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Briefing item
 

A new own-resources system by 2014

Budget - 22-03-2007 - 18:30
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The Budgets Committee is proposing a reform of the own-resources system which would above all emphasise equality between Member States. There would be a second stage, starting in 2014, based on a yet-to-be-determined system of levies, although this would not be a real "European tax".

With the European Commission due to publish its initial proposals for the revision of the budget in a few months' time, MEPs express their views on the "revenue" side of the Community's finances in an own-initiative report drafted by Alain LAMASSOURE (EPP-ED, FR).  The budget review, scheduled for 2008-09, will deal with both revenue and expenditure. MEPs in the committee believe the current system is complex, utterly incomprehensible to the public and not transparent - hence the need for reform.
 
Stage one: equality, simplicity and solidarity
 
In the first, transitional, stage the system would be based on the GNI resource, as proposed by Finland in 2004.  This resource is less visible to the general public but is more equitable in relating contributions to the general level of prosperity. The British rebate would be abolished by 2013.  Through the abolition of the VAT resource, the United Kingdom would "benefit" from the loss of its rebate. As to the Common Agricultural Policy, the committee proposes introducing compulsory co-financing (by the Member States at national level) of agricultural spending in the EU-15.
 
MEPs are aware that such an outcome is likely to be acceptable only as part of a global negotiation process which also covers expenditure.
 
A number of principles would underpin the system in this initial stage. The first of these, "equality between Member States", should ensure that no Member State enjoys any budgetary privileges.  Another principle - "solidarity and equal dignity" - would ensure that bargaining and privileges are eliminated.
 
This initial stage could enter into force as soon as an agreement is ratified, guaranteeing the transitional nature of the system, which would remain in force until a genuine own resource is created.
 
Stage two: a genuine own resource for the European Union
 
The new system will, under no circumstances, grant the European Union the right to levy taxes.  Fiscal sovereignty will remain with the Member States who might, however, authorise the Union for a limited period (to be revoked at any time), to benefit directly from a certain share of a tax, as happens with regional or local authorities in most Member States.
 
The new system "must not increase overall public expenditure nor the tax burden for the citizens".  If it directly allocates part of a tax to the European Union, "an equivalent reduction would have to be made elsewhere".
 
MEPs in the committee are calling for the new system to be introduced from 2014, with a "transition period" to guarantee "a smooth phasing-out of the old financing system".
 
Here too a number of principles would underlie the new own resource, the declared aim being "to revive the letter and spirit of the founding treaties". These principles would be: full respect for the fiscal sovereignty of the Member States, fiscal neutrality, no changes to the order of magnitude of the EU budget etc.
 
British rebate
 
The committee stresses that the current system, with its four different resources and its several different rebate mechanisms, be they general ones in favour of one Member State such as the British rebate, or special ones such as rebates in financing other rebates, is excessively complex, lacks transparency and is completely incomprehensible to European citizens; underlines that it does nothing towards fulfilling the requirement of establishing a direct link between the Union and its citizens.  The Budgets committee deplores the fact that the 2005 Brussels European Council, instead of creating a simpler and more transparent system, made it even more complicated and obscure by leaving the UK correction, the "British rebate", in principle intact and adding further derogations and corrections benefiting other Member States.
 
No EU tax
 
The  report states that the time for a genuine new European tax may not yet have come, although the Member States could decide to grant the EU such a tax in future.
 
However, the new own resources system should be based on a tax already in existence in the Member States, the idea being that a certain percentage of an existing tax would be fed directly into the EU budget as a genuine own resource, thus establishing a direct link between the Union and the European taxpayer.
 
Among the taxes envisaged for this purpose are:
- VAT
- excise duties on motor fuel for road transport
- excise duties on tobacco and alcohol
- taxes on corporate profits
 
During the discussions within the EP, other possible fiscal resources were identified, including taxes on share trading, on financial transactions (Tobin tax) or on savings.
Alain LAMASSOURE (EPP-EDFR)Rapporteur : 
The future of the EU's own resources
Procedure : own-initiative
Debate : 28.03.2007