EU Commission Proposes Corporate Levy and Increased ETS-Based Contributions

The European Commission has presented a proposal to introduce a temporary tax of 0.5% on surplus corporate profits as part of its efforts to adjust the "own resources" basket.

This tax would be paid by EU member states instead of directly by companies and would be based on the gross operating surplus of corporations. The aim is to generate additional revenue for the EU budget.

Alongside the corporate levy, the Commission plans to make adjustments to the Emissions Trading Scheme (ETS) and the Carbon Border Adjustment Mechanism (CBAM) in order to increase the call rate on ETS and CBAM revenue. This decision reflects the commitment made by EU leaders in 2020 to identify new sources of revenue for long-term budget plans. The proposed sources include the ETS, CBAM, and the reallocation of taxing rights under pillar one.

The Commission intends to cover the costs of the COVID-19 recovery package, which includes €750 billion ($821.4 billion) in grants and loans, by expanding its own resources basket rather than reducing program expenditure or investment. This expansion is seen as a means to avoid undermining other important areas of spending.

The proposal for a 0.5% tax on surplus corporate profits will be measured by the European accounts system, with EU member states being responsible for collecting and transferring this levy on a monthly basis. This measure is considered temporary and will remain in place until the EU can implement a common consolidated corporate tax base, although the finalization of the Business in Europe: Framework for Income Taxation initiative is still pending.

In addition to the corporate levy, the Commission aims to increase the call rate on ETS-based own resources, taking into account the rising costs associated with carbon emissions since 2021. The call rate is proposed to be raised from 25% to 30%. Furthermore, the CBAM is expected to contribute €1.5 billion per year to the EU budget starting in 2028.

The implementation of these changes will initially target the maritime and aviation industries, with a gradual expansion from 2028 to cover businesses in the construction, road transport, and other sectors. The EU estimates that the temporary corporate tax will generate approximately €16 billion annually, while the increased call rate on ETS-based own resources will raise an additional €1.5 billion. These projected revenue figures represent nearly a tenth of the EU budget for 2024.

These adjustments to the own resources package hold significant implications for the EU's ambitions of achieving greater fiscal integration. However, the Commission now faces the task of obtaining acceptance for its proposals from EU member states, which will likely involve negotiations and discussions among stakeholders.

By fLEXI tEAM