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Tax-Raising Powers Would Aid Crisis Recovery, EU Says

May 27, 2020, 4:05 PM

The European Union renewed its push to be given direct tax-raising powers as part of the efforts to recover from the economic crisis caused by coronavirus.

The 27-nation bloc should be able to raise its own revenue, the European Commission said in a proposal Wednesday. Its plan would put tariffs on carbon-intensive imports, a tax on digital companies with annual earnings of more than 750 million euros ($825 million), and a tax on companies “that draw huge benefits from the EU single market and will survive the crisis.”

Currently the EU budget is financed by member-country contributions, import duties, and a percentage of each member’s national value-added tax rate. Giving tax-raising powers to the EU itself has been discussed for some time, but is controversial and resisted by some governments as impinging on their sovereignty.

EU national governments would have to approve any common EU taxes unanimously, and the European Parliament would have to sign off.

According to the proposal, the pandemic’s impact and the need to manage repayment of the proposed recovery package “strengthens the case for fundamental reform of how the EU budget is financed.”

The commission’s proposal—part of a massive economic recovery package that includes grants and low-interest loans—gave little detail but said the three sources could raise up to about 25 billion euros annually, to be spent on common EU initiatives intended to speed up crisis recovery.

The new levies could be imposed alongside a proposed EU charge on plastic waste, already proposed in 2018, and some of the revenue from the EU’s emissions trading system, according to the plan.

Wednesday’s ramped-up EU budget proposal for 2021 to 2027 is designed to reboot the EU economy post-virus in line with the bloc’s long-term decarbonization goal. Total EU spending over the period should be 1.85 trillion euros ($2.04 trillion), the commission said.

The new budget proposal would replace the 2018 plan, which set the budget at 1.3 trillion euros. That plan has spent two years in unresolved discussions between the European Parliament and the Council of the EU, which represents the governments of member countries.

Check out Bloomberg Tax’s country-by-country roadmaps covering direct and indirect tax developments.

To contact the reporter on this story: Stephen Gardner in Brussels at correspondents@bloomberglaw.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com

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