Brussels preparing proposals for EU-wide tax

BERLIN/ BRUSSELS Mon Aug 9, 2010 3:53pm BST

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BERLIN/ BRUSSELS (Reuters) - The European Union executive is preparing proposals for an EU-wide tax that could fall on bank transactions or air travel, a senior official said on Monday, prompting immediate opposition from Berlin.

With European governments under financial pressure, officials in Brussels are looking for alternatives to finance a growing EU budget, the vast majority of which goes on subsidising farming and funding structural projects such as road building, while 4 percent pays for the EU's civil service in Brussels.

On Monday, Janusz Lewandowski, the European Union's commissioner in charge of the 140-billion euro (116 billion pound) budget, said he would outline in September how a new EU tax might look.

"There are various options that would not affect the finance ministries and have a link to European policy like a financial transaction tax, CO2-emission auctions and an aviation scheme," Lewandowski told Financial Times Deutschland newspaper.

"A transaction tax can bring in a big amount of money," he said. "The others will only contribute a smaller part to the 140 billion euros a year we are spending."

Within hours of Lewandowski's remarks being published, the German government had criticised the idea.

"The demand to introduce an EU tax contravenes the position underlined by the (German) government in its coalition agreement," a spokesman for the country's finance ministry said.

"The government's reservations are about the instrument of an EU tax as such," he said.

INOPPORTUNE MOMENT

A spokesman for Lewandowski said the commissioner was about to embark on a tour of Europe's capitals to talk to national leaders in Rome, Paris and London about the plans, adding that he would be "surprised" if anyone objected.

Asked what specific revenue-raising measures could be included in the European Commission's proposals, which are due to be presented on September 21 or 28, the spokesman was non-committal.

"Anything that relates to the budget in terms of income, and also spending, will have to be in there," spokesman Patrizio Fiorilli told a news conference on Monday, explaining Lewandowski's remarks.

"The Commission must present a proposal that is as concrete as possible and the climate now is to try and reduce member states' contributions, that is it."

Karel Lannoo of the Centre for European Policy Studies, a Brussels think tank, however, said now was not a good time to introduce a new tax.

"Many member states are going through drastic spending cuts," Lannoo said. "For any EU tax to be introduced you would need to address all the different ways European countries raise revenue. This is a can of worms and this is not an opportune moment to open it."

Repeated past attempts to craft a tax for all of the bloc's 27 countries have failed because many politicians believe it would surrender too much power to Brussels, or put the European Union in the position of acting like a mega-government.

The cool reception in Berlin contrasted with Lewandowski's optimism that "new developments" would overcome previous widespread opposition to such a tax.

"The public is open to tax the financial industry, via a financial transaction tax or bank levies, this is quite popular," he told the newspaper.

"Another possibility could be to tax what is directly connected to the single markets, to the open sky, open travel. So an aviation duty could be something to be charged on a European level. The third possibility ... are the CO2 auctions."

The European Commission declined to be drawn on how much money an EU tax could raise. Last April, Commission officials outlined how a bank levy could raise up to 50 billion euros across the EU.

(Editing by Susan Fenton)

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