The EU Council has adopted the bloc’s roughly €1.1 trillion long-term budget, but a €750 billion coronavirus recovery package that depends on new EU levies still needs approval from member states.
The European Commission said the December 17 adoption of the 2021-2027 multiannual financial framework (MFF) means the budget will be in place by January 1, 2021, funding necessary social programs, agriculture, development, and the green and digital transitions. The European Parliament endorsed the MFF December 16.
“With the final step taken today for the adoption of the [MFF], we can start the implementation process,” said EU Budget Commissioner Johannes Hahn in the commission's release. “The European Commission will spare no effort to lead Europe's recovery from January 1 onwards. For the first time we will also have a mechanism in place which will help us to protect even better the EU taxpayers’ money.”
As for the coronavirus recovery package, the council adopted the NextGenerationEU regulation December 14, but portions of the sectoral acts for the instruments the package will fund are still the subject of negotiations between the EP and the council, according to a commission Q&A release. Member states must also present their national recovery and resilience plans for the Recovery and Resilience Facility — which includes €310 million in grants and €250 million in loans to member states — to be finalized.
For the EU to borrow the €750 billion in 2018 prices on capital markets to fund the recovery, the own resources decision — adopted December 14 by the council — must be approved by member states. The EP and council are also finalizing the adoption of the 2021 budget, which contains €164 billion in commitments and €166 billion in payments for member states to provide coronavirus recovery funds, and create and protect jobs.
Once approved by all 27 member states, the own resources decision will raise the own resources ceiling — the amount of resources member states may be called annually to put toward EU expenditure — from 1.2 percent to 1.4 percent of the EU’s gross national income, according to the December 14 council release.
Revenue sources for the MFF include modified own resources: customs duties, of which member states may retain 25 percent of the amounts collected; contributions of 0.3 percent based on VAT; and a new contribution based on non-recycled plastic packaging waste, often called the plastic levy, the commission Q&A says. The plastic levy, which will go into effect January 1, 2021, is calculated at €0.80 per kilogram of non-recycled plastic packaging waste.
To repay the borrowed recovery funds, the EU plans to introduce new own resources, based on a timeline agreed on by the commission, council, and EP at the November 10 EU summit. The commission will introduce proposals for a carbon border adjustment mechanism and a digital levy in June 2021, with the intent to introduce them by January 1, 2023. The commission also plans to review the EU emissions trading system and its possible expansion to aviation and maritime in spring 2021, with a proposal in June 2021.
Further, new own resources could include a financial transaction tax, based on developments in the enhanced cooperation work; a levy based on the corporate sector; or a new common consolidated corporate tax base. These proposals could be introduced as soon as June 2024, according to the Q&A.