Redistribution of Responsibilities Between EU and Member States Would Result in Considerable Savings

There are many different ideas about what the future of the EU should look like, but one particularly controversial issue is how the different powers and responsibilities within Europe should be divided between Brussels and the Member States. Reformers need to ask themselves, in which areas of policy do we need more Europe, and in which could we do with less? Where might the competencies of the national states in policy design be best put to use and where might a centralised decision-making process in Brussels prove more productive? A study carried out by the Centre for European Economic Research (ZEW), Mannheim, on behalf of the Bertelsmann Stiftung looking at the main areas of EU policy has found that shifting competencies in certain areas either to the Member States or to Brussels could save money and make the process of political decision-making in Europe more efficient.

A total of eight different policy areas were considered in the study: agriculture, unemployment insurance, asylum and refugee policy, education, development, rail and freight transport, corporate taxation, and defence. Researchers evaluated a possible reallocation of competencies between EU institutions and the Member States with respect to efficiency goals. They considered a reallocation of competencies in two directions, one scenario with EU institutions bearing a greater share of responsibility, the other with national states being given more competencies.

The study found evidence that greater powers at the EU level would lead to increased efficiency, particularly in the areas of defence, asylum and refugee policy, development policy as well as corporate taxation. In many of these policy areas, uncoordinated parallel efforts from the Member States would be counter-productive since these issues often require presenting a united front to external forces or reacting jointly to external developments such as migration or security threats.

Unified rules on corporate taxation most effective at the EU level

“The fact that the EU currently has 28 different tax bases makes it easier for international companies to play EU Member States off against each other in a competition to create the most business-friendly tax regulations and to then shift their profits to the country with the lowest taxes using mechanisms such as license agreements and contribution systems,” explains Professor Friedrich Heinemann, head of the ZEW Research Department “Corporate Taxation and Public Finance” as well as co-author of the study. Furthermore, due to a lack of uniform data pools, it is difficult for EU countries to check whether taxes have been paid in other EU countries or how much has been paid.

The study found, meanwhile, that decisions regarding agricultural policy should be made at the national level for greater efficiency. The income subsidies offered to farmers and agricultural operators through the EU’s common agricultural policy (CAP) has created disproportionate costs as well as undesired incentives for farmers to base all their decisions on maximising the subsidies they receive. As a result, in 21 of the 28 Member States, the amount of income support farmers receive through CAP is higher than the national low-income threshold.

All of the policy areas identified by the study as requiring greater efforts on the EU level are not only cost-intensive, but are also aimed at ensuring that the EU makes a sustainable contribution to the safety of its citizens and at tackling the challenges of globalisation and social inequality in the world. By comparison, the remaining policy areas such as agriculture or education are far narrower, more technocratic and sector-specific. Shifting the responsibility for these areas of policy to the EU would save less money and would be an unpopular move among EU citizens.

For further information please contact

Prof. Dr. Friedrich Heinemann, Phone +49 (0)621/1235-149, E-mail friedrich.heinemann@zew.de