Commission to relaunch controversial tax plan

(BRUSSELS) - The European Commission on Tuesday will relaunch the controversial idea of a European-wide tax to help fund the EU budget, as cash-strapped states are reluctant to contribute more.

The commission will unveil a package of proposals that could transform the way the European Union collects funds following the global recession and a surge in public deficits that forced European governments to tighten their belts.

The proposals will set the stage for tough negotiations over the 27-nation bloc's budget for 2014-2020, with battle lines drawn over farm spending, which accounts for 40 percent of expenditures and rebates for states such as Britain.

European Union Budget Commissioner Janusz Lewandoswky has signalled that a European-wide tax is a possible option to increase EU revenue and reduce national government contributions, which fund 75 percent of the budget.

"He will present a list of eight options in this area without necessarily picking one or the other," said a European official close to the issue, noting the sensitivity of the idea.

A European-wide tax will be a hard sell in countries already forced to raise taxes and cut budgets to slash big shortfalls between revenue and spending in the wake of the global economic crisis.

A majority of EU states, notably regional powerhouses Britain, France and Germany, have already voiced opposition to the idea. Belgium and Spain have said it was worth exploring.

France's junior minister for Europe, Pierre Lellouche, has said the idea of a European tax was "perfectly ill-timed," saying the goal should instead be to "make savings" in Brussels.

The new options expected to be proposed include taxes on carbon emissions, air transport, financial transactions or bank profits.

The report will include ideas that have already been discussed without success including directly transferring a portion of national taxes to the EU, such as valued-added taxes or oil taxes.

The commission will also propose the creation of European-wide bond to fund major infrastructure projects, an idea that lacks consensus so far, an EU source said.

European Commission President Jose Manuel Barroso endorsed the idea of a continental bond at his first State of the Union speech before the European parliament in early September.

"A Euro spent at European level gets you more than a Euro spent at national level," Barroso said at the time.

The package to be unveiled Tuesday will be prudent regarding EU spending reform, with no specific figures on regional development aid dear to eastern European states and the Common Agricultural Policy crucial to French farmers.

French President Nicolas Sarkozy has already warned that he is willing to trigger a "crisis in Europe" if anyone tries to "dismantle" the Common Agricultural Policy.

The commission is also expected to launch a debate on national rebates, which Britain secured under prime minister Margaret Thatcher in 1984 on the grounds that a large slice of EU money was used for farm subsidies from which her country did not benefit.