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Q&A: The EU's high-level group on own resources

European Commission - MEMO/14/130   25/02/2014

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European Commission

MEMO

Strasbourg, 25 February 2014

Q&A: The EU's high-level group on own resources

The high-level group on own resources has been formally established today by the Presidents of the European Commission, the European Parliament and the Council of the European Union. This memo aims to clarify the role, mandate and functioning of this new inter-institutional group and provide background information on own resources (see glossary).

INFORMATION ON THE HIGH-LEVEL GROUP

What is the purpose of the high-level group?

The group has been set up to study the current system of income to the EU budget. It is expected to suggest possible improvements to that system. The main aim of the group is to explore ways to make the system simpler, fairer, more transparent and more democratically accountable.

How will the group do its work?

The group will undertake a general review of the current own resources system and issue a first assessment at the end of 2014, taking into account all existing and forthcoming input from the three European institutions and national parliaments. It will draw on appropriate expertise, including from national budgetary and fiscal authorities and independent experts.

National parliaments will assess the outcome of the work in the context of an inter-parliamentary conference in 2016. The conclusions and/or recommendations of that conference will determine whether the Commission will make a proposal to improve the own resources system.

Who is in the high-level group?

The group will be chaired by former Italian Prime Minister and EU Commissioner Mario Monti, plus several members appointed by the European Parliament, the European Commission and the Council.

While the composition of the group has yet to be finalised, the Commission has nominated Vice-President Maroš Šefčovič (Inter-Institutional Relations and Administration), Commissioner Janusz Lewandowski (Financial Programming and Budget) and Commissioner Algirdas Šemeta (Taxation, Customs, Statistics, Audit and Anti-Fraud) to the group.

Why was the high-level group on own resources created?

The Commission's proposal for the new Multiannual Financial Framework 2014-2020 included a new, more transparent and fairer system of financing the EU budget that would reduce Member States' Gross National Income (GNI)-based contributions due to new proceeds from a future financial transaction tax for the EU budget and a new modernized Value Added Tax (VAT)-based resource. The Commission also proposed to simplify the existing correction mechanisms that apply to a number of Member States through lump sum gross reductions of their GNI contributions. The negotiations brought no significant changes to the way the next EU budgets will be financed but called for the establishment of the high-level group on own resources.

How much will it cost the European taxpayer?

The group will cost European taxpayers very little, as existing logistical resources and infrastructure (staff, meeting rooms, etc.) will be used and the members of the group will not be remunerated.

INFORMATION ON THE EU BUDGET'S OWN RESOURCES

What are the own resources of the EU budget for the 2014-2020 period?

Under the present system, there are three types of own resources:

Traditional own resources: consist mainly of customs duties on imports from outside the EU and sugar levies. EU Member States keep 20 % of the amounts as collection costs.

Own resources based on value added tax (VAT): a uniform rate of 0.3 % is levied on the harmonized VAT base of each Member States.

Own resources based on GNI: each Member State transfers a percentage of its GNI to the EU. Although designed simply to cover the balance of total expenditure not covered by the other own resources, this has become the largest source of revenue of the EU budget.

Other sources of revenue include tax and other deductions from EU staff remunerations, bank interest, contributions from non-EU countries to certain programmes, interest on late payments and fines.

What are the "correction mechanisms" for the 2014-2020 financial period?

These mechanisms are measures to correct contributions considered excessive by certain Member States and include:

The UK rebate: the UK is reimbursed by 66% of the difference between its contribution and what it receives back from the budget. The cost of the UK rebate is divided among EU Member States in proportion to the share they contribute to the EU's GNI. Germany, the Netherlands, Austria and Sweden, who considered their relative contributions to the budget to be too high, pay only 25% of their normal financing share of the UK correction.

Lump-sum payments: Denmark, the Netherlands and Sweden will benefit from gross reductions in their annual GNI contribution of EUR 130 million, EUR 695 million and EUR 185 million, respectively. Austria will benefit from a gross reduction in its annual GNI contribution of EUR 30 million in 2014, EUR 20 million in 2015 and EUR 10 million in 2016.

VAT call rates for Germany, the Netherlands and Sweden will be fixed at 0.15%.

How is the own resources system decided?

The system of EU own resources is adopted by unanimity in the Council and ratified by all Member States. The European Parliament is consulted.

What still needs to be adopted before the own resources system for MFF 2014-2020 enters into force?

There are some steps that need to be taken before the own resources system can enter into force. They are:

The Own Resource Decision, which requires unanimity in Council, consultation of the European Parliament and ratification by all Member States;

Two regulations related to the implementation and making available of own resources require a qualified majority in the Council. The European Parliament is consulted on the regulation that makes available own resources, and has to give its consent to the implementing Regulation.

It is estimated that the new legislation will enter into force no earlier than 2015 but the new own resources system will be applied with retroactive effect as of 1 January 2014.

How does the system of own resources work?

The overall amount of own resources needed is determined by total expenditure less other revenue. It cannot exceed 1.23% of the EU's GNI.

The collection of own resources is planned in annual budgets on the basis of estimations which are updated on a regular basis prior to adoption, during the implementation and even after the execution of an annual EU budget.

The Member States' contributions, based on their GNI, are calculated only after all calculations (on the two other own resources, other revenue and the rebates) are made, as it used to ensure the expenditure and revenue in each EU annual budget is balanced.

What were the resources of the EU budget in 2012?

Remark: TOR = Traditional Own Resources (customs duties, sugar levies)

How did own resources develop over the last 60 years?

Figures and graphics available in PDF and WORD PROCESSED

Glossary

Correction mechanisms – Measures taken to compensate Member States whose contribution to the EU budget is perceived as being too high compared to their relative wealth and the benefits they get out of the EU budget. There are several types of corrections, including the so-called 'rebate'.

Collection costs – see 'traditional own resources'

MFF - The Multiannual Financial Framework lays down the spending priorities and maximum annual amounts which the European Union may spend in different political fields over a fixed period. Currently the MFF is seven years long, from 2014-2020.

The ceilings laid down in the MFF regulation are not equivalent to the EU budget. The annual EU budget itself usually remains below the MFF expenditure ceilings. The MFF also covers income sources for the EU budget, as well as correction mechanisms for the financial period.

Own resources – simply, this is the revenue of the EU budget. There are three types of revenue:

Traditional own resources (TOR) - consist mainly of customs duties on imports from outside the EU, and sugar levies. Member States keep 20% of the amounts as collection costs.

GNI-based resources – this is commonly referred to as Member States' contribution to the EU budget. Each Member State transfers a standard percentage of its Gross National Income to the EU.

VAT-based resources – a uniform rate of 0.3% of the harmonised VAT base is transferred to the EU budget from each Member State

Revision of the MFF (also called mid-term review) - The functioning of the current 2014-20 MFF will be reviewed by the Commission in 2016, taking into consideration the economic situation at the time as well as the updated macroeconomic projections.

Further information:

MFF website (includes a dedicated page on the EU's own resources)

http://ec.europa.eu/budget/mff/resources/index_en.cfm

High-Level Group on Own Resources:

http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ecofin/139831.pdf


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