The European Union should broaden the sources of revenue funding its budget to include financial transactions, digital companies and wealthy individuals as it faces rising costs for defence, competitiveness and the green transition, the Vienna Institute for International Economic Studies (wiiw) said on October 7.
The EU needs to raisebns of euros in additional funding as it confronts higher defence spending and seeks to strengthen its economy while financing its green and digital transitions. The European Commission has proposed a budget of almost €2 trillion for 2028-2034, with new and adjusted EU revenue sources expected to raise €58.2bn annually.
In a study, wiiw economists Bernhard Schütz and Philipp Heimberger argued that the bloc should become less dependent on contributions from member states and develop a broader range of EU-level revenue sources.
"Even greater dependence on member states’ contributions risks narrowing the debate over the EU budget further to the question of which country pays how much, rather than focusing on how to address the challenges of our time and how to finance the measures needed to tackle them," Heimberger said.
The researchers said a wider mix of revenue sources could distribute the financing burden more evenly, make it easier for governments to reach agreement on the EU budget and reduce tax competition between member states.
The current system relies heavily on national contributions linked to gross national income and value-added tax, meaning that labour and consumption indirectly bear much of the burden.
Labour accounted for 52% of total tax revenue in the EU in 2024, while consumption accounted for 27%, according to the study. Capital and wealth taxes contributed just 5% and 2%, respectively.
The economists therefore called for greater use of taxes that draw revenue from financial markets, digital activity and wealth.
A financial transaction tax could generate tens ofbns of euros annually depending on its design and participation, while potentially discouraging high-frequency trading that can contribute to financial-market volatility, the study said.
A common EU digital tax could raise as much as €26bn a year, according to the researchers. Such a tax could also address what they see as a gap in the taxation of large foreign technology companies that earn revenue from EU users without necessarily having a physical presence in the countries where that revenue is generated.
"Large foreign digital corporations can currently generate substantial revenues from processing user data without having to pay tax on those revenues in the EU countries concerned, as they do not have a physical presence there. A digital tax would change this," Schütz said.
The study also examined a minimum tax on individuals with net wealth above €100mn, which it estimated could generate up to €40bn a year for the EU budget.
Other possible sources included taxes on crypto-assets and online gambling, as well as a bank levy, alternative forms of corporate taxation and a carbon-based tax on air tickets.
The Commission has already proposed several new own resources, including revenues from the EU emissions trading system and the Carbon Border Adjustment Mechanism, alongside a levy on uncollected electronic waste and a tobacco tax.
The wiiw researchers said the debate should extend beyond simply finding enough money to cover the EU's spending plans, arguing that decisions on revenue sources would also determine how the costs of common priorities were distributed.
They also called for common EU borrowing to remain part of the discussion, pointing to the experience of the €800-billion NextGenerationEU recovery programme launched after the COVID-19 pandemic.
"A stronger and more independent financing base, complemented by common borrowing for strategic investment, could substantially strengthen the EU’s capacity to act, including in its competition with China and the United States," Heimberger said.
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