MEPs want the EU to have its own financial sources for the next long-term budget instead of relying mainly on member state contributions.
On 14 March, Parliament kick-started the EU’s debate on what the next long-term budget, starting 1 January 2021, should look like. MEPs adopted Parliament's position that among other things wants to change how the EU is funded, paving the way for a system where the EU has more of its own resources and moves away from being almost exclusively dependent on the contribution it receives from EU countries.
Belgian ALDE member Gérard Deprez, one of the lead MEPs dealing with the revenue side of the budget, said: “We as the Parliament said that we will not accept a new [long-term budget] without own resources. We are determined.”
Together with Polish EPP member Janusz Lewandowski, Deprez has written a report on own resources, which is part of Parliament's position on the next long-term budget, also known as multi-annual financial framework. The report proposes new sources of revenue for the EU, including a corporate income tax, environmental taxes, a financial transaction tax at the European level, a special taxation of companies in the digital sector, and a reform of the VAT system.
Current system too complex
Deprez said the main reason for Parliament’s firm position on having own resources is one of the original treaties that laide the basis for the EU. According to the Treaty of Rome, the European Economic Community was to be financed by national contributions for a transitional period only and subsequently by a system of own resources.
The Belgian MEP added that the Parliament believed the current system based on member states' gross national income was "illogical and incomprehensible" as well "complex" due to rebates and exemptions.
At the moment member state contributions account for 70% of the EU's long-term budget, while 12% comes VAT and 13% from other revenues, such as taxes paid by EU staff of fines paid by companies in breach of competition laws.
Lewandowski said he would like to have at least one third of the EU's budget financed by own resources: “Our philosophy is to say that each own resource should reduce the gross national income contributions so that you don’t get the impression that you are paying twice.”
Reviewing the revenue
Both MEPs stressed that the own resources should be introduced gradually rather than overnight. New own resources would have to be re-evaluated often, particularly if they are introduced as an incentive, said Lewandowski.
For example, if a tax on plastic bags was introduced to discourage their use, it could lead to fewer bags being purchased, meaning the EU would receive less revenue from the tax over time. To avoid volatility, the MEPs call for several own resource streams that are checked regularly and adjusted as needed.
On 2 May, Jean-Claude Juncker, president of the European Commission, will outline his institution's proposal for the next budget to the Parliament. Lewandowski said he expected the Commission three or four new own resources. “We don’t know what the candidates are, but for sure there is again an attempt to modernise the revenue side of the budget.”
"Opportunity for change"
During the negotiations in 2011, Lewandowski was the EU’s budget commissioner with the responsibility of reaching an agreement on the long-term budget Back then he also proposed ideas for own resources. “But there was a difficult climate around own resources," he said. "Last time there was an austerity climate.” This time he said he saw an “opportunity for change”.
Fellow MEP Deprez agreed that there was a different climate now in the EU with better public finances in many countries and a restored public trust in the economy.
During Parliament’s April plenary in Strasbourg, French president Emmanuel Macron emphasised in a debate that France wants the EU to not only have a bigger budget, but also its own resources.
Deprez said: “It's the ideal moment to relaunch the European project and say what we want to do together. It's a new situation. This isn’t always the case so we have to take advantage of it."
- In addition to the annual budget, the EU sets a long-term budget for a period of at least five years
- The current budget, covering 2014-2020, amounts to €963.5 billion
- The European Commission will present its proposals for the next long-term budget on 2 May with the hope that a deal can be wrapped up before the European elections in May 2019