With an ever more pressing climate crisis, calls for European action in the fields of innovation and security and the recent Russian invasion of Ukraine, there is no lack of needs for increased common endeavours at the EU level. The most recent major challenge – the effects of the COVID-19 pandemic and the measures to counter it – was met with a huge credit-financed spending programme called Next Generation EU (NGEU). But will this be a one-off, or the start of an ambitious new era in European integration and EU action?
In this European Policy Analysis Daniel Tarschys delves into fiscal history and theories of public spending to show that ‘extraordinary’ taxes, debt issuance, and spending programmes (such as NGEU) normally become ordinary. The scale and cost of the challenges Europe faces also suggest that this higher level of activity and spending will become permanent. But how should it be funded?
This analysis suggests that what is taxed, and how, depends on not only the spending requirements but also evolves with the dominant forms of production and exchange. The digital revolution in the economic way of life should therefore be reflected in the way the EU is funded.
The author examines recent proposals for new ‘own resources’ for the EU, the OECD/G20 agreements on taxing multinational enterprises, and the various possible designs for financial transaction taxes. He concludes that a ‘Market Access Fee’ – a fraction of a percentage charge on any monetary transaction within the EU – is an interesting option. Such a payment for the advantage of trading within the EU’s market would be a fair contribution to the maintenance of that beneficial economic order.