European fiscal union

A new report by former Commissioner Mario Monti revives the talks about EU fiscal and political integration

The new report compiled by Mario Monti, tasked by the European Commission, argues that the European Union should raise its own taxes - instead of relying on national contributions - and proposes a set of possible measures on direct EU funding.

Currently, the member states provide the great majority of the funding through contributions from their national budgets. The idea of the report is to reverse this relationship by allowing the EU to raise its own funds. The main possible revenues proposed by Mr. Monti are a CO₂ levy, an electricity tax, an EU corporate tax and a financial transactions tax.

Obviously, the above measures are just possible examples of direct EU taxes on which one can agree or not. But, regardless of the actual taxes that will eventually be chosen, in this moment the real question is whether or not the concept itself of European taxes is correct.

Actually, as the economic theory points out, within a currency union the fiscal integration is not just acceptable, but it is essential. The presence of a common federal budget with spending capacity allows - among other things - to realise strategic projects useful for the whole area, to pursue redistributive policies, and to smooth the asymmetric economic shocks so hard to manage under the current European infrastructure.

Moreover, beyond the economic aspect, there are a number of issues that the EU can certainly address more efficiently than single countries on their own. Above all, let's think about the management of migration flows and the planned deals with African nations, the measures to combat terrorism and the protection of EU external borders threatened by wars in neighbouring countries. It goes without saying that a common approach to such issues should be financed directly by the EU itself, and not by national taxes reversed into the European budget.

The two most popular concerns are possible overall tax rises and the lack of democracy. Regarding the former, it has to be considered that the new European taxes should be offset by a corresponding decrease in national ones, since the tasks transferred at European level doesn't need to be financed at national level anymore. Secondly, it should be kept in mind that the European Parliament is directly elected by European citizens and that the other European institution's members are chosen by national parliaments or governments which have a democratic mandate. Hence, this is not a question of lack of democracy, but of scaling up the issues at a more suitable level.

The real problem is that many people do not feel a European sense of belonging. Originally, the European project got everyone involved by ensuring peace in a continent struck by centuries of wars and by embracing the post-war world order that brought solid democracies and a fair economic growth. Nowadays, Europe should more vigorously focus on the new challenges outlined above, since the timid and divided responses provided until now are strengthening the movements professing nationalist and anti-immigration political rhetoric. Indeed, one of the main European problem is that the EU doesn't have the powers it needs to pursue its politics and ideas, which are continuously opposed by single countries that act only in their own interests without sense of solidarity (the most evident example is the difficulty EU is facing in redistributing migrants among the member states). In this context, the failure in addressing certain issues is actually the member state's failure, not the EU's one.

Transferring the necessary tools to the EU and moving towards "an ever closer union" - not only monetary, but also fiscal and political - is the proper way to allows the EU to achieve its objective, and thus to make people feel real Europeans again.

2017.01.22