{"id":173471,"date":"2020-07-10T10:07:12","date_gmt":"2020-07-10T14:07:12","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=173471"},"modified":"2020-07-10T10:07:12","modified_gmt":"2020-07-10T14:07:12","slug":"is-europe-at-risk-of-a-tax-increase","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/07\/is-europe-at-risk-of-a-tax-increase\/","title":{"rendered":"Is Europe At Risk Of A Tax Increase?"},"content":{"rendered":"
July 10, 2020<\/div>
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By <\/strong>Orbex<\/strong><\/a><\/p>\n

European governments are spending unprecedented levels of money on COVID relief. Therefore, it\u2019s only natural to wonder: how is this going to be paid for?<\/p>\n

Germany might have the fiscal latitude to adjust its budget to address the issue. But what about countries like Italy, or France, which were already above EU debt guidelines?<\/p>\n

The shutdown makes things more complicated for government finances. And not just because of the increased spending. In fact, since when has a government actually reduced its spending once given the opportunity to spend, anyway?<\/p>\n

The economic fallout means that governments are expected to collect less revenue in taxes. And then there are countries, like Italy, they\u2019re considering cutting taxes to stimulate the economy.<\/p>\n

Where\u2019s the Money Coming From?<\/strong><\/h2>\n

A closer look at the much-vaunted \u201cNext Generation EU\u201d program that promises \u20ac750B in spending on the part of the central EU government, can give us some insight.<\/p>

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The EU plans to raise those funds on capital markets, and will then have to pay them back. From where? The EU doesn\u2019t collect taxes. Its members contribute in order to finance it.<\/p>\n

In the second part of the agreement, there are some mentions of how to pay it off. They include increasing fees from the Emissions Trading System, and carbon border adjustment fees.<\/p>\n

But the agreement also provides provision for a digital tax on companies making over \u20ac750M a year, and taxes on companies that \u201cdraw huge benefits from the EU single market\u201d.<\/p>\n

The document says these new sources of revenue \u201cmay\u201d pay off the debt. However, it doesn\u2019t say the sources will be terminated once the debt is paid off.<\/p>\n

Effectively, this creates two new income streams for the EU.<\/p>\n

But We Don\u2019t Want to Talk About That Now<\/strong><\/h2>\n

Just yesterday, the ECB\u2019s Villeroy said that France should aim to stabilize taxes, not raise or lower them.<\/p>\n

Business Minister of Ireland Varadkar urged for cuts to business taxes. Last week Italian PM Conte insisted on tax cuts for middle-income earners in Italy.<\/p>\n

At least publicly on a national level, government officials are pushing to cut taxes to help\u00a0the economy overcome COVID.<\/a><\/p>\n

Perhaps the increase in spending at the EU level, plus new EU sources of revenue, is a way for national governments to \u201cendorse\u201d the collection of unpopular taxes to the EU.<\/p>\n

This Isn\u2019t Exactly New<\/strong><\/h2>\n

The EU wanting to implement a digital tax and increase carbon emissions costs has been a present issue for nearly a decade at this point.<\/p>\n

The need to pay down increased debt might offer an opportunity to finally pass those measures.<\/p>\n

National governments cutting some of the taxes for a limited period of time might offset the tax burden of introducing the measures on the EU level. But any tax cuts national governments implement now will likely last only the duration of the coronavirus emergency, by which time EU-level taxes will be firmly established.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex European governments are spending unprecedented levels of money on COVID relief. Therefore, it\u2019s only natural to wonder: how is this going to be paid for? Germany might have the fiscal latitude to adjust its budget to address the issue. But what about countries like Italy, or France, which were already above EU debt […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-173471","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/173471","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=173471"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/173471\/revisions"}],"predecessor-version":[{"id":173476,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/173471\/revisions\/173476"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=173471"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=173471"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=173471"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}