Vienna Favors Letting EU Levy Taxes

There’s no question about it. The European Union needs more money. As it continues to grow and expand, take on new responsibilities in foreign policy and defense and improve its competitive economic edge, Brussels consumes more and more money -- money primarily contributed by the six biggest member states.

No matter who does the math -- the member states or the Commission itself -- without an increase in income, the EU will not be able to grow, and its much-desired goal to pull even with or surpass the U.S. in economic competitiveness will fall flat. The question is where this revenue comes from.

Until now Brussels has only called for increasing contributions -- mostly the big six members Germany, France, Britain, Austria, Sweden and the Netherlands -- by raising its allowed budget spending from 1.15 to 1.24 percent of gross national income. The Commission has rejected all proposals to levy a direct EU tax on citizens in member states, although Budget Commissioner Michaela Schreyer has frequently lamented Brussels "limited financial autonomy."

Austrian Chancellor Wolfgang Schüssel, however, sees the EU tax as the best possible solution for filling the European Union’s coffers.

Independent financial source

"The Union needs its own safe financial source," he told the German business daily Handelsblatt on Monday. Plus, a tax would allow the EU Commission to become more independent of the member states -- an important aspect when it comes to fiscal policy, an area where members are relunctant to cede more authority.

The EU tax would lead to a reduction of the contributions required of the member states, he told the newspaper. Schüssel sees the proposal within the same framework as put forth in December by the six contributors, who called for a 1 percent capping of EU spending starting in the 2007 finance period.

Although the EU has no authority to levy taxes, Schreyer was open to the Austrian leader’s suggestion. "I welcome the position of Chancellor Schüssel," she told Handelsblatt.

Germans oppose tax

Within Germany, politicians across the spectrum reacted strongly to the Viennese initiative. Joachim Poß, finance expert for the Social Democrats, said the time was not right for introducing an EU tax. The question of taxation should be left up to member states, he said and stressed: "The European Union is far from being a nation."

Michael Glos, parliamentary faction leader for the opposition Christian Social Union, dismissed the EU tax as the "best possible way of destroying the remaining sense of EU cohesion," as member states and Commission prepare for a lengthy debate over budget guidelines.

The Free Democrats’ lead candidate for the EU elections this year, Silvana Koch-Mehrin, suggested Brussels take a closer look at its expenditures. Europe should become better, but not more expensive, she told the Associated Press. The whole EU budget needs to be examined closely, she said. "About half of all EU money flows into agriculture, but only 4 percent is invested in education," she explained. The Commission should use the upcoming discussion on finance to introduce its own budget reforms, she admonished.