The EU May Need to Introduce a Bloc-Wide Tax After Brexit – Bloomberg

The EU May Need to Introduce a Bloc-Wide Tax After Brexit – Bloomberg

The European Union should consider the introduction of common taxes as it seeks to overhaul its budget and cover a financing hole created by Brexit, the bloc’s executive arm said.

Even though the withdrawal of the U.K. “will signify the loss of an important partner and contributor to the financing of EU policies and programs,” it will also “remove some obstacles to reform on the revenue side of the EU budget,” the European Commission said on Wednesday.

In a so-called reflection paper on the future of EU finances, the commission urged member-states to examine how to boost the EU’s “own resources,” which currently consist of a levy on sales tax, customs duties as well as transfers from the budget of each of the bloc’s 28 nations. New sources of revenue “should be conceived not only to finance part of the EU budget, but also to accompany its core policies,” the commission said.

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Among the options tabled is applying common energy or environmental taxes “to ensure a level playing field between companies and contribute to the global fight against climate change.” Also, revenue from the issuance of currency “could in the longer term become the basis for an EU own resource,” while receipts from auctions under the emissions trading system, and emission premia for cars could also be used to finance the bloc’s policies.

The U.K. departure from the EU in 2019 strips the bloc of its second-largest net contributor after Germany. While just 2 percent of total public expenditure, the EU budget is expected to be among the most contentious issues in Brexit talks, as millions of beneficiaries, including farmers and scientists across the continent, rely on its commitments for funding.

“The gap in EU finances arising from the United Kingdom’s withdrawal and from the financing needs of new priorities need to be clearly acknowledged,” the commission said. “The EU budget faces a tough challenge to fund more with less.”

The extent of the overhaul required will depend on the future direction of the EU and the consequent expectations from joint policies, according to the commission. Simplifying funding stream and finding new revenue sources is seen as necessary under all five scenarios considered by its staff.

“A percentage of the common corporate tax base or the financial transaction tax could be designed to reinforce the single market, mirror the benefits of the internal market for the largest companies and strengthen the fight against tax fraud and tax evasion,” according to the report, which is going to feed into the commission’s proposal for the bloc’s budget after 2020.

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