The EU is a regulatory union, not a tax-and-spend union. One reflection of this is that the Community budget is very small in aggregate terms, amounting to no more than roughly 1 per cent of the area-wide GDP. Is the smallness of the budget an expression of a well-justified allocation of tasks between the member states and the Community, or is it an unfortunate consequence of political hesitation or lack of courage to accept the budgetary requirements of close economic integration? A comprehensive answer to this question is beyond the scope of the present chapter, which only attempts to shed some light on the issue by reviewing briefly the tasks of the EU in the light of principles developed within the theory of fiscal federalism (section 2). It also describes the financing of Community expenditure and the suggestion to endow the EU with a ‘Community tax’ (section 3). First, however, it briefly sets out the framework within which negotiations on the Community budget take place (section 1).
KeywordsEurope Income Expense Agglomeration OECD
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