Schreyer’s budget blueprint: direct tax for EU citizens and scrap the British rebate

Date: 06/11/03

Budget Commissioner Michaele Schreyer talks exclusively to Dana Spinant about the outlook for EU financing after 2007, and reveals that there may be a shock in store for the United Kingdom to the tune of €3 billion

THE European public should pay a direct tax to finance the EU, according to the commissioner in charge of the Union's budget.

Such a move has been ruled out in the past by several member states including the United Kingdom. But the British government may be even more alarmed by Michaele Schreyer's prediction that its €3 billion-a-year rebate, negotiated by former UK premier Margaret Thatcher in 1984, will be scrapped within two years.

Speaking to European Voice, the German commissioner offered an early glimpse into how the EU budget may look after 2007, when the present "financial perspective" expires.

Schreyer has warned that the EU must increase its budget and refocus its spending to face the challenge of enlargement and also to take account of the additional responsibilities it will be granted by the constitution, such as greater powers over border controls or food safety.

The new member states will increase the Union's gross domestic product by only 6%; this means that the net payers - those countries paying more than they receive from the EU - will have to continue to cough up cash.

But the burden should be spread more fairly among the net payers, said Schreyer. It is inevitable, she believes, that the British rebate, under which the UK gets back the difference between what it has paid and what it receives from Brussels, will be done away with and replaced with a more equitable system. This should be part of the deal on the Union's finances set to be approved in 2005, she added.

The European Commission has just entered the trickiest stage of its five-year term, as it undertakes talks on the next financial perspective covering the period from 2007 to 2013.

It is due to unveil its multi-annual budget plans at the end of this month. (However, member states will have the last word on the Union's budget.)

Schreyer insists that the Union needs to spend more. Although it is allowed to spend up to a ceiling of 1.27% of the Union's gross domestic product, the EU has only spent the equivalent of between 1.02 and 1.2% of GDP in recent years.

"Considering the challenges we face, we cannot calculate on a smaller or on unchanged budget," she said. "I hear some of the member states saying that in the future it should be only 1% of the gross national income this will not work."

However, she underlines that the total spending will not exceed the 1.27% threshold set by government leaders in 1999.

She confirmed that, during discussions held on this topic by the College of Commissioners last week, there were no calls to change the ceiling.

But for Schreyer, "priorities" are more important than "figures".

She says the Union should spend more on issues about which the public feels strongly, such as justice, home affairs and citizens' rights, as well as increased food safety and protection against communicable diseases. "We will make a proposal to have justice, home affairs and citizenship as a separate category of spending," she added.

Moreover, she wants to divert money away from the traditional spending areas, such as agriculture and structural policy, to those on which the EU can bring "added value", such as research.

High on the German commissioner's priorities is funding for the Union's foreign policy, one of the main topics in the Convention on the future of Europe. "For me, this must be mirrored in the budget," she said.

Schreyer also thinks the Byzantine system of financing the Union's budget from "own resources", such as customs tariffs and a percentage of VAT levied by member states, is overdue for reform.

In particular, she would like to see the introduction of a direct contribution from taxpayers in member states to fund the EU. But this would not mean a new tax, she explained. "I'm not a fan of that. [We should take money] from an existing tax, whose basis is harmonized, with the assignment of a specific percentage to the EU budget."

So for instance, this could mean that a percentage of VAT would be directly levied for the sole purpose of EU funding. This would not, however, result in harmonization of VAT rates across the Union. She insisted this would not bring in additional money for the Union or increase the overall tax burden on citizens, it would simply be a more transparent way of collecting the EU's cash. "We are not looking for new resources, but for a new structure," she added.

Nevertheless, there will still be net payers in the Union.

"The Community is a solidarity community. There are net contributors and there are net receivers. This is fundamental and should not be put into question. But of course, there is an interesting debate that has so far not taken place: what is the accepted solidarity contribution to the EU budget?

"We have only one comparable figure, the [United Nations] millennium goal that 0.7 % of the gross national income should go to the poorest countries. Here we have an agreement on what solidarity means in terms of figures. But what is the accepted solidarity contribution to the EU?"

Major feature in which the EU's Budget Commissioner, Michaele Schreyer, is interviewed about the outlook for the EU's financing after 2007.

http://ec.europa.eu/comm/budget/financialfrwk/index_en.htm http://ec.europa.eu/comm/budget/financialfrwk/index_en.htm

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