Decision on own resources opens up further sources of revenue.

JP – 09/2020

At the extraordinary European Council of 17-21 July 2020, the EU leadership agreed on a comprehensive package totalling € 1,824.3 billion, including the multiannual financial framework (MFF) and exceptional reconstruction measures under the "Next Generation EU" instrument amounting to € 750 billion. With its legislative opinion on the decision on own resources on 16 September 2020, which was adopted by 455 votes in favour, 146 against and 88 abstentions, the European Parliament has now given the green light to the Corona reconstruction plan.

The decision on own resources is the legal basis for the sources of revenue of the EU budget. The decision to adjust own resources became necessary for finding new sources of revenue for the EU budget to at least cover the cost of the recovery plan. The new decision on own resources also includes the Commission's authorisation to raise funds on the capital markets. Going beyond the actual decision, Parliament's opinion calls for a legally binding timetable for the introduction of these new own resources, as well as sustainable financing of the recovery plan, which could otherwise be at the expense of future generations.

Potential for additional own resources

In connection with the raising of additional equity capital, the introduction of taxes for multinational corporations was brought into play as an optional measure, especially if they are largely responsible for environmental pollution. Valérie Hayer (RENEW, FR), co-reporter, made the same comment: "We will make sure that IT giants, tax evaders, major third country polluters and others who benefit from our internal market pay their debts without contributing fairly to our prosperity and the protection of our environment."

Uncharted territory under contract law

Irrespective of the permissibility of an EU tax in principle, it is undisputed that current contract law does not yet include fiscal competence. The Commission's credit authorisation is also a new instrument. However, there are already EU bonds but their volume has so far been very limited and their revenues are in turn used for loans and not for non-repayable grants.

Further steps to implementation

Now that the Parliament has approved the decision on own resources, the EU Council can adopt it promptly. In order to allow the recovery plan to be implemented as soon as possible, the decision on own resources, once adopted by the Council will be submitted to the Parliaments of the 27 Member States for ratification in accordance with their national constitutional law.

Effects on social security

"Next Generation EU" - assuming the ratification of the decision on own resources by the Member States - can have a positive impact on social security in the medium term. By making use of this financially powerful instrument and by strengthening and stabilising the internal market accordingly, macroeconomic effects can lead in particular to a support of the revenue side for the social security funds. The increase in important EU programmes to accelerate ecological and digital change could also relieve the expenditure side in the long term through indirect effects, e.g. by reducing health burdens.