Keeping its commitment during the negotiations on the long-term EU budget for 2021-2027, the European Commission yesterday finalized its proposal for the next generation of own resources. The package includes a new temporary statistical own resource based on corporate profits. After reaching a political agreement on the Fit For 55 package, which seeks to ensure that EU policies contribute to the climate neutrality of our continent, the Commission proposes to also adapt the proposals for own resources based on the emissions trading system ( ETS) and the Carbon Border Adjustment Mechanism (CBM) compared to the original December 2021 proposals.

Yesterday’s proposal completes and updates the budget’s next-generation own resources package tabled in December 2021. At the time, three sources of revenue were proposed: one based on Emissions Trading Revenue (ETS), one based on resources generated by the proposed EU carbon border adjustment mechanism and a third based on the share of the residual profits of multinational corporations to be redistributed to EU member states under the recent OECD/G20 agreement on the redistribution of tax entitlements (‘first pillar’ ). These sources are complemented by a statistical own resource linked to the corporate sector. Once in force, this package of new own resources will ensure sufficient long-term financing of the budget, including the repayment of NextGenerationEU.

The president of the European Commission, Mrs. von der Leyen, said: “Today [σ.σ. χθεσινή] proposal complements our proposal for stable new own resources to finance NextGenerationEU’s massive investment in EU recovery and resilience with four new own resources for the EU budget. Member States now have all the elements to quickly reach an agreement and ensure the funding of the EU budget.”

New temporary statistical own resource based on corporate profits

The European Parliament, the Council and the Commission jointly agreed in 2020 that a new own resource linked to the corporate sector should be proposed. The new statistical own resource based on company profits will be temporary and is to be replaced by a possible contribution from the Business in Europe: A Framework for Income Tax (BEFIT) initiative, once proposed and unanimously approved by all Member States.

Meanwhile, the same resource proposed would be calculated as 0.5% of the theoretical profit base of EU companies, which is an indicator calculated by Eurostat based on national accounts statistics.

It is not a corporation tax, nor does it increase compliance costs for companies. It will be a national contribution paid by Member States based on the gross operating surplus for the financial and non-financial corporate sectors, which will help balance the own resources package and further diversify the EU budget’s revenue sources.

The statistical same resource on corporate profits will generate revenues from 2024 of around €16 billion (2018 prices) per year.

Adaptation of the same resource of SEDE

After increasing the price of carbon emissions to around €80 per tonne of CO2 in 2022 (from €55 in 2021), Member States’ emissions trading system (ETS) revenues doubled in two years to €30 billion in 2022. Prices are expected to remain well above €55 per tonne of CO2 in the coming years. Compared to the original proposal in December 2021, the Commission proposes to increase the payment rate for the same ETS-based resource to 30% of all revenues derived from EU emissions trading — up from 25% originally proposed. This is expected to generate revenue of around €7 billion for the EU budget (in 2018 prices) annually from 2024 onwards. This amount is expected to increase to around €19 billion per year from 2028, when revenues from the new ETS will also flow into the EU budget. At the same time, the annual ETS revenue allocated to Member States could exceed €46 billion, far exceeding the amount expected when the Fit for 55 proposal was put forward.

Adaptation of the MSPA

In light of the Fit for 55 package, the Commission also proposes a technical adjustment of the Carbon Border Adjustment Mechanism (CBM) control framework to align its original proposal for a single resource with the adopted text. This source of revenue is expected to generate around €1.5 billion per year from 2028 for the EU budget.

Next steps

Yesterday’s proposal will be considered in the negotiations with the Member States in the Council on the next generation of own resources of the budget.

Legislative discussions on the first proposal in December 2021 made limited progress. While initially the second proposal for new own resources had to be submitted by 2024, the Commission decided to submit it earlier so that Member States have all the elements to participate in the negotiations under the agreed roadmap. The Commission calls on the Council to speed up these negotiations.

George Fellidis