MEPs urge quick negotiations on corporate and carbon taxes for EU budget

MEPs have welcomed plans for three new revenue streams for the European Union that will include raising money from new taxes on multinational corporations.

But MEPs José Manuel Fernandes (EPP) and Valérie Hayer (Renew) said ministers must start working very quickly so that the European Parliament negotiates the proposals as soon as possible.

“The risks are clear: much higher national contributions to the EU budget, or cuts to the Multiannual Financial Framework in the medium term. This is clearly not in the interest of the citizens. We are ready to use all means at our disposal to ensure the new Own Resources’ implementation,” the two MEPs, co-rapporteurs for the EU’s Own Resources, said.

The Council will have to vote by July 2022 accorindg to a legally binding roadmap towards the introduction of new Own Resources.

The MEPs also said the failure to reach a €15 billion per year for the repayment of debts incurred under the ‘NextGenerationEU’ recovery plan (NGEU) was regrettable, and requested a higher share of the new income sources to be defined as Own Resources accruing to the EU budget.

“Any decision on the expenditure side must come from a political choice and not from ‘revenue constraints’ …We call on all EU capitals to acknowledge our common responsibility: repay the debt and stop narrowly focusing on national budgets or on each individual Own Resource in isolation. Governments should rather consider the political and economic merits and distributive implications of the package as a whole.”

The European Commission announced that alongside the carbon border adjustment mechanism and the Fit-for-55 package there will also be a new minimum effective tax rate across the EU targeting large multinationals.

The carbon border adjustment mechanism puts a carbon price on imports, corresponding to what would have been paid, had the goods been produced in the EU and the Fit for 55 changes to EU Emissions Trading System, where 25% of the revenue from EU emissions trading flows into the EU budget.

Now added to those two pillars is a global minimum effective tax rate of 15% for large groups operating in the European Union as well as proposals to further combat tax evasion through shell entities known as “letterbox companies”.

“Shell companies continue to offer criminals an easy opportunity to abuse tax obligations. We have seen too many scandals arising from misuses of shell companies over the years. They damage the economy and society as a whole, also placing an unfair extra burden on European taxpayers,” said Valdis Dombrovskis, EC executive vice-president for the economy, in December 2021.

The minimum tax rules will apply to any large group, both domestic and international, with a parent company or a subsidiary situated in an EU member state and also aims to ensure effective taxation in situations where the parent company is situated outside the EU in a low-tax country which does not apply equivalent rules.

The next scheduled step in the legislative train is for members of the Committee on Budgets to have a first debate with the Commission on the proposals in a meeting on 13 January.