martes, 15 de abril de 2008

Financing the European Budget (Income)

The EU Own Resources System:

Total EU revenue has to be equal to total expenditure and is required to stay within agreed legal limits, currently 1.31% of the EU gross national income (GNI) for appropriations for commitments and 1.24% of EU GNI for appropriations for payments.

The main source to finance the EU budget is now a resource based on the Member States' gross national income. This has grown to surpass the other sources, customs duties and agricultural levies ("traditional own resources"), and a resource based on a value added tax base. The own resources system has evolved significantly since the beginning of the first financial framework. In 1988, the GNI resource made up less than 11 % of EU financing, compared to 28 % provided by custom duties and agricultural levies and 57 % by the VAT-based own resource.

In 2013, the GNI resource will provide about 74 % of the EU financing, against 13 % for customs and agricultural levies and 12 % for the VAT-based resource.

The sources and mechanisms of funding the EU budget should ensure an adequate funding of EU policies. They should be judged against commonly agreed principles such as economic efficiency, equity, stability, visibility and simplicity, administrative cost-effectiveness, financial autonomy and sufficiency. None of the funding sources of the EU budget satisfies all of these principles to the same extent, and it is difficult to conceive an "ideal" funding system.

However, the resources structure should seek to comply with the most important funding principles to the greatest possible extent, while minimising negative effects from the perspective of other relevant principles. To achieve that objective, choices have to be made on the principles and their relative importance.

Although the current system has succeeded in providing sufficient resources to finance the EU budget, there is nevertheless a continuous debate about whether the source of funding could be improved in order to better comply with the relevant financing principles. The two largest sources of revenue – the VAT and GNI based own resources – display many of the characteristics of national contributions and are often perceived as such. They are provided by national Treasuries and are sometimes presented as an expenditure item in national budgets. As a consequence, Member States often tend to judge EU policies and initiatives in terms of returns compared to their national contributions, rather than looking first at the overall value of pursuing certain policies at the European level.

The overall composition of the Union's own resources system will thus be an important element to be examined in the context of the review.

In the years since the 1984 Fontainebleau agreement, according to which "any Member State sustaining a budgetary burden which is excessive in relation to its relative prosperity may benefit from a correction at the appropriate time", several permanent or temporary correction mechanisms have been introduced on the income side. These corrections, which include the UK correction – essentially consisting of the reimbursement of 66% of the difference between UK GNI- and VAT-contributions to the budget and its receipts – lump-sum payments to the Netherlands and Sweden, reduced VAT call-rates for the Netherlands, Sweden, Germany and Austria, as well as a flat rate retention of 25% of traditional own resources for Member States collecting them, have considerably reduced the simplicity and transparency of the system.

More importantly, this logic, alongside the increasing focus placed on a narrow 'accounting' approach with the main objective of maximising returns, has led to tensions between Member States and has coloured the public debate about the value of EU spending and the benefits of EU membership itself.

Against this backdrop, the review will take a close look on whether and to what extent the various correction mechanisms which have emerged and their underlying principles are still justified. A consensus on spending priorities could already facilitate a reform of the EU own resources system It is also in this context that possible alternative own resources should be examined very carefully, taking into account the national sovereignty on fiscal policy and, for instance, the cross-border mobility of some tax bases and the impact of such resources on related EU policies.

What principles should underpin the revenue side of the budget and how should these be translated in the own resources system?
Is there any justification for maintaining correction or compensatory mechanisms?
What should be the relationship between citizens, policy priorities, and the financing of the EU budget?