The Cost of Donor Aid to the Taxpayer

January 23, 2006

It is generally accepted that overseas aid is a moral and an essential constituent part of the annual budget for Western governments.

The European Commission in Brussels has often drawn criticism for the way it supervises its own expenditures. 65% cannot be verified by the European Court of Auditors, who say that it is affected by "errors of legality and regularity". The Funding for Peace Coalition has long highlighted the hundreds of millions of aid, destined for the average Palestinian, and which has been diverted towards the violent and corrupt.

It is now evident that this enormous level of uncontrolled spending is no longer sustainable. There are gathering calls by senior European politicians, within Brussels and amongst the member states, who are calling for extra taxation to fund these excesses.

What follows is one of several articles that have been printed on the subject in leading publications.

New EU taxes urged to pay for budget

By Graham Bowley, International Herald Tribune


BRUSSELS. The Austrian chancellor, Wolfgang Schüssel, on Wednesday called for new taxes that European citizens would pay directly to Brussels to finance the European Union's budget.

Schüssel's call, which will most likely face fierce opposition from Britain and other member states, represents an idea that is crystallizing among some EU leaders that the Union must be given greater powers to tax its citizens directly if it is to end the interminable wrangling among member governments over their EU budget contributions.

"Europe needs a strong way of financing itself," Schüssel said in a speech to the European Parliament in Strasbourg. Austria is the current holder of the EU's rotating presidency.

The idea of direct taxation could mark an important stage in the evolving nature of the EU, which in 2004 expanded from 15 to 25 members. But some member states, most prominently Britain, want to retain national control over their tax policies and have fought to restrict the expansion of the EU's central budget, which among other things redirects funds from richer to poorer members and pays for common EU policies.

Schüssel, who wants to use Austria's presidency to restore confidence in the EU after the rejection of the constitutional treaty last year, said the Union would not survive if it continued to rely solely on budget contributions from national governments. He said that giving the EU power to levy taxes directly would end the kind of infighting that soured relations for most of last year during talks on the 2007-13 budget.

"We will kill ourselves next time - the member states - if we negotiate only on this basis," he said.

Schüssel and other EU leaders, like Josť Manuel Barroso, president of the European Commission, see a direct tax as a possible step in the evolving nature of the EU, which in recent years has taken on new members and added the single currency, the euro, among a core group of its members.

Schüssel said the new European tax could be levied on investors' short-term profits and on international air and sea travelers, but gave no further details.

A British government spokeswoman said: "This is something that the U.K. has reservations about, and we are not alone. There are other member states that have concerns about it."

The idea of a direct European tax is not a new one, but it has come to the fore since member states reached a seven-year budget deal in December after bitter talks, and after the European Commission was given the role of reviewing the whole of the budget in 2008.

The EU receives some funds directly from the import duties and value-added tax receipts of member states, but its activities are financed mostly by direct annual handouts from the EU's richest members, like Germany and Britain.

Carter Dougherty contributed reporting for this article from Vienna.

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