EU’s £650bn recovery fund in jeopardy: Brussels taxation power grab sparks massive row

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The £650 billion bailout cash pot will be distributed, in non-repayable grants and low-cost loans, to pandemic-stricken regions and industries. To pay for the aid, the European Commission was granted unprecedented borrowing, taxation and spending powers to run up £351billion in joint debt. The cash will be distributed as part of a £1.6trillion total package that includes the bloc’s next seven-year budget.

Eurocrats are working on a three-pronged plan to raise up to £13 billion a year to help fund the bloc’s coronavirus recovery, which is due to be distributed later this year.

The Commission wants to introduce special Brussels-led taxes on carbon emissions and digital companies.

But EU capitals are set to oppose the plans, known as “own resources”, because they don’t want to hand unprecedented taxation powers to the bloc’s executive.

One senior diplomat told the FT: “The only thing we agreed in July last year was there would be a proposal by the Commission, and the Commission has every right to come up with proposals.

“But it is quite clear that many member states do not want new own resources… there are all kind of difficulties. This is not going to be solved soon.”

In a nod to last July’s record-breaking summit, a second insider said: “We will battle again.

“We are thinking about it very much.”

The row over the own resources is expected to reopen the rift between so-called frugal countries – the Netherlands, Denmark, Sweden, Austria and Finland – and those capitals that support handing Brussels more powers.

French President Emmanuel Macron, one of the architects of the plan, is expected to call for more EU-wide taxation to pay for the fund.

After the initial fund was announced, he hailed the agreement as the biggest jump in EU integration since the euro was introduced in 1999.

Whereas Dutch prime minister Mark Rutte was rounded on for sticking up for his domestic voters opposing the creation of a common debt fund and the flow of funs from richer northern European taxpayers to their neighbours in the south.

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The deal was thrashed out without a single public vote being cast after almost 100 hours of acrimonious negotiations between EU governments.

The deep divisions among member states are expected to linger for years to come as future plans are drawn up to start repaying the EU’s new collective debt after 2028.

EU diplomats say the plans for a digital levy is expected to provoke the toughest battle because of other international efforts to introduce a similar global tax.

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Germany has warned eurocrats that any plans for the digital taxation shot not interfere with work being carried out by the OECD.

Plans for a digital levy is also expected to have an unfair impact on different member states, with Ireland expected to be hit the most.

Poland would be more heavily affected by any plans to introduce a carbon border taxation, which countries have warned must comply with World Trade Organisation rules.

Paul Tang, head of the EU Parliament’s taxation subcommittee, said: “Rather than getting bogged down in the usual divisions and discussions, European countries should keep an eye on the broader aim of increasingly public investment and pays to pay for them.”

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