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Tax Chief Confident EU Will Repay Virus Borrowing On Time

By Matt Thompson and Todd Buell · September 21, 2020, 1:52 PM EDT

The European Union will definitely secure enough new revenue to pay back on time the unprecedented borrowing it has undertaken during the novel coronavirus pandemic, Paolo Gentiloni, the EU tax commissioner, told a conference Monday.

Sufficient political momentum now exists at the European level for the bloc's member countries to agree to grant new revenue-raising powers to the European Commission, Gentiloni said. The official spoke alongside Olaf Scholz, the German finance minister, at an online meeting held by the commission to discuss fair taxation.

Member countries have authorized the commission to borrow €750 billion ($882 billion) on international markets to disburse among the countries to help them recover from the economic damage wrought by the pandemic.

The measure is currently held up at the Council of the EU  — which comprises representatives of the bloc's 27 member countries — despite a professed need to act quickly. Part of the package authorizing the borrowing is a requirement to raise new revenue to feed to the EU budget.

The commission will present its proposal on specific new revenue-raising powers in the early part of next year and have them in place in 2023, Gentiloni said. 

"We will have to begin repayment of the recovery fund in 2026," he said.

Scholz acknowledged that the question of new revenue streams to directly feed into the EU budget is a vexed one, but struck a cautiously optimistic note.

"There has been a long debate for a decade now on the question of own resources," Scholz said, "but now there is urgency."

The German finance minister pointed to work already undertaken by the finance ministers and leaders of EU countries to identify possible new revenue streams.

"The council has already come forward with proposals for possible own resources," Scholz said, pointing to measures that have been floated, such as new charges on aviation and maritime fuel, pollution taxes and a financial transaction tax.

Scholz also suggested that EU member countries were getting closer to voting on a controversial proposal that would require multinational companies to publish where they pay their taxes.

Germany is chairing meetings of EU ministers until the end of the year in a role known as the presidency. It has up to now resisted bringing the question of public country-by-country reporting to a vote, even though it appears that, unlike in November when member country ministers rejected such a proposal, a majority of countries would now back the measure.

Even though his own government is split on the issue, given the country's presidency, "we will support any debate and a decision-making process and that's what we're looking at now," Scholz said.

Benjamin Angel, a top tax official at the European Commission, also speaking on the panel, expressed regret that EU counties haven't yet approved public corporate tax transparency. Still, he said he was reassured by Scholz's statement that the German presidency is committed to doing its best to have the measure endorsed.

A spokesperson at Germany's Justice Ministry, which is responsible for the public country-by-country reporting initiative, didn't respond to a request for comment from Law360.

--Editing by Neil Cohen.

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