Revenue Formation Policy in the European Union Budget

The European Union’s post-2027 agenda raises a deceptively simple question: where will the money come from? The problem has acquired new urgency since the European Commission’s July 2025 proposal for the 2028–2034 Multiannual Financial Framework – envisaging a substantially larger envelope (around €2 trillion), greater budgetary flexibility, and additional revenue sources–has reopened distributional conflicts over who pays, who benefits, and under what rules. Moving beyond a purely economic reading, this article frames revenue reform as an institutional choice embedded in the EU’s quasi-federal system of multilevel economic governance and revisits the usefulness – and limits – of first-generation fiscal federalism for interpreting the Union’s evolving fiscal architecture.
The analysis is motivated by the fiscal afterlife of NextGenerationEU. Although conceived as an off-budget instrument, interest payments are charged to the EU’s current budget, while principal repayment–up to €338 billion linked to grants and the reinforcement of existing programs via externally assigned revenue–will enter the EU budget as a direct expenditure item from 2028 to 2058, sharpening the political necessity of reshaping the revenue side. 
Against this background, the article identifies the obstacles that continue to prevent a shift towards tax-based “own resources”, and it evaluates the plausibility of alternative trajectories, including a more explicit reliance on common debt. 
It does so through a structured examination of the EU’s existing own-resources system and the Commission’s successive reform packages (2021–2025), paying particular attention to proposals that seek to create more autonomous revenue streams–such as reallocating 30 per cent of EU ETS auction revenues and 75 per cent of CBAM proceeds to the EU level–while recognizing the political constraints that have repeatedly stalled agreement in the Council. Drawing on EU primary law and official documentation, alongside expert debates on EU taxing powers and fiscal integration, the article argues that–customs duties aside–the Union still lacks a comprehensive own-resources system that is genuinely autonomous from member-state budgets.

The core implication is that the EU’s future revenue strategy is likely to remain a politically contested mix of national contributions, tightly circumscribed “tax-like” resources linked to sectoral policies, and carefully designed borrowing instruments whose long-term stabilization remains uncertain.

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