The European Union should not receive its own direct income

The European Union should not receive its own direct income

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Blogger: Bill Wirtz
The European Union should not receive its own direct income

In an effort to make the European Union independent of its funders, the European Parliament is making clear demands in the 2021-2027 budget talks. Their calls for direct income would have significant ramifications.

 

Not every federal state is the same

 

When talking about federal states or the creation thereof, one usually thinks of the United States, or maybe even Germany. But rarely would the example of Switzerland come up.

While the Confederation of Switzerland was designed to follow the example of the United States in regards to federalism and states' rights, the Swiss avoided the concentration of executive authority onto one person. It is interesting to note that although every European country made (and continues to make) constant adjustments to their form of government, the Swiss council has not altered since 1848. The only political change that has been made to the Federal Council is the reversal of the Magic Formula, also known as the Swiss consensus, a political custom that divided the seven seats in the country between the four ruling parties. With the arrival of billionaire industrialist and EU-opponent Christoph Blocher and his Swiss People's Party, the political agreement was shaken up and, furthermore, made Switzerland's accession to the European Union increasingly unlikely.

This form of government could be maintained because of a financial reality: the cantons provide the government in Berne with the means to fund centralised activities. Taxes are levied by the Swiss cantons, and then allocated to Berne. One could argue that this is essentially a formality, as the constitution would obligate the cantons to do so regardless, but that would leave out the reality of government. In order to acquire power, you need the military and you need money. Cantons could decide to withhold their contributions, thereby financially forcing the central government into submission, despite constitutional considerations.

 

What we have, and what we'd get

 

Under the present system, EU member states contribute an amount proportionate to their GDP to the European Union. The budget negotiations in the European Council determine how high that contribution should be, with current negotiations for the 2021-2027 budget varying between 1 and 1.3 percent of GDP. This is the only source of income for the EU, as it does not have any direct revenue.

However, the European Parliament would like to change that.  

MEPs demand the introduction of measures that would allow the EU to raise its own revenue, such as ones based on a new corporate tax scheme (including taxation of large companies in the digital sector), revenues from the Emissions Trading System, and a plastic tax.

The draft interim report on the 2021-2027 MFF– Parliament’s position with a view to an agreement – by co-rapporteurs Jan Olbrycht (EPP, PL), Isabelle Thomas (S&D, FR), Gérard Deprez (ALDE, BE) and Janusz Lewandowski (EPP, PL) has been adopted with 25 votes in favour, 5 against and no abstention.

This report will be voted on in the Strasbourg plenary session of the Parliament next week, but it will likely be adopted, as the major political groups favour it. What does this effectively mean?

As soon as Brussels reaches at least some degree of financial independence from the member states, it will also achieve political independence from its members. As we've seen in the example of Italy, withholding funds from the EU can be used as a bargaining tool, or when U.S President Barack Obama withheld funding from UNESCO in a effort to calm down UN resolutions on Israel. Centralised bodies only hold real power over their members if they control both the fiscal revenue and the military. The European Union is currently seeking both to get direct fiscal revenue and establish an EU army.

What we'll get will be more centralisation, without much of a choice to opt out. Once the EU has this independence, only leaving the bloc could help reduce the size and scope of the institution. Internally reforming it becomes virtually impossible once member states lose negotiating power over the budget.

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