Direct taxation by the EU on the horizon

What do President Marcron, Parliament President Tajani, former Commissioner Monti and many others have in common?

GD/AD – 11/2017

All these politicians are united in their wish to open the way for the EU to have a direct source of revenue. The common denominator is a change in the way the EU is financed. Currently, the EU is financed by membership contributions, which limits the financial sovereignty of the EU as an institution due to a lack of direct funding (comparable to the restrictive laws in Germany governing associations). Instead, it is proposed that the EU levy taxes directly without interference from the Member States. A financial transaction tax and carbon tax (CO2) are both being considered. 

Parliament writes a long wish list

Several weeks ago, there was a European Parliament resolution calling for a larger EU budget. This will fund EU tasks such as migration, border security, digitalisation and the European Defence Union. Many Members of the European Parliament and the President of the European Commission, Juncker, like others are calling for a special Eurozone budget line. 


Observers believe there could be an even bigger funding wish list on its way. Despite the lack of media reporting about the debt and euro crisis, these problems still have not been solved. Public debt continues to rise, with the exception of Germany and, to a limited extent, some smaller euro countries. Hardly anyone is speaking about stringent debt reduction.  

EU Labour Authority as ‘test case’

At the same time, several social security systems in euro countries have run into financial difficulties. From their point of view at least, it would be reasonable to consider ‘communitising’ payment burdens. Brussels would then take on the welcome role of saviour of social systems which can no longer be guaranteed through subsidiarity, and it would win support in countries which have fought against the alleged ‘policy of austerity’. 

Establishing an EU Labour Authority, as a kind of ‘test case’, has been a recent topic of discussion, even though there has not been any explicit mention of who will take on responsibility for providing unemployment benefits. This could likely change just as quickly so that other social institutions, which are often underfunded, would expand the recipient list of transfer payments.