Opinion of the European Economic and Social Committee on the second set of new own resources (exploratory opinion)
Date: 2023-06-14
Institutions: European Economic and Social Committee
Subjects: EU budget, budgetary procedure, commitment of expenditure, economic recovery, financial control, financial management, multiannual financial framework, own resources








C_2023293EN.01001301.xml










18.8.2023   


EN


Official Journal of the European Union


C 293/13







Opinion of the European Economic and Social Committee on the second set of new own resources
(exploratory opinion)
(2023/C 293/03)







Rapporteur:



Philip VON BROCKDORFF











Referral


20.1.2023, Letter from Maroš ŠEFČOVIČ, Vice-President of the European Commission for Interinstitutional Relations and Foresight




Legal basis


Article 304 of the Treaty on the Functioning of the European Union




Section responsible


Economic and Monetary Union and Economic and Social Cohesion




Adopted in section


30.5.2023




Adopted at plenary


14.6.2023




Plenary session No


579




Outcome of vote
(for/against/abstentions)


140/67/12




1.   Conclusions and recommendations









1.1.


As stated by the European Economic and Social Committee (EESC) in its previous opinion on this matter (1), Member States’ agreement is necessary to add new own resources to cover the debt repayment resulting from borrowing under the NextGenerationEU Recovery Plan without jeopardising the budgets of EU programmes or substantially increasing the Gross National Income (GNI)-based resource contribution.












1.2.


The EESC emphasises that the designing of proposals for new sources of own revenues should be done in context of the budgetary pressures faced by Member States following the pandemic and the ongoing international tensions. This has become all the more important in the current higher interest rate environment, which may lead to the new own resources proposed in the 2021 Commission package falling short of covering the cost of repaying NextGenerationEU.












1.3.


The EESC notes that the own resource based on plastic packaging waste that is not recycled is in force. It emphasises the importance of adopting and transposing the new legislative proposal on packaging and packaging waste related to non-recycled plastic packing waste in a harmonised manner. The EESC also considers an own resource calculated on the basis of the volume of municipal waste as another implementable option (assuming it is technically and environmentally feasible), which would also support the circular economy.












1.4.


The EESC urges the Commission to develop the proposals concerning Business in Europe: Framework for Income Taxation (BEFIT) as soon as possible. In this regard, the EESC calls on the Commission to set clear aims in relation to simplifying the tax landscape and ensuring the competitiveness of existing and new tax directives. In particular, the EESC highlights the need to base the BEFIT rules on harmonised definitions and standards as well as a more refined estimation of the potential additional revenues linked to its implementation.












1.5.


The EESC deems it reasonable to explore the possibility of including financial services within BEFIT or of developing a global financial transaction tax (FTT) as proposed by the European Parliament while at the same time assessing impacts of the proposal.












1.6.


The EESC welcomes the agreement between the Council and the European Parliament on the Carbon Border Adjustment Mechanism (CBAM). Moreover, with the aim of achieving a more level playing field in terms of labour conditions, the Commission may consider an additional levy targeting EU companies importing products from third-country manufacturers that do not ensure proper protection of workers, assuming this is in line with the World Trade Organization (WTO) rules and subject to clear criteria to its application. At the same time, the EESC re-emphasises the need for some export relief for EU companies to compete on third markets.












1.7.


Pursuant to the OECD/G20 Inclusive Framework, the EESC notes that a standstill and withdrawal period concerning digital taxes had been agreed. An EU-wide tax on digital transactions could however be potentially considered to increase own resources in case the agreed rules of the OECD/G20 Inclusive Framework are not respected by other major trading partners.












1.8.


The EESC also emphasises that the second set of own resources measures should be in line with the proportionality and social fairness principles. In addition, the EESC reiterates that all of the proposals regarding own resources should be supported by an impact assessment of their effectiveness.




2.   Background









2.1.


Article 311 TFEU stipulates that, without prejudice to other revenue, the EU budget should be financed wholly with EU own resources. These resources can be defined as revenue streams directly assigned to the EU without the need for any additional decisions by the Member States. However, the major part of EU revenues consists, in practice, of contributions from the Member States (2).












2.2.


Presenting its Work Programme for 2023, the European Commission announced a proposal for a second basket of new own resources, currently planned for the third quarter of 2023 and building, inter alia, on the announced legislative proposal concerning a single set of tax rules for doing business in Europe (BEFIT). This advances the schedule of the interinstitutional agreement presented in December 2020 by one year (3).












2.3.


The second basket of own resources follows the first one, presented during December 2021 (4), which was based on three new sources of revenue. The first source is based on revenues from emissions trading (ETS), the second draws on the resources generated by the EU Carbon Border Adjustment Mechanism (CBAM), and the third is based on the share of residual profits from multinationals that will be reallocated to EU Member States under the OECD/G20 agreement on a reallocation of taxing rights (‘Pillar One’).












2.4.


The aim of the new own resource proposal is to ensure a resilient and diversified flow of revenues for the EU, avoiding both cuts to EU programmes and an excessive increase in the contributions to the EU budget based on the GNI of Member States.












2.5.


The long-term impact on the EU budget of the NextGenerationEU (NGEU) Recovery Plan — implemented to cope with the economic and social disruption caused by the pandemic — will be considered within the new framework, which is designed to duly utilise the new set of own resources to steadily repay the funds borrowed on the capital markets by the Commission for the grant component of NextGenerationEU by 2058 at the latest. It should be pointed out that the repayment of the principal and interest have to be financed from the EU budget in line with the Multiannual Financial Framework (MFF).












2.6.


Ahead of its proposal on the second set of new own resources, the Commission asked the European Economic and Social Committee to put forward its point of view and recommendations in order to enrich its proposal with the EESC’s perspective.












2.7.


The current EESC opinion supplements the previous one issued by the Committee on the same topic (5) with some adaptations to consider the ongoing institutional debate and most recent developments.




3.   General comments









3.1.


The EESC is appreciative of having the possibility to again voice its position on a crucial and strategic matter for the future of the EU integration process.












3.2.


In this respect, the EESC would like to underline that the debate about the origins of own resources, and their use for the EU budget respecting the principle of universality, should be carried out not just among the European institutions, but also generally involving the business community, other social partners and civil society, including representatives of as many categories of EU citizens as possible, thereby also involving older age groups and vulnerable groups.












3.3.


As pointed out in its opinion on the Proposal for an own resources decision, the EESC agrees that it is necessary to provide for new own resources to duly sustain the EU agenda and objectives without jeopardising the budgets of the EU programmes under the Multiannual Financial Framework (MFF) 2021–2027 and without substantially increasing the GNI-based resources contribution.












3.4.


At the same time, the EESC notes that, with the introduction of the own resource based on non-recycled plastic packing waste, the high share of the GNI contribution on the part of Member States has been reduced. In this context, the EESC emphasises the importance of adopting and transposing the new legislative proposal on packaging and packaging waste in a harmonised manner with a view to reducing the compliance burden.












3.5.


The EESC hopes that the announced second set of own resources measures will be in line with the proportionality and social fairness principles, striking an appropriate balance between the need to have a strong financial budget able to sustain the EU’s objectives, on the one hand, and social cohesion as well as a business-friendly environment, on the other hand.












3.6.


The EESC highlights the importance of distinguishing between EU own resources and EU tax policies: whereas the former utilise tax tools to ensure appropriate revenue streams to fund the EU budget, the tax policies of the EU should aim to promote economic integration, as well as to enhance and further develop the single market, rather than increasing tax burdens and undermining social and economic integration.












3.7.


The EESC would like to emphasise that the Commission proposal will have to carefully consider the adverse impact of the Russian attack on Ukraine, which is persisting over time, with its related consequences in terms of global economic downturn, impact on supply chains, and international tensions, thus creating a complex context to cope with. Such a context includes, inter alia, high, persistent inflation and rising interest rates in order to ease inflation itself. All of this creates a very challenging economic environment for the Commission’s proposal.












3.8.


In light of the abovementioned context, the EESC observes that the budgetary pressures faced by Member States after the pandemic and during the ongoing international tensions should be taken into proper consideration for the purpose of developing proposals for new sources of EU budget revenues. The EESC notes that collecting revenues at EU level puts a further strain on national budgets. Moreover, the repayment of NGEU borrowing from the EU budget is a given commitment, possibly leading to higher Member State contributions in the absence of new own resources.












3.9.


At the same time, the EESC points out that the new own resources proposed in the first Commission package on 14 December 2021 will probably not be sufficient to cover the whole of the EU’s current obligations given also the higher interest rate environment.












3.10.


The EESC deems it important to have a sound and strong EU budget able not only to ensure the strategic autonomy of the European Union, but also to properly support the twin green and digital transitions with all the challenges and adaptations that this will involve for Member States, regions and local communities, as well as businesses across Europe.












3.11.


The EESC observes that, in order to effectively reinforce the EU budget and multiannual financial framework, the NGEU grants will need to be repaid over the specified period of time without further extension in order to avoid the risk of excessive borrowing costs stemming from an excessively protracted duration, which would be detrimental to economic growth and social well-being for future generations. That is especially true during the current period of rising interest rates, which are making indebtedness more difficult to sustain in the long run and financing costs rather unpredictable.












3.12.


As a prerequisite to propose an own resource based on corporate taxation, the EESC calls for the Commission to further develop, with urgency, the proposal concerning a common set of rules to estimate the corporate taxable base for EU-based entities that are part of a group with global consolidated revenues above a certain threshold. BEFIT will also include provisions for the allocation of profits to Member States based on an apportionment formula. Once allocated, profits would be subject to the corporate income tax rate of the respective Member States.












3.13.


The EESC notes the Commission’s announcement that it will seek to build on the BEFIT proposal to develop an additional stream of EU own resources. However, finding a political agreement on such a proposal might be quite difficult, as the 2011 and 2016 CCCTB (6) proposals have shown in the past.












3.14.


The EESC calls for a debate involving all stakeholders with respect to BEFIT, as this will help to ensure transparency regarding its impact. Moreover, the EESC highlights that BEFIT needs clear aims and key principles in order to deliver simplification of the tax landscape and ensure the competitiveness of existing and new tax directives.












3.15.


The EESC highlights that the potential rules on BEFIT should be based on harmonised definitions and standards in order to enable the proper functioning of the proposal across the entire internal market, as well as a more refined estimation of the potential additional revenues linked to the implementation of BEFIT, if such revenues do actually materialise (7).












3.16.


The EESC points out that, in any case, there is an intrinsic volatility associated with corporate tax revenues, resulting in complexity when it comes to precisely estimating future fiscal revenues to be deployed into own resources. That is especially true in the current economic context with high inflation and interest rate increases. As to the matter at hand, the EESC encourages the Commission to carry out dedicated studies and impact assessment simulations aimed at establishing a reliable range of own resources that could be collected through BEFIT. However, the EESC cautions about any additional compliance costs for businesses.












3.17.


Since the Commission’s proposal on BEFIT will build on the Inclusive Framework two-pillar approach embraced by the OECD and the G20 with regard to the allocation of profits (pillar 1) and on the complementary rules (pillar 2), the EESC encourages the Commission to continue working in close coordination with international initiatives both to develop the BEFIT proposal.












3.18.


As also suggested by the European Parliament, the possibility to include financial services within BEFIT, or the development of a global financial transaction tax, could be explored while assessing possible impacts. The new tax provisions should then be combined with targeted rules aimed at devoting part of the additional tax revenues expected to EU own resources.












3.19.


The EESC recalls that the sole objective of the CBAM agreed between the Council and the European Parliament was to motivate the EU’s trading partners to decarbonise their production alongside the EU. This was proposed as an own resource in the first package. Further to this, the Commission may consider the possibility of an additional levy targeted at EU companies importing products from third-country manufacturers that do not ensure proper protection of workers. This option would only be considered as long as it is compatible with WTO rules and subject to clear criteria to its application. This levy could provide some protection to workers in third countries and progressively facilitate the achievement of a level playing field in terms of labour conditions between the EU and other trading blocs. At the same time, the EESC calls for some form of export relief so that EU companies can compete on third markets. This was highlighted in a previous EESC opinion on the CBAM.












3.20.


Pursuant to the OECD/G20 Inclusive Framework, whereby a standstill and withdrawal period concerning digital taxes had been agreed, the EESC is of the view that an EU-wide tax on digital transactions to increase own resources could be potentially considered. However, this would only apply in case the agreed rules of the OECD/G20 Inclusive Framework are not respected by other major trading partners.












3.21.


In cases where it is technically and environmentally feasible to recycle municipal waste, a statistics-based own resource based on the volume of municipal waste is another option to making landfilling and incineration more expensive than recycling, thereby supporting the circular economy across the internal market.












3.22.


As pointed out in its previous opinion on the proposal for an own resources decision, the EESC maintains that efficiency and effectiveness in the collection, administration and subsequent expenditure of own resources is key at all stages and strategic to ensuring a proper and productive harnessing of own resources to achieve the ambitious objectives set forth by the Commission agenda.












3.23.


Finally, and also in line with the previous opinion on the proposal for an own resources decision, the EESC reiterates the importance of all of the proposals regarding own resources being supported by an impact assessment on the effectiveness of the proposed measures, and, in particular, on the revenues such measures are expected to generate.






Brussels, 14 June 2023.


The President of the European Economic and Social Committee

Oliver RÖPKE
            





(1)  Opinion of the European Economic and Social Committee on Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. The next generation of own resources for the EU Budget (COM(2021) 566 final), Proposal for a Council Regulation amending Regulation (EU, Euratom) 2020/2093 laying down the multiannual financial framework for the years 2021 to 2027 (COM(2021) 569 final — 2021/0429 (APP)), Proposal for a Council Decision amending Decision (EU, Euratom) 2020/2053 on the system of own resources of the European Union (COM(2021) 570 final — 2021/0430 (CNS)) (OJ C 323, 26.8.2022, p. 48).

(2)  European Parliamentary Research Service.

(3)  Interinstitutional Agreement between the European Parliament, the Council of the European Union and the European Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management, as well as on new own resources, including a roadmap towards the introduction of new own resources of 16 December 2020 (L433I/28).

(4)  COM(2021) 566 final.

(5)  EESC opinion on the Proposal for an own resources decision (OJ C 323, 26.8.2022, p. 48).

(6)  Common Consolidated Corporate Tax Base.

(7)  The purpose of BEFIT is to simplify and to allow for effective consolidation of profits and losses, and not necessarily to collect more revenues.




ANNEX
The following amendments, which received at least a quarter of the votes cast, were rejected in the course of the debate (Rule 74(3) of the Rules of Procedure):

AMENDMENT 3


ECO/617 — Second set of new own resources


Paragraph 3.18


Amend as follows







Section opinion


Amendment




As also suggested by the European Parliament, the possibility to include financial services within BEFIT, or the development of a global financial transaction tax, could be explored. The new tax provisions should then be combined with targeted rules aimed at devoting part of the additional tax revenues expected to EU own resources. However, the EESC understands that a financial transaction tax could possibly make the EU less competitive, especially if applied only within the EU. Moreover, a broad-based Financial Transaction Tax (FTT) is unlikely to collect much in terms of revenue but could still adversely impact European businesses and households, potentially reducing growth with a further strain on public finances.


As also suggested by the European Parliament, the possibility to include financial services within BEFIT, or the development of a global financial transaction tax, could be explored (9). The new tax provisions should then be combined with targeted rules aimed at devoting part of the additional tax revenues expected to EU own resources. However, the EESC understands that a financial transaction tax could possibly make the EU less competitive, especially if applied only within the EU. Moreover, a broad-based Financial Transaction Tax (FTT) is unlikely to collect much in terms of revenue but could still adversely impact European businesses and households, potentially reducing growth with a further strain on public finances.





Reason

This is very important background information to add, explaining to the reader of the opinion, how politically complicated introducing the FTT across EU Member States still is, despite the fact that the Commission’s legislative initiative was already proposed almost 12 years ago. This only proves that benefits of introducing the FTT only in the EU or only among some of EU Member States, are highly questionable.

Outcome of the vote:







In favour:


80




Against:


122




Abstention:


14





AMENDMENT 4


ECO/617 — Second set of new own resources


Paragraph 3.19


Amend as follows







Section opinion


Amendment




The EESC recalls that the sole objective of the CBAM agreed between the Council and the European Parliament was to motivate the EU’s trading partners to decarbonise their production alongside the EU. This was proposed as an own resource in the first package. 
Further to this, the Commission may consider the possibility of an additional levy targeted at EU companies importing products from third-country manufacturers that do not ensure proper protection of workers. This option would only be considered as long as it is compatible with WTO rules and subject to clear criteria to its application. This levy could provide some protection to workers in third countries and progressively facilitate the achievement of a level playing field in terms of labour conditions between the EU and other trading blocs.
 At the same time, the EESC calls for some form of export relief so that EU companies can compete on third markets. This was highlighted in a previous EESC opinion on the CBAM.


The EESC recalls that the sole objective of the CBAM agreed between the Council and the European Parliament was to motivate the EU’s trading partners to decarbonise their production alongside the EU. This was proposed as an own resource in the first package. At the same time, the EESC calls for some form of export relief so that EU companies can compete on third markets. This was highlighted in a previous EESC opinion on the CBAM.





Reason

The same as in paragraph 1.6.

Outcome of the vote:







In favour:


78




Against:


129




Abstention:


11




The following amendments were adopted in the course of the debate, but received at least a quarter of the votes cast in favour of retention of the original text (Rule 74(4) of the Rules of Procedure):

AMENDMENT 1


ECO/617 — Second set of new own resources


Paragraph 3.18


Amend as follows







Section opinion


Amendment




As also suggested by the European Parliament, the possibility to include financial services within BEFIT, or the development of a global financial transaction tax, could be explored. The new tax provisions should then be combined with targeted rules aimed at devoting part of the additional tax revenues expected to EU own resources
. However, the EESC understands that a financial transaction tax could possibly make the EU less competitive, especially if applied only within the EU. Moreover, a broad-based Financial Transaction Tax (FTT) is unlikely to collect much in terms of revenue but could still adversely impact European businesses and households, potentially reducing growth with a further strain on public finances
.


As also suggested by the European Parliament, the possibility to include financial services within BEFIT, or the development of a global financial transaction tax, could be explored 
while assessing possible impacts
. The new tax provisions should then be combined with targeted rules aimed at devoting part of the additional tax revenues expected to EU own resources.





Outcome of the vote:







In favour:


96




Against:


91




Abstention:


15





AMENDMENT 2


ECO/617 — Second set of new own resources


Paragraph 1.5


Amend as follows







Section opinion


Amendment




The EESC deems it reasonable to explore the possibility of including financial services within BEFIT or of developing a global financial transaction tax (FTT) as proposed by the European Parliament
. However,
 the 
EESC understands that an FTT could possibly affect competitiveness, and may not result in significant additional revenue
.


The EESC deems it reasonable to explore the possibility of including financial services within BEFIT or of developing a global financial transaction tax (FTT) as proposed by the European Parliament 
while at
 the 
same time assessing impacts of the proposal
.





Outcome of the vote:







In favour:


126




Against:


79




Abstention:


8






(9)  
            
0n 28 September 2011 the Commission tabled a proposal for a Council Directive on a common system of financial transaction tax (FTT) and amending Directive 2008/7/EC. It was not agreed to in Council and on 14 February 2013, the Commission tabled a proposal aimed at introducing a Financial Transaction Tax (FTT) in eleven Member States through the instrument of ‘enhanced cooperation’. The issue remains at a standstill also among these Member States even though the dossier has been regularly discussed at the ECOFIN
.