EU: new sources of income still unclear to finance collective borrowing 

The European Union plans to endow itself with new sources of income to repay the massive loan which will be used to finance the economic recovery in order to lighten the burden on member states, but many uncertainties surround their adoption.

Debt repayment must begin from 2026, at the end of the multiannual financial framework (2021-2027) negotiated by the 27 during a marathon summit.

At present, the main source of income for the Union comes from the national contributions of the Member States. The amount varies from year to year: in 2018, they represented 77% of revenue (65.9% of payments made on the basis of gross national income and 11.1% from VAT revenue). Added to this are customs duties and other miscellaneous sources.

Discussions on taxation are always difficult because they are taken unanimously.

– The plastic tax, the most advanced –

The tax on non-recycled plastics is the least controversial. The EU is counting on an implementation from January 1, 2021.

Tight schedule, but encouraging precedent: the decision to ban single-use plastics was taken in just six months.

This tax will be paid by member states “according to the weight of non-recycled plastic packaging waste, with a call rate of 0.80 euro per kilo”, with a mechanism to avoid excessive contributions.

The European Commission expects relatively stable revenues over the period 2021-2027, between 4 and 8 billion euros per year.

But these revenues are set to wane with the progression of recycling in the EU.

– Carbon revenues, for a “sustainable” Europe – 

A carbon “tax” (or “carbon border adjustment mechanism”) to avoid price differentials on products manufactured in regions where environmental legislation is more permissive, and a review of the European carbon market (or system of emissions trading, ETS): one goes hand in hand for a “sustainable and competitive” Europe, assures EU chief executive Ursula von der Leyen.

The Commission must present “in the first half of 2021” a proposal on the adjustment mechanism, long supported by France, for an introduction “no later than January 1, 2023”.

But its elaboration will be complex, if the EU wants to respect the rules of international trade.

The long failed carbon market has already been reformed several times, and has helped stabilize the price of carbon at more than 20 euros. It charges for large energy consuming facilities (power plants and industries).

The expected revision plans in particular to extend it to the air and maritime sectors. But no timetable is specified.

Germany welcomed the idea very coolly, as it has already made provision in its own energy transition plans to allocate the ETS revenues that are due to it.

According to the Commission’s estimates, the carbon tax could bring in between 5 and 14 billion per year and the extension of the carbon market coverage around 10 billion per year.

– The tax on digital giants, a political challenge –

A proposal on a “digital license” is to be brought forward in the first half of 2021, with a view to implementation in 2023.

The Commission estimates that a digital tax on companies with an aggregate annual turnover of over € 750 million could bring in up to € 1.3 billion per year.

Such a fee would be created “mainly for political and equity reasons”, notes an official within the Commission.

It should meet resistance from countries that host the headquarters of these large companies in favor of an encouraging national tax system, like Ireland.

– A tax on financial transactions postponed –

A sea serpent in European discussions, such a tax has never succeeded in rallying all the EU countries over the past decade.

In their conclusions, the 27 briefly mention this option in the context of the multiannual budget that will follow (after 2027) and in which “the Union will endeavor (…) to set up other own resources, which could include a tax on financial transactions “.

This could prove to be very interesting financially. According to MEP Pierre Larrouturou (S&D, left) it could bring in between 57 and 60 billion euros per year.

Source: EU: new sources of income still unclear to finance collective borrowing – Boursorama

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