C2 A4: Government's proposal for Regulation 2024/XX laying down the Federal Budget

CHAPTER 1 : GENERAL PROVISIONS

Article 1: Object

The present Regulation lays down the Budget through which the Federation can
collect and make use of financial resources to meet its financial commitments.

Article 2: Definitions

For the purposes of this Regulation:

1. Budget - Refers to the set of elements by virtue of which the Federation
   anticipate its revenues and financial commitments for the following year;

2. Deficit - Refers to the situation in which a Government’s expenditures are
   higher than its receipts on a yearly basis. The difference between
   expenditures and receipts is corrected by contracting debts.

3. Debt - Refers to the total of the Federation’s financial commitments. It
   results from the cumulative financing needs of the Federation over time.

4. Tax - Refers to a compulsory, unrequited payment to public authorities.

CHAPTER 2: ON THE FINANCIAL RESOURCES OF THE
FEDERATION

Article 3: Minimum Corporate Tax

To ensure a fair and equitable economic environment and to prevent the erosion
of the Federal tax base, the Federal European Government hereby establishes a
Minimum Corporate Tax Rate.

The Minimum Corporate Tax Rate shall be applicable to all corporate entities
operating within the Member-States of the Federation.

Article 3a.

1. The Minimum Corporate Tax Rate shall be set at 15%.

2. This rate shall apply to the profits of corporate entities as defined by
   the Federal Tax Code.

Article 3b.

1. Member-States shall implement the Minimum Corporate Tax Rate through their
   respective national legislation.

2. Member-States shall ensure that their national tax laws are in compliance
   with the Minimum Corporate Tax Rate provisions of this Article.

Article 4: Carbon Domestic Adjustment Mechanism

1. In an effort to combat climate change and incentivize the reduction of
   greenhouse gas emissions, the Federal European Government hereby
   establishes a Carbon Domestic Adjustment Mechanism applicable to all
   member states of the Federation.

2. For the purpose of the present Regulation this mechanism shall:
   • Comprise a tax rate (Art. 4a);
   • Be allocated to environmental programs (Art. 4b);
   • Include punitive measures against faulty administrations (Art. 4c).

3. The Carbon Domestic Adjustment Mechanism shall be levied on the carbon
   dioxide equivalent emissions of fossil fuels, including but not limited to
   coal, natural gas, and oil, at the point of production or importation into
   the Federation.

Article 4a.

The initial tax rate shall be set at €30 per metric ton of carbon dioxide
equivalent emissions.

The tax rate shall be subject to an annual increase of 5% plus the rate of
inflation, to ensure the continued effectiveness of the Carbon Domestic
Adjustment Mechanism in reducing emissions.

Article 4b.

Revenues generated from the Carbon Domestic Adjustment Mechanism shall be
allocated to the Federal Budget and used for the following purposes:

1. Investment in renewable energy and energy efficiency projects.

2. Support for innovation in low-carbon technologies.

3. Assistance to industries and communities transitioning away from fossil
   fuels.

4. Mitigation of the impact on low-income households through rebates or tax
   credits.

Article 4c.

1. Entities subject to the Carbon Domestic Adjustment Mechanism must report
   their emissions annually to the designated national Authority.

2. Failure to comply with reporting requirements or payment of the Carbon
   Domestic Adjustment Mechanism shall result in penalties, including fines
   and legal action.

Article 5: Uniform VAT Rate

In the interest of economic harmonization and fairness, the Federal European
Government hereby establishes a Uniform Value Added Tax (VAT) Rate.

The Uniform VAT Rate shall be applicable to all goods and services sold within
the member states of the Federation.

The Uniform VAT Rate shall be set at 20% of the commodity’s Value added, a
quarter of which is due to the Federation’s budget.

This rate shall apply to the final consumption of goods and services, excluding
those exempted by the Federal Tax Code.

CHAPTER 3: ON THE FINANCIAL INSTRUMENTS OF THE
FEDERATION

Article 6: Issuance of debt

In accordance with Article 52 of the European Youth Convention, the Federation
may raise temporary debt to face situations that put the Federal Treasury at a
risk of structural imbalance.

Those situations include and are limited to:

1. economic and financial crisis, putting the Federal budget at risk;

2. pandemics;

3. natural disasters occuring within the Federation;

4. events that pose a direct threat to national or Federal security.

The issuance of debt shall be granted solely to the Federal Treasury Agency,
under the approval by an absolute majority of the House of European Citizens and
the Senate.

When a risk of imbalance occurs, the Federal Treasury Agency may issue debt with
a maturity exceeding no longer than 40 years.

Article 7: National contribution to the budget

Member-States shall contribute to the Federal budget by paying at least 2% of
their gross national income through the taxes they collect in the name of the
Federation, including but not limited to the Minimum Corporate Tax, the Domestic
Carbon Adjustment Mechanism, Customs and VAT.

Member-States remain the sole accountables for collecting taxes.

Member-States may apply a national Corporate Tax Rate higher than 15%, but are
entitled to pay for the amount which is due to the Federation.

Member-States may apply a Value Added Tax rate higher than 20%, but are entitled
to pay for the amount which is due to the Federation.

From 1 January 2032, Member-States shall cease to generate debt on their own
initiative and capacity.

If the ressources levied to meet the Federation fiscal commitments do not meet
the financial objectives of the Federation, the Government may, following the
extraordinary legislative procedure, present measures to increase the
aforementioned taxes or create new ressources destined to the Federal Budget.

Ensuring Transparency and Accountability in Tax Payments, Member States shall ensure full transparency and accountability in the payment of all taxes and levies, including those owed to international organizations and funds.
Each Member State shall establish a publicly accessible registry detailing all tax payments made to international bodies, including the specific amounts, dates, and purposes of such payments. This registry shall be updated quarterly and made available online in an open data format.
Failure by a Member State to comply with transparency and accountability requirements for tax payments shall result in the following penalties:
a. The Member State shall be brought before the Court of Justice of the European Federation. The Court may impose periodic penalty payments or lump sum fines until compliance is achieved.
b. If the Member State still fails to comply after Court penalties, the Commission may seek further enforcement measures under Articles 258-260 TFUE.
Whistleblowers and civil society organizations that report suspected tax payment irregularities shall be protected from retaliation and their claims thoroughly investigated. A reward system shall be established to incentivize the reporting of fraud and corruption.
The European Federation shall establish a centralized monitoring system to track tax payments across all Member States.

CHAPTER 4: ON THE FINANCIAL GOVERNANCE OF THE
FEDERATION

Article 8 : The Federal Treasury Agency

A Federal Treasury Agency shall be created and placed under the responsibility
of the Ministry of Finances and Budget. It is:

1. Responsible for meeting the Federal Government's liquidity commitments so
   that it can honor all of its financial commitments at all times and under
   all circumstances.

2. Tasked with managing and reimbursing on time the debt accumulated by the
   Federal Government and Member-States

Under no circumstances is the Federal Treasury Agency allowed to generate debts
on its own initiative and profits from the bonds already issued.

Member-States shall have until December 31th 2031 to reimburse all the bonds
contracted before the adoption of the present Regulation. The FTA shall ensure
that the Member-States have the necessary funds to fulfill this commitment
appropriation.

Article 9: Budget planning

In order to pursue its objectives and financial commitments, the Federation
shall adopt, under the ordinary legislative procedure, an annual budget.

The additional resources laid down by the present Regulation shall be allocated
in priority to the reimbursement of:

1. The borrowing of financial capital through the former EU Next Generation
   EU recovery package.

2. The potential deficit generated by the Federal Pension Regime mentioned in
   Directive 2024/XX laying down fair and decent social standards across the
   Federation.

Article 10: Budgetary monitoring

The European Parliament shall monitor the appropriate implementation of the
budget. The European Parliament is entitled to sanction a Member State, or the
Federal Government, via a procedure for a lack of contribution to the Federal
budget if they do not meet their financial commitments.

CHAPTER 5: IMPLEMENTATION

Article 11: Entry into force and application

1. The present Regulation shall enter into force immediately following its
   publication in the Official Journal of the European Federation.

2. The Government shall be allowed to adopt any decree or implementing act
   related to the implementation of the technical aspects of the present
   Regulation.

3. It shall apply from [Day][Month][Year]

The present Regulation shall be binding in its entirety and directly applicable
to the European Government and in all Member States.

For the European Parliament

The President

For the European Senate

The President