The Guest Blog

Guest blog post by Margit Schratzenstaller and Danuše Nerudová.

The debate about tax-based own resources, which as “genuine own resources” may (partially) replace current own resources funding the EU budget, is as old as it is controversial. On the one hand, Núñez Ferrer (2008) and Begg (2011) rightly stress that the current EU system of own resources, which primarily rests on contributions by EU Member States, has its merits: in particular by providing steady, predictable and reliable revenues to finance EU expenditures; by guaranteeing a balanced budget; and by establishing (at least ex ante, i.e. before the application of the various correction mechanisms) a “fair” distribution of the financial burden across Member States. In addition, national contributions respect the subsidiarity principle by leaving the decision on the distribution of the financial burden among individual taxpayers to Member States (Lipatov and Weichenrieder 2016).

On the other hand, the current financing system has been attracting various criticisms over the last decades. First, the increasing dominance of direct contributions out of Member States’ national budgets to the EU budget, which have been continuously curtailing the EU’s financial autonomy (European Commission 2011a; Iozzo et al. 2008) and further a “juste retour” logic (Richter 2008). Secondly, the intransparency of the opaque own resources system, which is preventing EU citizens from assessing their respective country’s contribution to the EU budget and the connection between EU revenues and expenditures (European Commission 2011a): thus weakening political credibility and acceptance of Member States’ contributions to the EU budget (Schratzenstaller 2013) and causing a deficit in democratic accountability (Fuest/Heinemann/Ungerer 2015). Thirdly, the fact that the own resources system does not support central EU policies (European Commission 2011a): in particular, that there is no link to the overarching goal of sustainable growth and development in all its three dimensions, as laid down in the Europe 2020 strategy aiming at “smart, inclusive and sustainable growth”, or in the 2030 Agenda for Sustainable Development (Schratzenstaller et al. 2016).

The European Commission has been pushing the debate about strengthening tax-based own resources via various reports, reviews of and reform proposals for the EU system of own resources (European Commission 1977; 1998; 2004; 2010; 2011a; 2011b) for four decades now. Also the European Parliament is in favour of transferring some taxation powers to the EU level (European Parliament 2007). After the most recent failure of the European Commission’s and the European Parliament’s initiatives to introduce an EU tax together with the EU Multiannual Financial Framework (MFF) 2014 to 2020, a mid-term review of the EU system of own resources was commissioned to an inter-institutional High Level Group on Own Resources (HLGOR), consisting of representatives from the European Commission, the European Parliament, and the European Council as well as from academia. The HLGOR, chaired by Mario Monti, has just released its Final Report (HLGOR 2016). This “Monti Report” will for sure inject renewed vigour into the academic, but above all into the political debate in the various EU institutions involved in the preparation of the next MFF for the period 2021 to 2027 as well as in the individual Member States.

A first innovative contribution by the Monti Report is to enrich the traditional criteria to evaluate potential candidates for own resources by a sustainability-oriented perspective as suggested by Schratzenstaller et al. (2016). From this perspective, tax-based own resources are a well-suited instrument to reduce existing sustainability gaps in taxation in the EU: by helping to decrease distorting taxes (in particular the high taxes on labour) and to internalise market imperfections (e.g. environmental damage or excessive liquidity and speculation in financial markets), by limiting excessive tax competition, by furthering environmental sustainability, and by preserving the tax morale by combatting tax fraud and evasion within the EU. Accordingly, the Monti Report recommends to reform the current system of own resources by using tax-based own resources improving the functioning of the Single Market, or relating to the Energy Union, environment, climate or transport policies. In particular, the report mentions several tax-based options which are also analysed in the FairTax project ( a financial transactions tax (Solilová/Nerudová/Dobranschi 2016), a corporate income tax-based own resource (Nerudová/Solilová/Dobranschi 2016), and carbon-based levies (Krenek/Schratzenstaller 2016). These analyses of tax-based own resources – and this is a second benefit of the Monti Report – are embedded in a broader perspective on a whole menu or “basket” of possible own resources for the EU budget.

A third very valuable contribution of the Monti Report is a differentiated and carefully assessed presentation and discussion of various approaches of varying scope to implement tax-based own resources and their legal implications. In particular the HLGOR explores in detail the possibilities to introduce tax-based own resources within the current legal framework, thus complementing existing current analyses collected for example by Büttner/Thöne (2016). Indeed it is important to note that the implementation of EU taxes does not necessarily require own genuine taxation powers, i.e. full legislative and revenue authority for the EU. EU taxes can also be introduced based on a kind of remittance system as suggested in Nerudová/Solilová/Dobranschi (2016), with Member States’ tax administrations collecting revenues and transferring them to the EU budget. This would reflect the central motivation of a sustainability-oriented EU tax approach: namely, that certain sustainability-oriented EU taxes are a powerful instrument to close sustainability gaps in taxation in the EU. To provide incentives for effective revenue collection, Member States should be granted the right to keep a share of the proceeds. Such a pragmatic approach would not require an explicit answer to the much more fundamental question whether the EU should be granted own taxation powers to support its further development (Büttner and Thöne 2016). Moreover, it would not restrict national tax sovereignty and could thus be more acceptable to (the overwhelming majority of) Member States’ governments and parliaments reluctant to give up some of their taxation powers. Not least, an own EU tax authority incurring additional compliance costs would be unnecessary.

Fourthly, the Monti Report is very clear on the connex between EU revenues and expenditures. It provides a cogent rationale why shifting the expenditure structure towards true European public goods with a European value added is an indispensable condition for sustainable and sustainability-oriented reform of the EU revenue system.




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Schratzenstaller, Margit, Krenek, Alexander, Nerudová, Danuse, and Dobranschi, Marian. 2016. EU Taxes as Genuine Own Resource to Finance the EU Budget: Pros, Cons and Sustainability-oriented Criteria to Evaluate Potential Tax Candidates. FairTax Working Paper 3.

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