Posted on Jul 19, 2021, 5:11 PMUpdated Jul 19, 2021, 5:23 PM
On paper, the exercise seemed rather easy. To repay over thirty years the generous loan of 750 billion euros that Europeans collectively issued to get their economies back on their feet after the Covid crisis, new financial resources had to be released.
But while the Commission was preparing to unveil, on Tuesday, the proposal that was to make this ambition a reality, it decided, on Monday, to postpone the announcement until next autumn. Because the obstacles rise one after the other, to the point of endangering the whole structure. And also because tensions are emerging within the Commission on the tax subject.
First there was the digital tax setback. The agreement on the minimum taxation of multinationals within the framework of the OECD has changed the situation and Washington has put pressure on the Europeans to give up their own digital tax plan. Brussels froze, in principle until autumn, the proposal it was about to announce. For some, the mass is said and the United States will never accept that Europe taxes twice its Gafa, a fortiori to repay its loan. In Paris, in any case, we do not look favorably on this digital tax which would be more like a tax on online commerce and would largely affect European companies.
For others, nothing is yet decided if the European Commission shows courage. Quits, believes Valérie Hayer, the MEP specialist in budgetary issues, to ask the Member States now to commit to redirecting part of the future revenues from global taxation to the European budget, if no European tax comes to supplement the device (an option which would have favored Bercy). Europe expected revenues of 2 billion per year from it.
Risk of retaliation
The famous border carbon adjustment that the Commission presented on July 14 is also strongly contested. Less within the Union where reluctance has gradually faded with regard to this levy which should protect European companies against “environmental dumping” from countries with less strict climate standards such as Brazil, India or Russia.
The main criticisms come from outside, from the United States in particular, which has recently been moved by the consequences of such a tax. “The United States currently do not have the political means to make Congress vote for a carbon market equivalent to that which exists in Europe, so they fear being affected by this tax”, explains Thomas Pellerin-Carlin, of the Institute. Jacques Delors. The project therefore runs up against the risks of trade reprisals, of complaints before the World Trade Organization if the tax creates trade distortions and the complexity of the implementation of the device which should bring in 9 billion euros.
Politically suicidal
The third own resource envisaged, the most profitable with around 10 billion euros in expected income, is linked to the reform of the European market for emission allowances that Brussels and which is also strongly contested. With the exception of Germany, Denmark and the Netherlands, all the countries of the Union as well as the elected representatives of the European Parliament criticize this aspect of the reform which extends the European carbon market to buildings and transport.
The Commission may well propose a very substantial support fund to compensate for the increase in prices for the most deprived households, the social impact of these measures is worrying. “Do not make the mistake of extending the carbon market to heating and fuel,” warned Pascal Canfin, president of the European Parliament’s Environment Committee. We lived it in France, it gave the Yellow Vests. It is politically and climatically suicidal ”.
According to him, this high social risk tool is also ineffective in reducing greenhouse gas emissions. He also argues that asking the French or the Poles to repay the European stimulus plan with an increase in their heating bill would be a golden gift for the populists.
The road is therefore strewn with pitfalls, while the European Parliament was counting on these own resources from 2023. A timetable that will be very difficult to keep. However, the first repayments of the European loan should not take place until 2028. There is therefore a little time left to find compromises. Otherwise, states will have to dip into their coffers in order to directly supplement the European budget.
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