Monday, July 19, 2004

Taxing times

They simply do not give up. Ever since Spinelli, who in 1942 mooted a European federal government with its own taxation powers, the idea of a European tax keeps popping up. And no sooner is it batted down, up it comes again.

The latest idea comes from Michaele Schrayer, budget Kommissar, who is suggesting a European tax on petrol, introduced by 2014 as a "genuinely European tax".

She is urging member states to support the creation of "a main fiscal resource based on energy, VAT or corporate income tax" although she does concede that this would have to be offset by decreases in national rates. Also on the cards is the old chestnut of an EU levy on aviation fuel.

This highly federalising move is being promoted by EU Kommissars as a means of making EU funding "more transparent", for which the commission is prepared to court unpopularity. "The proposal reflects the nature of the EU as a union of member states and citizens by clarifying the link between the taxpayer and the EU budget," Schreyer says.

It would end rows over the individual EU membership dues paid by national treasuries and economies, and "…help us move on from the sterile debates about member states net contributions by ensuring that resources are collected across the EU as imposed and not simply from national treasuries," she adds.

Nevertheless, commissioners still have enough grip on reality to admit that a "fully tax-based system is not realistic at this stage of EU integration". "The fiscal resource would be introduced progressively," said a commission spokesman.

Meanwhile, in an attempt to break through member states’ reluctance to accept harmonisation of corporate taxes – another ambition high up on the wish-list – the commission is prepared to consider allowing some states to go ahead on their own. Amazingly, this idea is being sold on the basis of "boosting competitiveness".

The plan is to invoke "enhanced co-operation" procedures, with France and Germany forming a core of at least eight EU member states, which could then deal with taxation measures between them by qualified majority voting. Once core is up and running, the hope is then that other countries might join, achieving the commission objective in gradual stages. You really do have to admire its persistence.

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