1. Dr Giacomo Benedetto Jean Monnet Chair in EU Politics
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

2. Contents
Structure of the Budget
Crisis and challenges
History and Packages
British rebate and its lessons
Reform of Own Resources

3. Multiannual Financial Frameworks Own Resources: Revenue
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

4. De facto budget, not 1% GDP, c. 3% GDP
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

5. 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?

6. 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

7. Interinstitutional conflict
Commission and EP in Luxembourg Treaty 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

8. British rebate 1984: 1 EP demands: Commission proposal:
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%

9. 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.

10. Relaunch the EU with a new budget?

11. High Level Group on Own Resources
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

12. Reflection of single market: CIT, VAT, Carbon Tax
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

13. 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

14. Aviation tax rather than kerosene tax
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?