in any European Country, the “Safety net” should also cover the social security minimum
pensions that in this way should paid out from general taxation.
The sharing of the remaining functions between national and local governments will
probably depend on single countries preferences, traditions, institutions and de facto condi-
tions. Once progressively deprived from stabilization function, national governments will
probably concentrate on regional and personal distribution, higher educations, law and order,
national infrastructures, general administration, and, obviously, debt service. Education,
health, local transport and other services will probably implement the subsidiarity’s principle
at the level of local governments, but on should always bear in mind that overlaps with con-
straints from, and monitoring by higher tiers will be widespread and not easily managed or
disentangled.
4.2. The financing of EU and of lower levels of government
At the moment EU budget (Laffan 1997) is not (and must not be) higher than 1.27 per cent of
Union’s GDP, i.e. near about 85 billions of euro. This plentiful amount of money comes from
custom duties on extra Union imports (about 15 per cent of total resources), a sharing to
member countries’ VAT (about 35 per cent), and, as to the residual amount (i.e. about 50 per
cent), from countries’ contributions in accordance with their GDP. About half of these re-
sources are absorbed by agricultural policy alone. One third goes to the so called “Structural
actions,” i.e. to regional development and other cohesion initiatives. The small rest is dis-
persed among some minor items. Repeatedly during last years, both parliament and commis-
sion proposed some (marginal) budget increases and intra-resources shifts, looking also at the
incoming arrival of the candidate countries, with an estimated cost of about ten billions of
euro (e.g. Gretschmann 1998). At the 1999 Berlin Council, any proposal of this kind was re-
jected, including the budget enlargement for new members. National premiers remained stuck
in their loved funny puzzles of EU budget.32
This essential information about EU budget allows us to go back to the discussion of tax
reforms, and integrating this discussion with the previously outlined proposal about the allo-
32 The words are by themselves amusing and enlightening: “British correction,” “Rotterdam or gateway effect,”
“VAT frozen rate” and so forth.
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