No budget deal without new EU taxes, Costa warns

Costa, the President of the European Council, has cautioned that governments will suffer if they do not reach a consensus on new EU-wide taxes to fund the bloc's upcoming seven-year budget. While visiting Croatia on Wednesday, Costa urged EU leaders to relax their positions ahead of a crucial October 15 summit, where he aims to narrow down potential taxes acceptable to all EU governments.

"Our main goal is to finalize the basket of new own resources in October," Costa stated, alongside Croatian Prime Minister Andrej Plenković. "Afterwards, we can determine how much each member state must contribute." Securing an agreement on new EU taxes, known as own resources, is crucial for achieving a comprehensive budget deal in December before national elections in France, Spain, and Italy in 2027, which could disrupt the negotiations.

Costa is currently touring the 27 EU capitals to gather insights into their concerns and identify areas for compromise. The role of the Portuguese politician is significant, as he chairs leaders' meetings and mediates compromises among various factions. The matter of EU-wide taxes is one of the most contentious issues in the talks due to national governments' reluctance to cede more taxing authority to the European Commission and accept new levies that may disproportionately affect some countries.

Last year, the Commission proposed five new levies — focusing on carbon imports, emissions, electronic waste, corporate profits, and tobacco products — amounting to €66 billion per year to finance the budget. However, most of these ideas have faced resistance from governments, who must unanimously approve each new levy. Tensions were evident when Luxembourgish Prime Minister Luc Frieden opposed the proposed EU tobacco tax during a meeting with Costa on Wednesday.

"We will not accept proposals that disproportionately impact [Luxembourg]," Frieden informed reporters. Costa warned fellow leaders that failing to agree on new taxes would either lead to budget cuts or increased national contributions, posing challenges for all member states. Either scenario would be undesirable for the opposing sides in the negotiations.

Northern countries, led by Germany, argue that their contributions to the EU's coffers are already excessive, while Southern and Eastern countries demand more EU funds for agriculture and regional development. European ministers will deliberate on the issue of new taxes at a meeting in Brussels on September 22.