK, the rebate, or the “Thatcher rebate” as Commissioner Oettinger refers to on Wednesday, will become obsolete. This discount was obtained by Margaret Thatcher in 1984, knocking an annual 5 billion pounds off the UK’s contribution. Still, the UK provides about €12 billion on a net basis. “The gap in EU finances arising from the UK’s withdrawal and from the financing needs of new priorities need to be clearly acknowledged,” and, therefore “the EU budget faces a tough challenge to fund more with less.” [...]

Taxation policies and FTT revisited?

According to the European Commissioner for Regional Policy Corina Cretu, the EU does not necessarily want to impose new EU taxes. “We do not want EU taxes, but the participation in existing taxes is a consideration,” said Cretu, suggesting that the EU should consider realistic proposals to expand the EU’s own resources, as the budget at this form is currently not able to adapt to the challenges.

Common energy or environmental taxes could be applied to ensure a level playing field between companies and contribute to the global fight against climate change. According to the Commission, any new own resource should be conceived not only to finance part of the EU budget, but also to accompany its core policies.

Brexit may put another “failed” option at the European Council level back on the table. The financial transaction tax (FTT), a proposal that is still discussed at enhanced cooperation level with just a bit more than half of the EU-27 member states still participating in the conversations, can pair Common Consolidated Corporate Tax Base (CCCTB) in a way that the single market could be reinforced.

Full article on New Europe

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