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The European Constitution as a trapdoor for a Euro-tax

"Tony Blairıs biggest immediate problem in Europe is not the Constitution but the budget. The two are linked".
- columnist Peter Riddell (Times, 10.6.05)

After massive popular rejection, some have declared the European Constitution dead. But it won't lie down. Some haven't given up on ratifying the Constitution; others want to introduce parts of it without the inconvenience of a referendum.

The New Labour government's position (as at 6.6.05) seems to be to sit on the fence on whether to hold a referendum. However its election manifesto strongly spun its intention that the Constitution was 'good for Britain and Europe'.

The Constitution says that the EU "shall provide itself with the means necessary" to attain its objectives, which are certainly ambitious. The political elite want to mimic the USA as a superpower, expanding foreign policy initiatives and developing European military capabilities. Extending its controlling presence into more and more areas of national life will also require money.

Although the EU's budget is to be financed from the established system1, this is "without prejudice to other revenue".2

The Constitution contains a Charter of Fundamental Rights of the Union. This could be used to justify taxation of individuals in the name of 'solidarity' or 'the environment', as the EU can restrict the right to enjoy one's own property to meet 'objectives of general interest'.3

Energy or environment taxes could be slipped through without a veto4 In the light of recent developments, transport-related taxes, such as road charging, could come under "any other appropriate measure."5


Proposal for Euro-taxes - independently of the Constitution
The European Commission released a document: "Tax based EU own resources: An assessment" 6

It shows that the EU is already looking at nine new types of Europe-wide tax - covering 7:

  • extending VAT (and ending our 'temporary' zero rating)
  • personal income tax
  • company taxes
  • alcohol and tobacco duties
  • communications (including phone lines, broadcasting)
  • road travel
  • air travel
  • energy
  • financial transactions.

On the scoring system, personal income tax, energy and VAT were well rated; financial transactions less so. However it adds that none of them should be ruled out.

What might this involve?:
VAT - either as a surcharge, or as a fixed EU 'take' of perhaps 3% from the existing rate. (1.5% for some more sensitive items).

However, this could mean ending the UK's zero rating on various essentials, such as food in shops, children's clothing and shoes, books and newspapers, public transport fares, housing.

Our VAT 'opt-outs' 8 have always been seen as temporary. We should note from Sweden's case that on joining the EU, it retained temporary permission to operate a state-run monopoly of off-licences to sell stronger drinks. The European Commission duly demanded that Sweden set a date for ending these arrangements, stating that it would otherwise impose one.

Personal income tax - might be in the form of an EU levy included in national income tax. This was felt to be attractive as it 'enhanced accountability'.

Examples mentioned for the level of tax included a personal income tax levy of £162 (260 Euros), a telephone line tax of £24 per year (40 Euros) and an airport departure tax of £9 (15 Euros).

It noted reservations about a tax on financial transactions leading to a shift of business outside the EU, however this concern previously did not stop the EU legislating on art markets.

Given the UK government's recent moves towards national road user charging, the Commission's observations make interesting reading:

"For instance, taxing vehicles is not a very efficient instrument for reducing polluting emissions relating to road transport ". The same is noted on reducing congestion.


A political agenda
The theme of tax harmonisation runs through the comparisons. "Unequal tax treatment of equivalent EU taxpayers would probably be considered as discriminatory and against the ideals of European construction".

The Commission separately advances grandiose reasons for additional funding - e.g. 9
"...citizens look to the EU for protection against large scale disasters"
"...the audiovisual [film] industry is still structured on a national basis".

The end game is basically doing more on an EU level - which incidentally creates work for the Commission in policing it.

Despite assurances about maintaining tax sovereignty, the EU's supreme court10 has made several political judgements on tax matters, giving the UK government headaches and showing where the real power lies.

Even if some tax decisions currently seem 'national', the government has said that it rejects permanent opt-outs of European policy11. It originally saw no need for a European Constitution, but caved in after political pressure.

Prompted by discussions on the UK contribution rebate, Tony Blair admitted that that if there was "a fundamental review of how Europe spends its money, then of course everything then is open to debate".12

According to one report, his MEPs and some LibDems voted for a 'Eurotax' ("an independent EU funding system") to be set up over the next eight years.

What can you do?
Follow developments (e.g. during the UK's Presidency of the EU (1 July - 31 Dec 2005), and the heads of government meeting ('European Council') before it, on 16/17 June).

Follow the inevitable debate on the future of Europe that will result from the rejection of the EU Constitution. Look at the arguments for a different kind of relationship, such as the UK re-adopting self-government, but co-operating and trading freely with the other nations of Europe.



1 known as 'own resources'
2 EU Constitution reference - Article I-54
3 Part II Preamble; Arts II-77, II-112
4 so long as they are seen as 'primarily environmental' rather than 'primarily fiscal'. Art III-234
5 Art III-236
6 Tax based EU own resources: An assessment - Working Paper No 1/2004. Author: Philippe Cattoir, ISSN 1725-7557,
7 also 'seignorage' (definition imprecise, concerns bank income from issuing currency)
8 'transitional derogations'
9 Communication COM(2004)101, 26.2.04, (via search page
10 'The European Court of Justice'
11 Labour Party conference report, "The future of the European Union", 1995
12 BBC News, 10.6.05,

The Technical Annex ('Vol II') to a Commission internal report dated 14.7.04, COM(2004) 505 final (470kB, PDF) develops the above ideas in detail.



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This page compiled: 12 Jun 2005, updated: 26 Dec 2005