The Irish Times

Brussels faces battle on new pan-EU revenue sources

Commission aims to raise at least ¤13bn a year to service post-pandemic borrowing

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Brussels is grappling with deep divisions among member states over ways of raising fresh revenue to repay the unpreceden­ted debts the EU is taking on via its recovery fund, in a new challenge to the EU’s coronaviru­s-fighting plan.

The European Commission is working on a three-pronged approach to raise ¤13 billion¤15 billion of revenue a year to service the borrowing that it will start to issue this year under the ¤750 billion recovery plan. This will be based on an expansion of the EU’s emissions trading scheme, which would account for about half the revenue raised for the commission, along with a new carbon border adjustment mechanism and a levy on digital companies, according to a draft summary .

However diplomats said the commission will find it difficult to win member state support for the proposals, not only because of the complexity of designing the taxes and levies, but also because of reluctance in many capitals to share revenues with the EU. This is despite agreement among EU leaders last year that the commission would need “own resources” to repay the debt that they agreed to allow it to issue as part of the groundbrea­king deal on the recovery plan.

‘Come up with proposals’

“The only thing we agreed in July last year was there would be a proposal by the commission, and the commission has every right to come up with proposals,” said one senior EU diplomat. “But it is quite clear that many member states do not want new own resources... There are all kinds of difficulti­es. This is not going to be solved soon.”

“We will battle again,” said another EU diplomat, in reference to the disputes over own resources that dogged last year’s negotiatio­ns on the bloc’s recovery fund. “We are thinking about it very much.”

Own resources are in effect revenue streams directly allocated to the EU’s central budget – they currently include a share of customs duties and value added tax.

While France championed the creation of new revenue streams during last year’s negotiatio­ns, such moves were viewed with suspicion by other government­s, with fiscally conservati­ve countries such as Denmark and the Netherland­s among those most staunchly opposed.

Diplomats said that one of the toughest battles to come would be over plans for a digital levy that are now intertwine­d with rejuvenate­d internatio­nal talks. Brussels is planning, as instructed by leaders last year, to come forward with a proposal by the end of June, so that the levy could be introduced by 2023.

But many government­s are growing increasing­ly cautious. Diplomats said EU finance ministers from numerous countries, including Germany, warned Brussels at a meeting last month that any plans for the digital levy should not interfere with work under way at global level within the OECD.

The OECD efforts were galvanised this week by new proposals from Joe Biden’s administra­tion aimed at forging global consensus on taxing multinatio­nals.

Digital levy plans

EU diplomats said that Brussels’ digital levy plans would target a wider array of companies than the measures under discussion at the OECD, which focus on large multinatio­nals. Government­s have received assurances from Paolo Gentiloni, the EU economy and taxation commission­er, that he will make sure the plans fully respect the OECD work.

Diplomats underscore­d that other proposals will face political pushback too. Any extension of the emissions trading scheme, which requires polluters to buy tradable allowances, will encounter heavy opposition from the affected industries and within member states that are less advanced in the transition towards a low-carbon economy. – Copyright The Financial Times Limited 2021

‘‘ There are all kinds of difficulti­es. This is not going to be solved soon.

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