EU income tax revealed

Yesterday, news broke of secret plans to seize more than GBP£4 billion a year from British citizens by making them pay direct taxes to the EU, prompting a furious political debate.

According to the leaked proposals, which were seen by UK newspaper the Daily Express, Britain could lose the billions of pounds in a rebate that was agreed by then-prime minister Margaret Thatcher some 25 years ago. The Express warns that the plans - which come with a foreword by Jose Manuel Barroso, the European Union Commissioner - would cost every British family at least GBP£155 a year.

A day after the leak and the plans are now being touted as a "work in progress", but have already sparked political outrage. The debate began with Shadow Europe Minister Mark Francois who commented that the plans would be resisted by a Conservative government. In an exclusive interview with the UK newspaper, he said that the idea of an EU tax was a "non-starter"; while Mats Persson - of think-tank Open Europe - warned the plans would "rightly cause concern among British taxpayers."

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'Outrage'

Other commentators, from Matthew Elliott, the chief executive of the TaxPayers' Alliance, to Jim McConalogue of the European Foundation - which wants to renegotiate European treaties - to Ruth Lea of Eurosceptic think-tank Global Vision, have added their opinions to the debates.

Elliot called the idea and "outrage," before adding that "control of taxation must rest solely in the hands of democratically elected politicians who answer to British taxpayers."

Lea, meanwhile, warns that, "[the British] need to wake up to the fact we are now in a superstate. Year by year we are living in an integrated United States of Europe and this is just part of it."

Taxes

But the proposed taxes, which would reportedly see big cuts to certain programmes, would also require Britain to give up its GBP£4.1billion a year rebate first agreed by Mrs Thatcher in 1984.

The question now is that - if the proposed taxes go ahead - how will the new funds be spent? Currently EU funding is distributed in a grossly uneven fashion. Germany, for instance, currently pays 164 billion euros to the EU, but only receives 78 billion; while in Spain - a nation not sparingly different in terms of size - currently pays 76 billion euros to the EU, but gets 78 billion back.

The argument, by and large, is one we have heard before. Back in 2004, Britain's poorest regions argued that they would suffer job losses and economic stagnation because of a huge switch of development funding to the poorer Eastern European countries that were set to join the European Union later that year.

At the time, Britain argued that the regions were set to lose about GBP£3 billion in EU funding used to help businesses and to improve infrastructure; while some predicted that their development budgets would drop by 80 percent.

With the leaked the report and MEPs now having voted to increase the British payments to the EU in 2010, the problem seems to be rearing its head once again.

Now the new increase will fuel the political debate over whether Britain benefits from being in the EU, with Eurosceptics likely to use the proposed rules as leverage to drive a wedge between the British people and the pro-Euro UK government.

It may not be a difficult fight either, given that more than 25 percent of voters in this year's European elections backed parties that want to take Britain out of the EU.

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