TAE: A critical look at the European Commission’s proposals for new own resources

On 16 July, the European Commission presented its proposals for the EU’s next multiannual financial framework (MFF for 2028–2034). These also include proposals for new EU own resources. 

Until now, the financing of the EU budget has been subject to a ceiling. Under the current decision on the EU’s own resources, the total own resources available to the Union may not exceed 1.4 per cent of the Member States’ gross national income (GNI). This will change if the new Multiannual Financial Framework (MFF) introduces new own resources that flow directly into the EU budget. The EU budget will then be calculated, in particular, on the basis of past and expected revenue from the new own resources. 

We are particularly critical of the European Commission’s plans to use a separate EU value added tax (CORE) and tobacco tax as instruments for new own resources (TEDOR). 

Assessment/risks of the planned EU corporate tax CORE from the perspective of the European Taxpayers’ Organisation

  • The European Commission bases CORE on turnover. However, turnover says nothing about profitability, i.e. the success of businesses.
  • The TAE generally opposes an expansion of the EU’s own resources.
  • We also oppose corporate taxes based on turnover rather than profit.
  • Moving away from the current financing model carries the latent risk of underfunding the EU budget. What happens if the planned own resources are not generated? Then there would be only two options: higher compulsory contributions from Member States or tax increases at EU level. Alternatively, the EU would have to take on further debt on top of the existing debt from ‘Next Generation EU’ to cover the deficit. This ultimately jeopardises the mutualisation of debt.
  • In Germany and most EU countries, the tax and social security burden is already too high, both for individuals and for businesses. An additional burden on businesses would exacerbate this situation and lead to a liquidity crunch. As CORE does not take into account the profitability of businesses, in the worst-case scenario the assets of the taxed businesses could be eroded, thereby directly threatening their survival. 

Assessment/Risks of the planned EU tobacco tax TEDOR from the perspective of the European Taxpayers’ Organisation

  • TEDOR represents a departure from the balanced and pragmatic approach to tobacco taxation outlined by the European Commission in 2022.
  • There is a risk of excessive prices and market distortions.
  • The EU’s assumption that consumers are not price-sensitive is incorrect.
  • The planned tobacco tax increase carries the risk of an expansion of the black economy, which will lead to more illicit trade and ultimately to tax revenue losses for the state. According to estimates (a report by KPMG), tax revenue shortfalls on tobacco products in the EU already amount to around €19.4 billion per year. France and the Netherlands serve as cautionary examples: In France, the tobacco tax increase led to a significant rise in illicit consumption, resulting in tax losses of over €9.4 billion per year. The same applies to the Netherlands, where the tax authorities lose more than €860 million annually due to the tobacco tax increase.
  • Public health policy objectives are at risk.
  • TEDOR will place a massive burden on the tobacco industry, affecting both manufacturers directly and suppliers indirectly. For example, the planned increase in the minimum tax on cigars and cigarillos will lead to a rise from €12 to €143 – almost 1,100 per cent!
  • The European Commission’s impact assessment is incomprehensible for both large enterprises and SMEs. It lacks a thorough analysis of the effects on producers and jobs, as well as a forecast of the costs of the structural adjustments required by TEDOR.
  • A threat to the small and medium-sized cigar industry in Germany and Europe, with serious consequences for the associated jobs in Europe and in third countries.
  • The principle of proportionality in taxation is being violated.
  • TEDOR does not take into account the current practice of EU Member States.
  • Given the continuing economic strain, only a moderate tax burden should be sought in the interests of consumers.
  • The specific circumstances of Member States are not sufficiently taken into account. Member States with only internal borders face different challenges from those with external EU borders, as do countries with access to the sea.
  • Maintaining purchasing power parity (PPP) is necessary: the PPP index takes into account the different levels of purchasing power across countries when setting prices. Abolishing this adjustment would hit countries in Central and Eastern Europe disproportionately hard and further fuel inflation and illegal trade there. 

Key demand of the European Taxpayers’ Association (TAE)

  • No expansion of the EU’s own resources
  • Public debate on the role of the EU and the tasks that should be carried out at national level
  • A return to the EU’s principle of subsidiarity
  • Comprehensive and transparent impact assessments for regulatory authorities
  • Compliance with the principle of subsidiarity
  • Budget savings and new priorities
  • Reducing bureaucracy 

Download the full version of “TAE – Critical Analysis of the New EU Own Resources Proposals” 

Brussels/Munich, 18 July 2025