The European Union could impose taxes on citizens of member states under radical proposals announced yesterday to help make up a funding shortfall in the wake of Brexit.

A report commissioned by the European Commission, European Parliament and member states called for effective federal taxes to be paid directly to Brussels to fund the EU budget.

EU-wide VAT of 1 or 2 per cent, standardised petrol taxes and a federal corporation tax are among the proposals put forward in the report.

The new taxes are unlikely to affect Britain, as the earliest they could come into force is 2021, long after Theresa May’s target of leaving the EU by 2019.

Brexit is a key factor driving the proposed reforms as the EU looks to fill the gap in its budget that will be left by the UK’s contributions, an estimated £8bn a year.

One proposed tax in the report is EU-wide VAT of 1 or 2 per cent, which would be deducted from national VAT and paid directly to Brussels.