The European Commission has prepared a proposal that should fundamentally increase the total spending of the European Union by 45 percent. The Union wants to finance a larger budget by increasing contributions and introducing new taxes, according to the Institute of Economic and Social Analysis (INESS).
“According to our calculations, Slovakia should pay 550 million euros more to the common budget annually than before. This is the equivalent of revenues from the transaction tax,” explains INESS analyst Radovan Ďurana.
It would be enough to cut ineffective subsidies
In a new study called INESS, it claims that the introduction of new tax revenues is not necessary if the budget is drawn up based on the priorities that are part of the founding treaties of the EU.
These priorities are the promotion of the common market, the free movement of people, services and capital. Likewise, the solution of cross-border issues, including some defense expenditures, which member states cannot solve alone. If the budget were to concentrate on these basic areas, it could be more than 200 billion euros lower. There would be no need to increase the tax burden on EU citizens, which already exceeds 46 percent of GDP (average for the entire EU).
“However, the draft of the new European budget also continues the redistribution of resources, if subsidies and grants for the development of selected industries are added to the support of farmers and inefficient regional development spending. Instead of developing and expanding a functional capital market, the Commission wants to secure new resources by increasing taxes. Such a step, on the contrary, will reduce the competitiveness of the European economy,” states Ďurana.
Higher taxes instead of sustainable finance
The Commission wants to obtain part of the new income by increasing traditional sources. In the case of Slovakia, it could be 180-230 million euros per year. By introducing new taxes and obtaining shares from existing tax instruments, the Commission wants to extract another 365 million euros.
However, INESS draws attention to the fact that the Slovak government runs a very high deficit and does not have a strategy to reduce it below 3 percent of GDP. “Debt continues to grow despite consolidation measures. Companies pay the highest tax rates in the post-communist region. An increase in contributions to the EU budget would further complicate the path to sustainable finances, higher taxes would contribute to slowing down the flimsy growth of the Slovak economy,” comments the analyst on Brussels’ intentions.
According to him, at the upcoming negotiations, the government should demand a more economical and efficient budget that will not increase the tax burden on businesses and EU citizens.
