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Policy Paper

Financing the EU budget with a surtax on national income taxes


Author: Alberto Majocchi
Date: October 2011

To launch a European plan for sustainable development it is necessary to at least double the current size of the EU budget: this was already foreseen by the MacDougall Report in 1977 and by the Report on the evolution of public finance within the Monetary Union prepared by a group of experts for the European Commission in 1993.

Considering this, it appears reasonable to propose a modification to the current system of funding the budget by introducing a European surtax on the income taxes currently applied in the various Member States.  In the perspective of an evolution towards a federal EU, creating this surtax would mean a reform of the current “fourth resource”, significantly increasing the effect of redistribution and, to some extent, of stabilisation, if the proportional rate to be applied is corrected by a progressivity coefficient based on the ratio between the income per head of each individual Member State and the European average. In this way, the richer countries should pay more to the EU budget than the poorer ones.

This surtax, unlike the current “fourth resource”, would be paid directly by individual taxpayers, while the Member States would still have the right to decide to what extent it should be borne by the individual citizens, maintaining the structure and the level of progressivity of the national fiscal system.

This proposal, if put in place, would have the advantage of making transparent and clear to citizens the tax burden deriving from funding the EU, an important element if the size of the budget were to increase significantly in the future.

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