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Funding the EU Budget: A Case for Inaction?

PFM, Vol. 9 No. 4, (2009)

The way the EU budget is funded is often criticized, especially in the light of the increasingly complex devices used to limit net contributions. In addition to the formal UK rebate, there are reduced rates of take-up of different funding streams for certain other countries, all of which makes the funding side of the EU messy. Calls for the budget to be funded by a tax (or taxes) assigned to the EU level have repeatedly been articulated. However, the system has one over-arching attraction which is that it assures the EU of sufficient revenue to fulfill its spending commitments. This paper offers a critique and assessment of the current system for raising the revenue for the EU budget and considers the conceptual case for a move to a tax of Europe. It appraises the case for abandoning the current system in favor of a tax-funded one and concludes that although the case may be conceptually robust, political economy considerations suggest that change is unlikely for the foreseeable future.

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