Representatives of the European Union’s institutions are working on alternative sources of revenue for the EU’s long-term budget after 2028. The additional income is intended to help finance the repayment of debt incurred to support recovery programmes launched in response to the COVID-19 pandemic. Ideas under consideration include a levy linked to imports of carbon-intensive products and a tax on large corporations. However, according to Janusz Lewandowski, a Member of the European Parliament from Poland’s Civic Coalition, member states are reluctant to introduce new charges at a time when many of them are struggling with high public debt themselves.
“The European Union is in debt. This is the so-called pandemic debt, which was meant to help restart the economy. From 2028 onwards, however, it will mean repayments of at least €25 billion a year. These are capital repayments, not merely interest payments,” Janusz Lewandowski, an MEP from the Civic Coalition and former European Commissioner for Budget and Financial Programming, told Newseria.
In 2020, the European Union introduced NextGenerationEU, a temporary recovery instrument designed to help member states repair the economic and social damage caused by the COVID-19 pandemic. To finance it, the European Commission borrows on capital markets, generally on more favourable terms than most individual member states could obtain on their own. The funds are then redistributed across the EU.
The central element of NextGenerationEU is the Recovery and Resilience Facility (RRF), which provides grants and loans to support reforms and investments in EU member states under their national recovery plans.
Based on financing requests submitted by member states under the RRF and the funding needs of other EU programmes, the Commission expects to raise up to €637 billion by the end of 2026. The maximum envelope for the programme was set at €806.9 billion in 2021. Repayment of the debt incurred to finance NextGenerationEU is scheduled to begin in 2028 and continue over a long period, until 2058. The loan component will be repaid by the member states that used it, while grants will be financed from the EU budget.
“If no new sources of revenue are introduced, debt repayment will come at the expense of existing programmes,” Lewandowski warns.
In its proposal for the EU’s new long-term budget for 2028–2034, the European Commission has put forward five new own-resource mechanisms. One of them would be based on revenue from the EU Emissions Trading System (ETS). The Commission has proposed that 30% of revenue from the existing ETS 1 system should flow into the EU budget rather than remain with member states. This could generate an average of around €9.6 billion annually.
Other proposals include own resources based on excise duties on tobacco products, expected to generate an average of around €11.2 billion a year. Revenue linked to uncollected electronic waste could contribute approximately €15 billion, while resources based on the Carbon Border Adjustment Mechanism (CBAM) could bring in around €1.4 billion annually.
“In general, there is little enthusiasm for new revenue sources for the European budget,” Lewandowski says. “The most likely option appears to be the carbon levy, intended to prevent carbon-intensive industries from relocating outside the European Union. Yet it is the least efficient of the proposed measures, generating around €1.5 billion. The least popular proposal is the tax on large corporations with annual turnover exceeding €100 million, because it would be a completely new tax.”
The proposal concerns own resources based on a corporate contribution, known as CORE. Companies operating and selling goods or services in the EU market with annual net turnover exceeding €100 million would be required to make an annual flat-rate payment. According to the Commission’s estimates, this measure could generate around €6.8 billion per year.
During the European Parliament’s May plenary session, MEPs discussed alternative sources of financing for the EU’s long-term budget. In a position adopted in April, Parliament endorsed the Commission’s plan to introduce new revenue streams in order to reduce the EU budget’s dependence on national contributions from member states.
The resolution also stated that, should the Commission’s proposals be rejected by member states, the EU should consider other options. These could include a digital services tax, a levy on online gambling, an expansion of the Carbon Border Adjustment Mechanism and a tax on capital gains from cryptocurrencies.
“We added several proposals to those submitted by Commissioner Piotr Serafin,” Lewandowski explains. “However, I know the history of the battle over new own resources. We have not had many successes. The only genuinely new source introduced so far is the levy on non-recycled plastic, in place since 2021, which generates around €9 billion annually. Beyond that, including my own proposals, little has come of it.”
He adds that there remains a long path from proposals supported by the European Parliament and the Commission to ratification by national parliaments.
“Fortunately, Commissioner Serafin managed to remove from the list of potential revenue sources what would have been entirely unacceptable for Poland: ETS2, the mechanism covering buildings and road transport,” Lewandowski says.
He stresses that negotiations are likely to be difficult.
“The average debt level in the European Union stands at around 80% of GDP, while in the euro area it is 87%. The dominant trend will therefore be towards tightening belts and cleaning up public finances. There will not be many willing to accept additional burdens, whether on multinational corporations, electronic waste, tobacco excise duties or ETS revenues,” the MEP says.
According to the latest Eurostat data, at the end of the fourth quarter of 2025, the gross debt-to-GDP ratio of the general government sector in the European Union averaged 81.7%, equivalent to €15.37 trillion. Compared with the same period in 2024, this represented an increase of one percentage point, from €14.55 trillion.
