The Commission’s proposal to fund the next EU budget with corporate and tobacco levies is hanging by a thread, after a Commission presentation triggered pushback from EU countries.
In July, Commission President Ursula von der Leyen touted the “most ambitious ever” EU budget for 2028 to 2034, with €2 trillion to shape the bloc’s competitiveness and defence ambitions without completely neglecting farmers and regions that usually consume two-thirds of EU cash.
But nine EU countries are already running deficits high enough to warrant EU sanctions, and both the sheer size of the budget and any new income sources need unanimous support from the EU-27.
In a meeting with the Commission last Wednesday, EU countries may very well have already shot down two of the five new proposed income sources, expressing severe concerns on a €122 billion revenue plan.
“There is a certain irony that the EU Commission is proposing a new-own resources for its Next Generation budget based on the oldest taxes in the book,” one EU diplomat said, referring to the proposed Corporate Resource for Europe (CORE) and Tobacco Excise Duty Own Resource (TEDOR) revenue streams.
Key countries including Germany criticised CORE, which would generate around €6.8 billion annually by taxing companies with over €50 million in annual turnover and a permanent establishment in the EU, for impairing the international competitiveness of EU companies, and questioned if the tax was legal.
No one was open to, or even positive to the corporate tax, one EU diplomat said.
CORE covers “only a very small fraction” of net turnover at maximum 0.1%, and is “not a tax” but legal according to EU treaties, a Commission official said during the meeting.
Several delegations questioned the Commission’s CORE revenue forecast, given that companies from the financial sector have not yet been taken into account.
14 EU countries, including Italy, Greece, Austria, Sweden, Portugal, Romania, opposed TEDOR, which would supply around €11.2 billion annually by taking 15% of national income from tobacco levies.
The countries argued any new EU-level income should relieve capitals of their contributions and administrative burdens, rather than transfer funds from national budgets.
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As Euractiv reported in July, TEDOR’s estimated €11.2 billion a year assumes a revision of the Tobacco Taxation Directive (TED), which is not certain to maintain its current form nor to enter into force by 2028.
TEDOR can in principle be based on the current legislation, but this would imply lower revenues, a Commission official said. Countries asked if they would have to compensate for such budgetary shortfalls.
CORE, TEDOR and other proposed income sources will be debated by EU finance ministers on 10 October.