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Reforming the EU Budget: How to Increase Financial Autonomy?

Rui Henrique Alves

In this paper, we address the ongoing debate on the questions of the composition and financing of the European Union's common budget, which has recently been the object of a new impulse by the European Commission. We start by describing the current situation with regard to the size of the EU budget, the composition of its expenses and the way it is being financed. Then, by considering the main current challenges for the EU, together with some major lessons from the fiscal federalism theory, we argue in favour of a significant enlargement of the budget, together with a profound reform of its composition and financing. Regarding this last aspect, we analyse several recent proposals, with a special emphasis on the possibility of creating a true new "own resource", namely a European tax. The analysis of the involved costs and benefits allows us to argue in favour of an EU surcharge on national personal income tax, which would give the EU an important degree of financial autonomy, as well as more transparency in its financing and an increased feeling of belonging to European citizens. A simulation for the financing of the EU budget is then made, in line with this proposal.

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