Behavioural taxes may be too successful to generate EU own resources
Constantly looking for ways to generate EU-level ‘own resources’, the European Commission is increasingly exploring behavioural taxes to diversify and grow its budget revenues.
Behavioural taxes are levies designed to influence individuals’ and businesses’ behaviour, often to promote public health, environmental protection, or social welfare. By increasing the cost of harmful activities or products, these taxes aim to reduce their consumption or use, encouraging healthier or more environmentally friendly choices. Behavioural taxes could also generate revenue for the EU to fund related public services or programs, such as healthcare and environmental conservation initiatives.
Diversifying from customs duties, VAT and state contributions
The EU budget, €189 billion in commitments (2024), is financed by member state contributions and ‘own resources’, revenues from other sources. This includes:
- 75% of customs collections from duties on goods entering the Customs Union. The EU also takes
- a small cut of member state VAT collections – 0.3% applies to each EU country’s harmonised VAT base, which is capped at 50% of its gross national income (GNI), and the proceeds are transferred to the EU.
- There are a number of sundry other contributions.
- In 2021, European Union (EU) introduced a plastic levy on non-recycled plastic packaging waste to reduce waste and fund EU budgets, with rates set at EUR 0.80 per kilogramme.
The Commission, through its Directorate-General for Taxation and Customs Union (TAXUD), is exploring the potential of behavioural taxation to help diversify its own resources. A new unit focused on this area was established in summer 2023, driven by the team working on the carbon border adjustment mechanism. The Commission has studied the effects of taxing high-fat, high-sugar, and high-salt products, though results are yet to be published. Norway’s soda industry, for example, has seen a significant market shift towards low-calorie options without the imposition of a sugar tax, suggesting voluntary measures could be effective.
Plastic’s tax – a fiscal warning
But these taxes, by their nature to curb or disincentive undesirable consumption or unsocial behaviours tend to plateau. The EU’s Plastic-based own resource taxes appears to now have peaked at €7.1 million in 2025, and will start tailing off. The ‘plastic’ own resource was introduced as of 1 January 2021 by the 2020 Own Resources Decision. It is a national contribution (direct transfer from Member State budgets) on the basis of the quantity of non-recycled plastic packaging waste, with a uniform call rate of EUR 0.80 per kilogram
This does not promise everylasting revenues from the likes of Carbon Border Adjustment Mechanisms or Emmissions Trading Systems
VAT to promote virtuous behaviour
But it’s not just about raising taxes that the EC is studying behavioural taxes
The Commission’s directive on promoting goods repair includes financial measures like repair vouchers and training programs, which might lead to amending Annex III of the VAT directive to include reduced rates for specific repair services.
Behavioral taxation is set to become a priority for TAXUD by 2025, with informal discussions already underway with member states. This approach aligns with the political emphasis on health policy, as outlined in the 2023 anti-cancer plan. TAXUD officials have indicated that any new behavioral taxes must consider the internal market to ensure they do not disrupt its function.
