Transcript presentation

Route to reform of the EU’s
budget revenue
FAIRTAX H2020 conference :
Vienna, 19 September 2016
Dr Giacomo Benedetto
Jean Monnet Chair in EU Politics
Contents
• Structure of the Budget
• Crisis and challenges
• History and Packages
• British rebate and its lessons
• Reform of Own Resources
Structure of EU budget 1
• Multiannual Financial Frameworks
• Annual Budgets
• Own Resources: Revenue
• Traditional Own Resources
• VAT call rate of 0.3
• GNI % transfer
• Rebates
Structure of EU Budget 2
• Outside the Budget:
• The Juncker Fund (EFSI): leverage
• European Stability Mechanism (ESM)
• European Development Fund (EDF)
• Trust funds
• De facto budget, not 1% GDP, c. 3% GDP
• Not all net balances the same – contrast agriculture
and research
Crisis of the Budget
• Redistribution vs. Public Goods
• Need for flexibility for emergencies
• Ambition for digital and energy markets
• Emergency of:
• Euro crisis and Greece
• Migration
• Brexit
• Net Balance, British-type demands
• Budget vetoes and delays
• But British rebate abolishes itself?
Budget packages
• 1970: permanent finance for agriculture, some power
for European Parliament , enlargement to UK
• 1984: rebate for UK, VAT call rate to 1.4%,
enlargement to Spain and Portugal
• 1988: after Single European Act, double of ERDF
spending, increase spending from 1.0 to 1.3% GNP,
cap VAT contribution at 55% GNP, 5-7 year planning
periods
Interinstitutional conflict
• Commission and EP in Luxembourg Treaty 1970
wanted power to set own resources without votes of
national parliaments, with only 2/3 majority in Council
• Commission in 1975 Brussels Treaty wanted to give EP
power to set VAT call rate by 3/5 majority
• Commission and EP wanted EEC to be able to borrow
British rebate 1984: 1
• EP demands:
• rebate only in form of extra spending (support of Commission)
• annual approval of rebate by Council and EP (support by Commission)
• 3-year sunset clause and one-off payment
• new revenue to be decided by EP-Council co-decision
• Commission proposal:
• Rebate only if EAGGF (agriculture) > 33% spending
• Rebate to be 33% of net contribution, NOT 66%
British rebate 1984: 2
• Council decision:
• Rebate in unconditional cash, NOT through budget spend
• Value: 66% (not 33%) of net contribution
• Permanent but conditional on 1.4% VAT call rate and enlargement to
Spain and Portugal
• Any change set by unanimity and ratification in national parliaments
• No incentive to reduce agricultural spending
• No sunset clause – other than minimum 1.4% VAT call rate
Over time, smaller rebates for Germany, Austria, Netherlands, Denmark,
Sweden. Net balance mentality enshrined.
Relaunch the EU with a new budget?
Own Resources Reform 1
• High Level Group on Own Resources
• Escape net balance; find EU taxes?
• EU responsiveness through independence of budget?
• Interparliamentary conference on own resources, 7-8 September 2016
• Report published in December 2016
• Avoid pitfalls like the British rebate, consider historic
advice of EP and Commission, use sunset clauses if
necessary
Own Resources reform 2
• Reflection of single market: CIT, VAT, Carbon Tax
• Harmonized tax bases, technical ease: VAT and maybe
CIT
• Technical difficulty: FTT
• Political difficulty: VAT
• Steering effects: FTT, Carbon Tax
• Political demand: FTT, Carbon Tax, CIT
Own Resources reform 3
• Rebates on gross contributions not net contributions,
carbon tax effect disproportionate on less prosperous
member states
• Rebate for Poland, Czech Republic and others:
• Call it a fund, to co-finance existing policy
• Or forget co-financing, make it conditional only on not cross-subsidy of
coal or carbon intensive sectors
Own Resources reform 4
• Aviation tax rather than kerosene tax
• Aviation benefits from single market
• Environmental/climate change impact: Pigovian effect (Krenek and
Schratzenstaller 2016)
• No significant tax on flights, could be collected NOT via national
treasuries
• A Carbon-based Flight Ticket Tax (Krenek and Schratzenstaller 2016)?
• Or a flight tax levied by an EU agency?
• Unfair impact on geographically isolated countries: Malta, Cyprus,
Greece, Ireland, Finland?