EU Council President Costa warns of budget cuts or higher contributions if new EU taxes fail

European Council President António Costa is warning governments that they will be worse off if they fail to agree to new EU-wide taxes to finance the bloc’s next seven-year budget.

During a visit to Croatia on Wednesday, Costa urged EU leaders to soften their red lines ahead of an Oct. 15 summit, where he intends to narrow down several potential taxes that are acceptable to EU governments.

“Our priority is to try to fix already in October the basket of new own resources,” Costa said, speaking alongside the Croatian Prime Minister Andrej Plenković. “Then we can know how much we need to ask for each member state.”

Finding an agreement on new EU taxes — so-called own resources — is key to facilitating an overall budget deal in December before national elections in France, Spain and Italy in 2027 threaten the negotiations.

Costa is touring the EU’s 27 capitals to sound out their concerns and assess where there is room for compromise. The Portuguese politician plays a key role in the negotiations as he chairs leaders’ meetings and brokers compromises among different camps.

The issue of EU-wide taxes is among the thorniest in the discussions because national capitals are reluctant to hand more taxing powers to the European Commission and agree to new levies that would hit some countries harder than others.

Last year, the Commission proposed five new levies — targeting carbon imports, emissions, non-collected electronic waste, corporate profits and tobacco products — worth €66 billion per year to finance the budget. But most of the ideas have been met with resistance from governments, who must unanimously approve each new levy.

Tensions were on full display when Luxembourgish Prime Minister Luc Frieden rejected the proposed EU tobacco tax after a meeting with Costa earlier on Wednesday.

“We won’t accept proposals that impact [Luxembourg] in a disproportionate manner,” he told reporters.

But in a warning to fellow leaders, Costa said that failure to agree on new taxes will either result in budget cuts or higher national contributions.

“We have only two ways: reduce our ambitions on security, defense, competitiveness, cohesion and agriculture …. and the other alternative is to increase national contributions which is also a problem for all member states.”

Either outcome would be unwelcome for the opposing camps in the negotiations. Northern countries led by Germany complain that their contributions to the EU cashpot are already too high, whereas Southern and Eastern countries are demanding more EU funds for agriculture and regional development.

Europe ministers will discuss the question of new taxes at a meeting in Brussels on Sept. 22.