Other Revenue for the EU Budget – Status Quo and Potential

Fiscal Integration in an Experimental Union: How Path-Breaking Was the EU's Response to the COVID-19 Pandemic?

The implementation of the directive on services in the internal market has been a challenge in many parts of the EU. This is particularly true with regard to the interaction between the member states and their public entities, for example, the interaction between the Kingdom of Spain and Galicia. Implementing the directive in Spain required the passage of important legislation, at both the Spanish and Galician levels, and this took several years. Galicia’s experience is particularly interesting since the implementation of the directive had to take into account the community’s cross-border business activities with Portugal. This article argues that European regions, especially those with legislative powers, cannot confine themselves to merely being recipients of matched funding from the EU budget. Instead, they must take shared responsibility and work together as equal collaborators in implementing European law, even where it clashes with the status quo and the vested interests of certain minorities.

In 2008, the Common Agricultural Policy (CAP) reached its fiftieth birthday. It has been a constant factor in directing resources to the EU agricultural sector, but the means of channelling these resources have changed considerably over time. This article charts the evolution of the CAPs principal policy instruments and analyzes the welfare effects of its major reforms. It also analyzes these changes in terms of the institutional context of the principal reform pressures, namely international trade obligations and EU budget concerns. We will show that the link between these two pressures was never one of simple determinism: the CAP and its reform can only be understood in light of these pressures and of endogenous vested interests to the policy. En 2008, la Politique agricole commune (PAC) célèbre ses 50 ans. Cette politique a été un facteur constant de l'orientation des ressources vers le secteur agricole de l'UE, mais les moyens utilisés pour acheminer ces ressources ont changé considérablement au fil du temps. Le présent article retrace l'évolution des principaux instruments de la PAC et analyse les effets de ses grandes réformes sur le bien‐être. Elle analyse aussi ces changements dans le contexte institutionnel des pressions de la réforme, à savoir les obligations commerciales internationales et les préoccupations quant au budget de l'UE. Nous montrons que le lien entre ces deux types de pression n'a jamais été d'un déterminisme simple: la PAC et sa réforme ne peuvent être comprises qu'en examinant ces pressions et les droits acquis endogènes qu'elles génèrent.

Tax and Spending in the 2020s

The European Parliament (EP) and national parliament (NPs) occupy two opposite but complementary positions as budgetary authorities in the EU and, indeed, democratic legitimacy of EU and national budgetary procedures can hardly be conceived without taking into account NPs and the EP together. Framed within the discourse on throughput legitimacy, the article analyses if and to what extent the EP and NPs are involved in the decisions on EU revenues and expenditures as well as in the European Semester and what initiatives has the EP supported to enhance its participation and that of NPs in those domains. Given the unsatisfactory status quo, the article put forwards the proposal of a joint parliamentary control carried out by an interparliamentary committee on EU and national budgets to redress the problem of a lack of coordinated democratic scrutiny over them, in addition to the control carried out by the EP and NPs individually.

Dissatisfaction with the current EU budget has inspired the ongoing general review of the Union's budgetary system. In this context our aim is threefold. First, we demonstrate that the application of normative yardsticks to the budget reveals severe shortcomings of the status quo. Secondly, we identify the political‐economic obstacles to budgetary reform. Thirdly, we review the reform literature and identify ‘incentive channelling reforms’ as the most promising type. This type of reform option takes account of the incentives which so far cause reform resistance and tries to reconcile them with a more efficient budgetary outcome.

The aim of this study was to identify the circumstances in which the Common Agricultural Policy, once the most centralised policy in the EU, changed, after 2013, into one which is the most decentralised and diversified. The following hypothesis was put forward that the introduction of significant flexibility in the CAP reflects the search by Member States for the most effective ways to identify and implement their own preferences on the EU forum. The research was conducted from the perspective of the liberal intergovernmentalism theory based on a critical analysis of the respective literature and the applicable strategic documents and regulations. In the study, a large heterogeneity of agricultural sectors in the EU has been shown, resulting from several enlargements of the EU. Consequently, it has led to an increasing diversification of national preferences, signifi cantly affecting the shape of the CAP reforms proposed on the EU forum. Other important drivers influencing the changes in the CAP were the introduction of a co¬decision procedure in the area of agriculture, along with the increasing impact of Member States on the decision-making process since the economic crisis of 2008–2009. As a consequence, EU budget negotiations have been dominated by narrowly-defined sectoral and national interests. The concentration of Member States on an acceptable net position contributes to maintaining the status quo in terms of the expenditure part of the EU budget or its reduction. Thus, there is a risk that the deficit of European integration in areas assuming the distribution of costs and benefi ts between Member States may have a negative impact on the future of the EU.

Dalia Grybauskaite, while she was EU Budgetary Commissioner, said that the future financing of the CAP was the “hottest topic” of the budgetary review. The next months will be decisive as regards the financing of the CAP beyond 2013. Net beneficiaries of the CAP and agricultural interest groups would of course like to maintain the status quo while others would prefer to use the funds for other purposes. When, and how, is the common financing of the CAP justified?

This Article draws upon and connects three different developments: the ‘internationalisation’ of tax law and EU tax law, specifically; the increasing digitalisation of the economy, and the European Union’s need for more revenue to deal with the financial consequences of the COVID-19 pandemic and other policy priorities. It is explained why the taxation of data per se cannot be addressed at the global level at present and why the focus of research has to lie on the taxation of the different business models of the digital economy. In the absence of a global agreement as to how the digital economy should be taxed, the reaction of the European Union to such a fundamental undertaking remains uncertain and politically contingent on the outcomes of negotiation at the OECD level. Most particularly, on the so-called Pillar One agreement. A seemingly temporal solution to the taxation of the digital economy, the so-called DSTs (Digital Services Taxes) have been adopted by Member States of the EU and third countries, but their future remains uncertain. Amidst these developments, the EU has also looked for ways to increase its resources and to finance its post-Covid ambitious recovery plan. This need has led to a reconsideration of whether EU taxes could finance the EU budget (next to the Union’s own resources, which remain for the main part transfers from Member States). In this Article, I argue that beyond tax design considerations and potential constitutional impediments, the EU revenue side should be emphasised in the discussion. Therefore, I suggest that the Union should ensure that at least part of the revenue arising from digital taxation should be channeled to the supranational budget. Whether Pillar One gets adopted or not, the potential introduction of an EU digital levy, ideally by way of an EU tax, could help overcoming several shortcomings of the present tax status quo and could result in an increase of the resources at the disposal of the EU in a fashion compatible with the imperatives of democratic legitimacy.

Summary The European Union is facing huge environmental and climate-related challenges. Greenhouse gas emissions, biodiversity losses, ammonia emissions and continuing excessive nutrient loads in water bodies demand a much more targeted and consistent agri-environment-climate policy than has hitherto been the case. Agri-environment-climate policy measures to date – including within the Common Agricultural Policy (CAP) – have not sufficiently reduced the environmental pollution caused by agriculture. In its 2018 draft regulations, the European Commission proposes a “new delivery model” for the post-2020 CAP. This model shifts responsibility for policy-making towards member states and strives for greater “results orientation”, offering member states the possibility of implementing the CAP to focus much more on the public good. Under these legislative proposals, the EU will in future only specify the objectives and broad types of interventions, leaving member states to quantify targets and design the specific measures. To that end, each member state will produce a national strategic plan for its entire territory in which measures in Pillars 1 and 2 of the CAP are jointly programmed. This plan is to be submitted to the European Commission for approval. Three policy tools are envisaged in the design of the CAP’s “green architecture”: the “conditionality” of direct payments; the new so-called “eco-schemes” in Pillar 1; and environmental and climate-related regulations in Pillar 2 (AECM II). These three policy tools combined offer member states much greater leeway than they have had in the current funding period (2014-2020). In Germany this requires more extensive coordination between the Federal Government and German states. The Advisory Board’s conclusions on the legislative proposals submitted by the European Commission are mixed. Member states are being offered new opportunities to implement targeted agri-environment-climate measures, but the scope they are being given is so broadly defined that it is possible for their agri-environment-climate policies to be relatively unambitious and continuing to focus on income support. The Advisory Board recognises a risk of a race to the bottom in terms of the level of ambition of agri-environment-climate policy if the European Commission, which is the impetus behind it, does not apply more ambitious budgetary provisions or stringent criteria for the approval of national strategic plans. Whether a challenging, targeted and efficient agri-environment-climate policy is developed or member states stick with the status quo of agricultural aid primarily depends on their political will to take action. In the present report, the Advisory Board evaluates the legislative proposals for their potential to produce a targeted agri-environment-climate policy, and offers suggestions for an effective national design of this policy area as part of the CAP’s “new delivery model”. The Advisory Board also gives details of its April 2018 recommendation to gear the post-2020 CAP more towards serving the public good (WBAE 2018). To design an effective agri-environment-climate policy as part of the post-2020 CAP, the Advisory Board makes the following recommendations for the Federal Government and in part for state governments: I) Clearly identify agri-environment-climate policy issues and operationalise objectives. (1) Based on the issues identified, prioritise objectives; (2) state the contribution the CAP should make to achieving national environmental and climate action plans; and (3) support the interpretation of target income according to the case law of the European Court of Justice, thus focusing the CAP on safeguarding agriculture’s social functions. II) Specify and gradually increase the minimum budget shares for agri-environment-climate protection. For national implementation: (1) spend at least 30 % of the sum from direct payments and EAFRD funds on agri-environment-climate action objectives from the start of the new funding period; (2) increase this budget over ten years so that 100 % of Pillar 1 funds are available for ambitious eco-schemes, AECM II or animal welfare measures; (3) communicate this change in premiums in good time; (4) if eco-schemes are oversubscribed, reduce the basic premium (“basic income support for sustainability”); and (5) reallocate more funds from Pillar 1 to Pillar 2 as early as 2020. Furthermore, at EU level, support: (6) the complete removal of the basic premium over ten years; (7) the possibility of the basic premium being co-financed nationally; (8) a distribution of funds between member states in line with the challenges faced and added value to Europe; and (9) the stipulation that all member states spend at least 30 % of the sum from direct payments and EAFRD funds on agri-environment-climate objectives. III) Establish specific budgets at EU level for biodiversity and moor preservation across member states. At EU level, lobby for: (1) the establishment of specific EU budget shares for the Natura 2000 network and moor preservation (as a pilot project); and (2) the implementation across the EU in the medium term of a specified minimum percentage of extensively farmed land at regional level for species and biotope protection. IV) Replace blanket cross-compliance of direct payments with “specific conditionality”. (1) Minimise the conditionality requirements for individual farms in the CAP strategic plan and instead programme targeted, ambitious and well-funded eco-schemes and AECM II; (2) enshrine selected funding regulation standards in regulatory law to maintain land in a good agricultural and environmental condition (GAEC); and (3) from a certain subsidy amount, place beneficiaries under an obligation to receive advice or undergo individual farm sustainability checks. V) Reinforce constitutional and target conditionality. In EU negotiations, support the introduction of: (1) a sliding scale of constitutional conditionality; and (2) the implementation of binding target conditionality across the EU as part of the CAP strategic plans. VI) Overhaul the CAP’s performance framework. In EU negotiations support: (1) a closer alignment of the reported indicators and objectives; and (2) the simplification of reporting. VII) Clearly state the requirements for approval of the CAP strategic plans, thus increasing transparency and planning predictability. In negotiations at EU level, support: (1) the stipulation of minimum requirements in terms of the ambitiousness of eco-schemes; (2) timely public access to member states’ strategic plans; and (3) maximum inclusion of requirements in the basic legal instruments and not in the form of implementing acts or delegated legislative acts. VIII) Design targeted and efficient eco-schemes. (1) In the national strategic plan, programme measures that are of interest nationwide and have been formulated for the relevant objectives; (2) design and reward measures differently by location; (3) differentiate efficiently between eco-schemes and AECM II, and create targeted combination options; (4) exclude eco-scheme payments from capping or degression. IX) Open up eco-schemes to animal welfare measures and develop animal welfare support. At EU level, support: (1) the ability of member states to compensate for some of the costs incurred by increasing regulatory animal welfare standards considerably above the EU average with state payments within the scope of the European Agricultural Guarantee Fund (EAGF) or the European Agricultural Fund for Rural Development (EAFRD); (2) open up eco-schemes to non-investment animal welfare measures that can be linked much more effectively to the number of animals than to the eligible area. For national implementation: (3) considerably increase the use of funds for animal welfare funding; and (4) make use of opportunities to appropriate funds within the Joint Task for the Improvement of Agricultural Structures and Coastal Protection if funding does not come from eco-schemes. X) Increase the focus of Pillar 2 agri-environment-climate measures on objectives by means of innovative incentive mechanisms. (1) Test incentive tools for improved spatial steering of agri-environment-climate activities in practical applications; (2) develop programmes for results-based reward of environmental and climate performance; (3) do not stand in the way of a shift towards a more targeted agri-environment-climate policy by using the argument of higher administration costs. XI) Improve the institutional prerequisites for collectively organised agri-environment-climate protection. (1) Examine the extent to which elements of the Dutch system of collective nature conservation arrangements could also be applicable in Germany; (2) improve the institutional prerequisites for the implementation of collective models of environmental and climate action; (3) in pilot projects in the current finance period, support the grouping of relevant local actors into “biodiversity-generating communities”. XII) Revise the definition of subsidy beneficiaries and eligible land. At EU level, support: (1) the eligibility of all land managers who perform agricultural activities within the scope of Pillar 1; (2) the expansion of the definition of “agricultural activities” to include paludiculture in the draft CAP strategic plan regulation; and (3) the expansion of the definition of “permanent grassland” in the draft CAP strategic plan regulation so that member states can distinguish “permanent grassland” on a particular qualifying date. For national implementation: (4) make as much use as possible of the freedom to encourage high-quality nature conservation-related management and care of non-forest areas through Pillar 1.