EUROPEAN DIARY:Despite concerns about future funding, any plans to increase resources through EU-wide taxation will not pass muster, writes ARTHUR BEESLEY
THE EUROPEAN Commission in a new report sets out options for European taxes to increase the union’s “own resources” and lower its reliance on the treasuries of member states.
There’s page after page of it, all set down in loving detail, but it’s already a non-runner.
The prose is inert although it could be from the pen of Dickens. Each charge is described in outline before qualitative and quantitative assessment, all done in neutral terms with great exactitude and rigour. Strict fellows with names like Gride or Gradgrind come to mind, their days spent in a damp office dreaming up oppressive schemes to add guineas to guineas.
Financial sector taxation? Perfectly sly, sends all the right messages. Auctioning greenhouse gas emission allowances? Just the thing. Aviation charge? Inspired. EU VAT? Better still. EU energy levy? Terrific. EU corporate income tax? The best yet. More of this, chaps, we need more of this. Tax them until they bleed.
By chance, your correspondent ran into someone who knows the ways of the EU executive much better than he. Before coffee was ordered he said defeat on these questions was inevitable. “It will never happen.”
Germany is against, France too, and many other countries to boot. Even our friends on Merrion Street are on record as saying “an EU-wide tax would not be acceptable to Ireland”.
That settles that then? To a point, but not fully. A legion of uncertainties about the EU’s future funding remains unresolved.
The commission is trying to stimulate debate about how Europe raises and spends money, €122.9 billion this year, as an exceptionally challenging negotiation looms on the EU’s budget for the years after 2014.
It is a perennial controversy. MEPs voted only last week to raise the 2011 budget by 5.9 per cent but governments want to limit the increase to 2.9 per cent.
At issue in a commission budget review is something a little less immediate but no less significant: how to reform a system perceived as opaque, excessively complex and lacking in basic fairness. Dozens of questions arise.
Is there too much spending on farmers? In a time of grave financial weakness, should more be done to transform the European economy towards growth-oriented industries?
Should there be more spending on energy research, climate change and transcontinental infrastructure? Do the Germans contribute too much? Do the Poles receive too little?
The list is endless and every country has its own pet concerns.
For Ireland, for example, the key issue in this debate is whether Brussels cuts agriculture spending.
Drafts of the commission paper referred unambiguously to “a further significant reduction in the overall share of the EU budget devoted to agriculture, freeing up spending for new EU priorities”.
Last week’s document did not go that far, but suggested moving away from farm income-support and adopting environmental and climate change objectives instead of economic and social aspects of the Common Agricultural Policy.
More ominously, commission chief José Manuel Barroso spoke of the “need to further shift the policy towards the challenges we face” such as competitiveness, innovation, environmental protection and climate change.
All this is in line with Barroso’s grand project to fundamentally revitalise the European economy by 2020.
It is clear, however, that he faces a battle over the size of the CAP between countries that are big beneficiaries of the policy, such as France, and others such as the Netherlands which are not.
Are EU taxes the solution to such tensions?
European law established the principle of own resource taxation as far back as the Rome treaty in 1957, but it’s an idea whose time may never come. For one thing, governments like as much control over tax as they can muster. For another, the imposition of European taxes would reduce the power member states wield in Brussels. You won’t find many takers for that.
By raising again the own-resources question, however, Barroso has put it up to member states to confront the true scale of the EU budget dilemma.
As Brussels puts the austerity squeeze on member states, there are no easy answers, yet the implicit message is clear.
If they opt against EU taxes, as they will, member states will have to come up with the cash themselves and deal with the political challenge posed by competing demands for ever more scarce resources.
This is where matters stand at present, with 76 per cent of the current budget derived from national contributions based on gross national income. Twelve per cent comes from import duties and the bulk of the remainder comes from a levy on national VAT receipts.
For the vivid illustration of the problems this causes, look no further than the current controversy over the 2011 budget.
MEPs are flexing muscle, but parliament president Jerzy Buzek maintains they are acting “with a great sense of responsibility” and are aware of the difficult fiscal situation in member states.
Such assertiveness goes down very badly in national capitals as governments throughout Europe struggle to balance their books. “Conciliation” talks to settle this one will be difficult. The same goes for the wider budget debate.