The European Commission is expected to adopt on Wednesday 22 December a proposal paving the way for the creation of three new own resources for the EU budget, which have become essential since the implementation of the EU Economic Recovery Plan after the damage caused by the Covid-19 pandemic.
Indeed, the revenues from the new own resources introduced after 2021 will be used for early repayment of Next Generation EU loans starting in 2028.
The three new own resources envisaged by Commissioner for Budget Johannes Hahn are definitely an own resource based on the EU Emissions Trading System (ETS) and a Carbon Border Adjustment Mechanism (see EUROPE 12780/3).
There are some that believe, according to a source in the European Parliament, that the Commission should come up with a third new own resource, in the form of “a digital tax or levy or some kind of single market corporate tax”.
The three revenues envisaged are therefore the following:
- a clean resource based on the EU Emissions Trading System (ETS). This is the EU carbon market, through which installations (companies) buy or receive emission allowances. The Commission has made several proposals to modify the ETS, which the proposal on new own resources will have to take into account, such as the plan to extend the system to emissions from other sectors (including maritime transport) starting in 2023 (see EUROPE 12762/1);
– a carbon border adjustment mechanism. The mechanism provides for a tax on any product imported from a country outside the EU that does not have a carbon pricing system, such as the EU ETS. The aim is to adjust the price of imported goods as if they were produced in the EU and to ensure fairness for European companies;
- a digital levy. It would apply to digital business activities. An international agreement has been reached on a global minimum tax rate of 15% (see EUROPE 12824/10). The proposal should take account of this agreement.
José Manuel Fernandes (EPP, Portugal), rapporteur on the ‘revenue’ side of the EU budget, told EUROPE on Wednesday 8 December: “We are expecting the Commission to present a basket on new own resources, namely the Emissions Trading System and the Carbon Border Adjustment Mechanism”.
He says he is eager to “find out the amounts predicted” by the European Commission that would be released from these new revenues. “We know the Commission wants the same as us: sufficient resources to pay for the Next Generation EU debt. That is equivalent to about €15 billion per year until 2050, starting with the next MFF (2028)”, says Mr Fernandes.
He also believes that the introduction of new forms of direct revenue is “vital to enable the EU to recover from Covid-19, without burdening future generations with debt”. He recalls that these new revenues for the EU budget are foreseen in the Interinstitutional Agreement of 16 December 2020 on budgetary discipline, cooperation in budgetary matters and sound financial management as well as on new own resources (https://bit.ly/3EBuel4 ).
Protecting against budget cuts. Mr Fernandes reiterated that without new own resources, the EU budget will either have to be cut significantly to pay off the debt or require higher contributions from EU Member States, “which means increasing the contributions of citizens. Both solutions are incompatible with the purpose of Next Generation EU: as the name itself indicates, it should pave the way for the future generations, not to burden them with debt”.
On the chances of reaching an agreement in the EU Council on a sensitive dossier, Mr Fernandes said he was convinced that in the end, “the EU will reach a just solution. After all, unanimity in the EU Council and ratification in National Parliaments are required”.
Entry into force in early 2023. “Three new own resources will be proposed, which will better align the revenue side of the EU budget with the Union’s priorities”, confirmed an EU source, who specified: “Following the applicable procedures under the Treaties and subject to approval by Member States in accordance with their respective constitutional requirements, these new own resources are envisaged to be introduced by 1 January 2023. The EU Council will deliberate on these new own resources by 1 July 2022 at the latest in view of their introduction by 1 January 2023, as agreed in the Interinstitutional Agreement”.
The Commission will, on the basis of impact assessments, propose new additional own resources, which could include a financial transaction tax or a new common corporate tax base. The Commission will have to present a proposal by June 2024.
A new own resource already applies retroactively from 1 January 2021, consisting of a share of the revenue from national contributions calculated on the basis of the weight of non-recycled plastic packaging waste, as provided for in the Own Resources Decision.
The Commission originally had until June 2021 to make these proposals on the basket of new own resources and Parliament has expressed concern about the delays in implementing the ‘roadmap’ on new revenues (see EUROPE 12766/17).
The Commission had decided to postpone until the end of December to take account of the agreement on international tax reform (see EUROPE 12780/13). (Original version in French by Lionel Changeur)