Vol. 407 No. 9
12 Mr. J. Bruton asked the Taoiseach if he agrees with the view expressed by the Spanish Government that the present system whereby the EC is primarily financed by value added tax is regressive in that it penalises weaker economies which tend to have a greater propensity to consume, and therefore to pay value added tax; and if so, if he favours any amendment of the basis whereby the EC is funded.
While one source of Community revenue is proportional to GNP, it remains a fact that the system of Community own resources, as a whole, is regressive. The Government favour amendment of the basis whereby the EC is funded and are supporting Spanish proposals for Treaty amendments which aim to bring about by 1 January 1993 a progressive system, in line with internationally accepted principles of taxation.
If we are to go for a progressive system of taxation to fund the European Community, can the Taoiseach give any indication of exactly what type of tax is likely to fulfil that criteria?
The best way of achieving that objective is through the GNP-based member states' contribution, because it has regard to the capacity of member states to pay.
If one were to go for GNP-based contributions one would be moving away from the principle that the Community has its own resources in the form of a share of a particular tax. Is there a danger that if one were to go for GNP-based contributions there would be many disputes about how much was owed by particular states, and arguments about the measurement of GNP and so on?
The Community's own resources at the moment includes a Community GNP-related contribution by member states. That is a progressive part of own resources. The VAT aspect of own resources at the moment is regressive in so far as it is based on consumption and since the less developed regions spend more of their income on consumption they are, therefore, paying an undue proportion. The more we move towards a system of payment related to GNP, population and so on, the better.
