In April, Luc Frieden explained, above all, which European taxes he did not want. Three months later, the Prime Minister has just stated which ones he might accept. When questioned by the Austrian daily *Die Presse* about the financing of the European Union’s next budget, Mr Frieden began by setting out his limits. “I am very cautious when it comes to introducing new taxes. I am not fundamentally opposed to European taxes, but they must not place an additional burden on citizens and businesses, as we need purchasing power and competitiveness in Europe,” he replied.

This reservation does not, therefore, amount to an outright refusal. Luc Frieden accepts the principle of European tax revenue, provided that it is not simply added on top of existing levies. He thus explicitly rules out a European tax on corporate profits: “I cannot imagine us introducing, on top of national corporation tax, an additional European corporation tax, as this would undermine Europe’s competitiveness.”

He then puts forward his own solutions. “There are plenty of ideas. We could discuss a sugar tax or a tourist tax for visitors from third countries. It would also be possible to use the existing carbon border adjustment mechanism, the CBAM.”

This is a new development. Until now, the debate in Luxembourg had mainly highlighted the government’s objections. During the European discussions in April on the 2028–2034 budget, Luc Frieden had rejected a revenue source based on tobacco excise duties as well as an additional contribution from large companies. At the same time, he refused to allow the EU to cut funding for research, youth or competitiveness. The dilemma remained: calling for more Europe without increasing national contributions or accepting the new revenue streams proposed by Brussels.

Tough budget negotiations

The Austrian interview provides some initial answers. The tourist tax mentioned by the Prime Minister would not apply to all travellers. It would apply to visitors from countries outside the European Union. No rate, threshold, method of collection or revenue-sharing arrangement has been put forward. It also remains to be determined whether this levy would be collected on entry into the European Union, on overnight stays or via transport operators.

The idea of a sugar tax is equally vague. It could take the form of a levy on drinks or products with a high sugar content, as already exists in several countries. However, Luc Frieden does not specify which products would be affected, nor whether this tax would replace an existing source of national revenue or be added to it. At this stage, he is opening up a discussion rather than presenting a fully formed proposal.

The third approach is more practical. The CBAM already exists. Set to enter its final phase in 2026, it will gradually impose a carbon price on certain imports from countries where climate regulations are less stringent than in the EU. The European Commission proposes to allocate a significant proportion of this revenue to the EU budget. On this point, therefore, Luc Frieden is not suggesting the creation of a new tax, but rather the use, at the European level, of the proceeds from a mechanism that is already in place.

This proposal comes in the midst of difficult budget negotiations. For the period 2028–2034, the Commission wants to provide the Union with additional own resources. In particular, it is proposing a contribution drawn from excise duties on tobacco, revenue based on uncollected electronic waste, a contribution from large companies, and an increased share of revenue from the CBAM and the European carbon market. Tobacco-related revenue alone could generate an average of €11.2 billion per year, according to the Commission’s estimates.

Trade-offs

Luxembourg is directly exposed to several of these trade-offs. Greater harmonisation of tobacco taxation could reduce sales in the Grand Duchy and the associated excise revenue. A new levy calculated on the turnover of large companies would, for its part, affect a country that is home to numerous international groups. Conversely, a tax paid by visitors from third countries would place less of a direct burden on Luxembourg taxpayers and businesses.

This shift in focus sheds light on Luc Frieden’s position. He is not advocating a general increase in European taxation. He is seeking sources of revenue that would enable common priorities to be funded without adding a European corporation tax to national taxes. A political question remains. A European tax on tourists, sugar or carbon does not disappear simply because it is levied at the border or on a specific product. It is borne by a traveller, a consumer or a business, and may subsequently be passed on in prices. The choice outlined by Luc Frieden therefore does not merely concern the size of the future European budget. It begins to identify those who should finance it.