EU's budget arrangement is far from satisfactory
At a meeting of G20 finance ministers in Durban, South Africa, German Finance Minister Lars Klingbeil voiced his opposition to proposals within the European Commission's plan for the next long-term EU budget. The heart of the dispute lies in the proposed corporate tax initiatives and the sharing of fiscal responsibilities.
Klingbeil has expressed concerns about potential long-term fiscal risks for Germany and the increase in financial liabilities through EU-wide debt instruments or aggressive tax harmonisation. This stance contrasts with EU Commission President Ursula von der Leyen's ambitions to strengthen the EU budget through innovative revenue sources, often including digital or corporate tax reforms.
The European Commission has proposed a corporate tax plan, which would impose a tax on large companies with an annual turnover of over 100 million euros, as a new revenue source for the EU budget. Additionally, 15 percent of national tobacco tax revenues are proposed to be sent to Brussels. However, Klingbeil has criticised these proposals, arguing they send the wrong signal and do not align with the German government's objectives of strengthening the economy, securing jobs, and attracting investments.
The German government cannot agree to the proposed tax on large companies or the allocation of national tobacco tax revenues to the EU budget. Klingbeil's rejection of the shared debt and complex new tax schemes proposed by the Commission reflects a desire to protect national fiscal sovereignty and limit Germany’s financial exposure.
Despite the EU Commission's aim to finance common priorities through targeted corporate tax rules, Klingbeil's stance reflects a caution against deeper fiscal integration that could lead to joint burdens. The proposal for the next long-term EU budget, which includes these contentious elements, is not seen as ensuring financial limits by Klingbeil.
In response to the EU Commission President's proposal, Klingbeil has rejected it outright. He believes that the current form of the corporate tax proposal suggested by the European Commission is the wrong signal for the European economy, particularly given the ongoing recovery from the pandemic. The dispute between the two leaders underscores the challenges in balancing the desire for EU-wide budgetary resources with the need to preserve national fiscal autonomy.
Klingbeil's rejection of the corporate tax plan and the sharing of national tobacco tax revenues with the EU budget indicates a concern for potential financial risks to Germany, as such measures may not align with the country's objectives of strengthening the economy and attracting investments. Furthermore, Klingbeil's stance on these fiscal issues suggests a desire to protect national fiscal sovereignty and limit Germany’s financial exposure, which contrasts with Ursula von der Leyen's ambitions to finance common priorities through targeted corporate tax rules.
