Alfredo De Feo European pratictioner and researcher

The presentation of the High Level Group on own resources (HLGOR) report in January 2017, ends, at least at the political level, a very rich and intensive phase, where the own resources of the European Union have been on top of the European political agenda. EU own resources have attracted the interest of scholars who have contributed to the understanding of the potential impact of the various hypotheses.hlgor-mario-monti-report

The report delivered to Presidents of the three Institutions is the results of discussions internal to the group itself, contributions of national governments and Parliaments, support and contributions from experts. The report, adopted at the quasi[1] unanimity, in spite of the political and culture differences of the Members of the group, confirms that the realism of the proposals contained, proposals which go beyond the strict own resources issue.

The HLG report on own resources has three merits:

  1. The recommendations could be implemented without a Treaty change.
  2. The aim of the proposal is not to increase the expenditure, but to replace the current system;
  3. All recommendations respect the fiscal sovereignty of the Member States and do not seek to create a new supranational power of the Commission.

Those who expected the magic solution are probably disappointed, the report presents neither new tax, nor perfect tax, but it presents a solid examination of the most recent proposals

The taxes examined are all linked to an EU policy and divided into three clusters:

  1. the current resources, which could be continued because their well-functioning – traditional own resources, customs duties and levies, and the GNI based resources;
  2. the taxes linked to Energy, Environment and fight against the climate change – in particular a CO2 levy, proceeds from the European emission trade system, an electricity tax, a motor fuel levy (or excise duties on fossil fuels in general), and indirect taxation of imported goods produced in third countries with high emissions’ ;
  3. The taxes linked to the Single market: ‘a reformed VAT-own resource (replacing the existing one), an EU corporate income tax, a financial transaction tax, and other financial activities’ tax’.

The most interesting part of the report concerns the spending part of the budget. The report highlights two revolutionary principles the European Added Value and the Subsidiarity. Are all EU policies respecting those two subversive principles? or do they respond to the redistribution of resources to the Member States? A Reform of own resources can only be acceptable as part of a wider reform where the expenditure are focused on the new priorities, with European added Values, and responding to the Citizens worries.

What next?

The report leads to the 10th (missing) recommendation: EU Institutions should have been invited to open a reflection on the Added Value and Subsidiarity of the all current policies ahead of establishing the proposals for the new financing priorities post-Brexit. Brexit puts pressure on EU Finances because of the likely reduction of about € 10bn per year.

The timeline is favourable to reflections and preparation. The uncertainties linked to Brexit and elections in several EU countries make impossible, even thinking, to adopt serious reforms in the next two years. This period should be usefully used for an in-depth analysis of EU policies, debates at the national and European level, outside the EU bubble. Universities and Research centres could play a crucial role in this phase. Proposals and options should be on the table of EU Leaders around April 2019 when negotiations to adapt the current MFF for the year 2020 and adopt the new priority policies to be financed post 2020, will start. The zero-based budget could be taken as a model for this exercise.

The Institutions could follow the same method for the own resources, appointing a High Level Group on EU Policies (HLGEPO) to produce an evaluation by the end of 2018. The conclusions of this group will help to prepare a package of reforms of policies and new financing mechanisms which the European Council could discuss to re-launch the European project.

[1] A member of the group expressed his preference for a new mechanism limited to the abolition of the VAT based own resource and the simplification of national rebates.

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