EU proposes new Europe-wide VAT

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EU flags
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The 27 member states pay a fixed contribution to the EU budget

The European Commission has put forward proposals for direct EU taxes on member states, including a possible EU-wide value-added tax (VAT).

The proposals are part of a package of options for finding new sources of revenue for the European Union budget.

EU Budget Commissioner Janusz Lewandowski first said in August that he wanted member states to consider allowing the EU to levy direct taxes.

The UK, Germany and France have all rejected the idea of direct EU taxes.

Historically, national governments levy taxes in the EU.

The 27 EU member states pay a fixed contribution to the EU budget, based on their gross domestic product and a percentage of their VAT.

In its budget review, the commission put forward "the option of reducing member states' contributions by abolishing the VAT-based own resource and progressively introducing one or several new own resources as a replacement".

It said: "Possible candidates for new own resources could be a share of a financial transaction or financial activities tax, auctioning of greenhouse gas emission allowances, an EU charge related to air transport, a separate EU VAT rate, a share of an EU energy tax or of an EU corporate income tax."

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