In order to pay for the European recovery and to limit the bill for the Member States, the European Commission is counting on a accumulation of new sources of its own income, such as a levy on non-recycled plastic or a carbon tax at the borders.
The European Commission will put a battery of legislation on the table on Wednesday to enable a joint economic recovery after corona. There is radio silence over the total amounts, how much of this counts as transfer and as loan and the distribution of all jars among the Member States. Member States will not be able to bring out the calculators to measure the invoice until Wednesday afternoon, when the plans are known.
The majority of the European budget is financed by contributions from the Member States based on their gross domestic product (GDP). However, the EU countries are already deep in their pockets for national corona measures. And the GDP of all Member States is expected to suffer a severe contraction this year. That is why, more than ever, the Commission is playing out an old trump card: give Europe its own resources. European sources of income avoid Member States having to dock or argue more about where savings can be made.
The digitax, a tax on the income of tech companies that France has been advocating for years, is coming back on the table.
Own resources rhetoric are not new. For example, already 80 percent of customs duties on non-European products collected in all ports go to the EU budget. In February, at the failed summit on the European multi-year budget, a proposal was tabled to further limit Belgium’s customs revenues to 12.5 percent of the levies collected.
The European Parliament has been working for its own European income for decades. But every plan, such as a European tax on financial transactions, is vetoed and ends up in the forgetfulness. This time will be different, for two reasons. There are plans for new sources of income that can yield a lot of money. In addition, the Commission will ask the Member States to raise the ceiling for own European resources. Using this margin, the Commission, with the AAA rating of the European budget and additional guarantees from all Member States, can raise money from the market to finance a temporary recovery fund of at least EUR 500 billion. A carbon tax at EU borders on the import of contaminated products can bring quite a bit.
In its first proposal for a multi-annual budget for 2021-2027, the Commission already proposed some European ‘green’ sources of income. Any country could transfer a tax on non-recycled plastic to Europe. Member States would also transfer the higher revenues from pollution rights trading in recent years to the EU budget. Both proposals come back on the table, even though the enthusiasm of the Member States was limited, because everyone started calculating. The income from emissions trading (ETS) now goes to the Belgian regions. They do not like to see them disappear to Europe without an internal Belgian ‘compensation’. German Chancellor Angela Merkel also does not want to know.
In recent decades, Europe has also been tearing at a plan to calculate the tax rate for companies in the same way, without harmonizing corporate tax rates. She is now drawing a more feasible map: a tax on large companies that are active throughout Europe. The digitaks, a tax on the income of tech companies that France has been advocating for years, are also being brought back to the table.