Opinions about existence of ”EU-taxes” are not new but are still regarded as very controversial and undesirable. Partly this is due the lack of popular support among the citizens of the union. Partly because EU-level taxation is impossible to implement with the current institutional framework and would demand treaty changes. The European Commission does not have the right to exercise the same function as national taxation agencies.
One of the arguments in favor of taxation at EU-level is relating to the current framework for the EU-budget. With the current system the EU-member states are being divided into “net givers” and “net takers”. The budget related negotiations can take up to 1 year despite the budget being based on only 1% of EU-28 GDP. This leads to two major issues, one at the national levels and one at the EU-level.
The current budget system affects the national level politics in the sense where many political actors, such as political parties and citizens, in wealthier member states as Germany or Sweden will demand reduction of the net contribution. The scenarios in the socioeconomically compared weaker member states as Bulgaria or Slovakia are usually the opposite ones in the sense of political actors demanding from the governments to maximize the usage of funding provided from the EU-level.
Another major issue is the long time budget negotiation process between the European Parliament and the Council of Ministers. The net giver and net taker national governments will perform their intergovernmental process meaning that long negotiation periods also mean higher administrative costs. Therefore the idea of EU-level taxation is about providing the Commission with the right to be able to collect the funding for the EU-budget on its own.
Does it mean that Commission should have the right to impose taxation on individual citizens? One answer on the future scenario is no. The small size of the EU-budget , keeping in mind that 99% of the EU-28 GDP is spent by national governments, would mean that EU-level taxation can be imposed on other aspects. For example such as CO2 taxation for pollution or corporate taxation such as for large companies as Apple.
The recent legislative scandal regarding Apple shows why EU instead of the policy of tax harmonization between the state governments could have its own tax policy. Another reason is that global and regional business actors which can afford competent lawyers can use loopholes based on coordination of 28 national legislations. Let us say that EU could have its own corporate tax at 5-10% regardless if the business actors is operating in Spain or Bulgaria.
However, I want to put a question if there is any alternative to taxation at the EU-level. My answers is yes and it would be based on voluntary taxation at the individual-citizen level. By using for example the Swish app one would be in the position to contribute with money to the EU-budget. By establishing such a digital platform individuals would be able to provide their own contributions. Those who are not wishing to contribute would not be forced to do that but those who wish to contribute would achieve the right to perform that.
This approach could also lead to reduction of what is called “democratic deficit” and increased results regarding social trust and relations between the citizens and EU-institutions. One possible reason could be that EU-institutions as Commission and its agencies would be forced to be more transparent and careful with how the money is being spent within the multi-level governance system.
Today the EU is still a union based on a kind of social contract between the states/governments in the first place and not between the citizens and EU-institutions. By being able to make private contributions to the EU-budget a kind of voluntary social contract between the citizens and the institutions could be achieved. This could also make the union more democratic and legitimate as well as more fiscally stronger by providing additional funding for the budget.
