1. Home
  2. Press
  3. IW News
  4. No taxes for Europe
Share this article:

or copy the following link:

The link was added to your clipboard!

EU budget IW News 26. January 2017

No taxes for Europe

The European Union is funding its budget mainly through contributions from its Member States. This could change: Italy's former Prime Minister Mario Monti suggests that the EU should collect its own taxes in the future. But that would not be a good idea.

Share this article:

or copy the following link:

The link was added to your clipboard!

On Friday, the ECOFIN Council will discuss the report that the High Level Group of Experts, chaired by Mario Monti, has recently published. There is, in any case, a need for action: the Union's current financing system needs to be simplified. In addition, the United Kingdom, a large net contributor, will leave the EU.

EU taxation is not an alternative, however. As long as the EU budget is financed mainly through contributions from the Member States, national governments have an interest in an economically effective distribution of EU funds. The introduction of a European tax would weaken this interest, as EU revenues would flow directly into the Brussels budget. There is only an incentive to redeploy and reprioritize funding and finance projects which are of rising interest to the whole of Europe, when the EU budget restriction meets the fiscal interest of the Member States. Projects of rising interest are a common foreign and security policy and a common refugee policy.

At the moment, the EU's annual budget consists mainly of three sources: the first one is the EU’s single own source of income, namely revenues from customs duties levied on the import of goods from third countries into the single market; the second source is the national contributions which are based on the value added tax (VAT) and are paid by the Member States to the Brussels budget; and the largest share of the budget stems from contributions paid by the Member States to the EU according to their gross national income (GNI). Last year, GNI contributions accounted for almost EUR 104 bn, with an EU budget of EUR 143.5 bn.

A reform of the EU funding should abolish the contributions based on the VAT. The EU budget should only be based on the revenues from customs duties and the GNI contributions. The latter have the great advantage that they follow the economic performance of an economy.

Share this article:

or copy the following link:

The link was added to your clipboard!

More on the topic

Read the article
Jan Büchel / Barbara Engels in European Liberal Forum External Publication 4. July 2022

The Importance of the Data Economy for Europe’s Digital Strategic Autonomy

European companies need to have the ability to store, process, use, and share data securely and autonomously, for example by using cloud services based on agreed quality standards, values, and legislation.

IW

Read the article
Hubertus Bardt / Klaus-Heiner Röhl / Christian Rusche in The Economists' Voice External Publication 21. June 2022

Subsidizing Semiconductor Production for a Strategically Autonomous European Union?

The COVID-19 pandemic has highlighted the vulnerability of international supply chains and the dependency of the economy of the European Union (EU) on goods from non-EU countries. The scarcity of microchips that has persisted since the COVID lockdowns has laid ...

IW

Content element with id 8880 Content element with id 9713