“Control spending, always think of alternatives, delete inefficiencies” – this is the slogan of the EU budget reform recipe proposed by the signatory members of the Coalition of leading European free market oriented think tanks “For a Free Europe”. Today the Coalition submits the Policy Paper as a response to the Communication from the Commission “REFORMING THE BUDGET, CHANGING EUROPE” 112.9.2007 SEC (2007) 1188 to the relevant EU institutions.
The EU budget is a result of political negotiations and trade-offs between member states rather than a well grounded financing of generally agreed pan-European goals. According to the Coalition, EU budget revenue system is too complex and the application of several revenue streams is poorly justified. VAT and GNI-based revenue streams overlap, causing double taxation of the value added component. The EU budget revenue sources must be reformed and built on the following maxims: national contributions to ensure democracy; proportionality to encourage fairness and neutrality; simplicity and transparency (visibility) to create accountability; low administrative burden to increase the effectiveness of payments.
The Coalition proposes the following changes on the revenue side:
1) to eliminate VAT-based revenue stream;
2) to rely on member states contributions based on equal proportions on GNI;
3) to diminish the financial role of traditional “own” resources, leaving them as temporary regulatory tool and to move towards deeper liberalization of trade;
4) to abstain from new sources of revenue, such as an “EU” tax. The introduction of such taxes should be banned;
5) to eliminate corrections of payments or rebates.
Policies that are currently funded from the EU budget are too challenging, too optimistic, too ambitious and thus unrealistic to achieve. Policies are incoherent and contradictory; some of them even erode the competiveness of markets, so the aims of every policy and their consistency need profound re-examination.
EU budget spending must go in line with the following maxims: EU funds – for EU goals; goals, not interests, ensure efficiency; financing may bring desired results, yet redistribution is a result in itself. The application of these principles implies an essential reform (and perhaps abolishment of some) of the current policies.
On the EU budget expenditure side there is a crucial need for the following actions:
1) to create a sound exit mechanism from CAP and rural development policies and annually reduce contributions to the EU budget by the amount previously allocated to these policies;
2) to redesign the Cohesion Policy, focusing it on removal of barriers to flexibility of the markets and free movement of factors of production inside the EU market and improvement of infrastructure linking member states;
3) to abstain from financing new highly uncertain goals, such as climate change control and mitigation, Galileo, etc;
4) to rely on the private financing of innovation, research and development and not to increase present EU budget funding for these purposes;
5) to supplement the Union’s external actions with the promotion of free market reforms in non-EU countries;
6) to avoid the financing of profit-seeking private companies regardless of their region, economic activity or project.
The Coalition proposes zero preconceptions (regarding principles, size, revenue sources, policies and measures) as the baseline for the EU budget reform.
“Only the fundamental reform of the budget itself, not just a reform of the budget’s structure, may change Europe. If an agreement on common needs or attainable goals is not reached, the size of the EU budget must be decreased”, – Rūta Vainienė, Head of Tax Competition and Budget Reform Team, Coalition for a Free Europe and the Project Manager of the Lithuanian Free Market Institute, says.
RESTART THE EU BUDGET “CTRL+ALT+DEL”
Signatory members of the Coalition for a Free Europe:
Alberto Mingardi – Istituto Bruno Leoni, Italy, Director
Barbara Kolm – F.A. v Hayek Institute, Austria, Secretary General; European Center for Economic Growth, Austria, President
Jan Oravec – F. A. Hayek Foundation, Slovakia, President
Krassen Stanchev – Institute for Market Economics, Bulgaria, Executive Director
Pierre Garello – Institute for Economic Studies, France, Director
Remigijus Šimašius – Lithuanian Free Market Institute, Lithuania, President
Matthew Elliott – The Taxpayer’s Alliance, UK, Chief Executive
Pierre Bessard – Institut Constant de Rebecque, Switzerland, Execute Director
Sebestyén L. v. Gorka – Institute for Transitional Democracy and International Security, Hungary, Executive Director
Robert Nef – Liberales Institut, Switzerland, Director
Prof. Ivar Raig – Research Centre for Free Europe, Estonia, Chairman
Carl-Johan Westholm – Constitution For a Free Europe, Sweden, Founder
Prof. Hardy Bouillon – Chairman, Academic Advisory Board, Center for the New Europe, Belgium
Prof. Pascal Salin – Universite Paris- Dauphine, Paris
The Coalition For a Free Europe was launched in the middle of 2006. The goal of the Coalition is to offer the EU and local governmental institutions solutions based on individual freedom, responsibility and limited government in the areas of Tax competition, EU budget reform and EU accountability and energy policy. The Coalition members have a long history of cooperation among themselves in different fields of economic policy. Recently the Coalition members raised initiatives on the “Services” directive, Common Consolidated Corporate Tax Base and Excise policy. In 2008 the Coalition will concentrate on Tax competition and EU budget reform issues.
Head of The Coalition for a Free Europe Tax Competition and Budget Reform Team, LFMI’s Associate Policy Analyst