Reforming the Financing of the European Union

The debate about reforms of the EU budget and the system of own resources has a long history. Many reform proposals have been made. Some of them are restricted to marginal adjustments of the existing system, others suggest fundamental change. Public spending and taxation belong to the core of state sovereignty. Therefore, reforms of the EU financing system have to be seen against the backdrop of the particular institutional setup of the EU. The EU is a unique institution. It combines governance structures known from international organisations with elements of federalism. In the area of public finance, the current setup is based on the fiscal sovereignty of the member states. In particular, national parliaments have the right to levy taxes, and there is currently no consensus in sight that this should change. This paper makes a reform proposal which takes the fundamental institutional setup of the EU as given.

Fuest, Clemens, Friedrich Heinemann and Martin Streng (2015), Reforming the Financing of the European Union, A Proposal, ZEW policy brief No. 15-02, Mannheim