Own resources

Own resources

Own resources constitute the EU revenue. They have to completely cover EU expenditure. Since the MFF Regulation broadly defines the expenditure side of the package, the own resources and the MFF Regulation are closely linked. They can be said to be two faces of the same coin. In the past, when there has been an agreement on a new MFF, there has also been an agreement on own resources.

The rules on EU own resources establish:

1. a ceiling;
2. the different types of own resources;
3. corrections to address situations when a Member State's budgetary burden is excessive in relation to its relative prosperity.

1. What is the ceiling of own resources?

The ceiling of own resources is a maximum amount of own resources which the EU may raise during a year. Because the ceiling is expressed as a percentage of the EU gross national income (GNI) it depends on the rate of economic growth.

2. What are the types of own resources?

Under the current MFF, there are 3 types of own resources:

Traditional own resources.

Mainly customs duties and sugar levies.

Own resources based on the value added tax (VAT).

As a rule, a uniform rate of 0.30% is levied on the harmonised VAT base of each Member State.

The taxable VAT base is capped at 50% of gross national income (GNI) for each country. The aim of this rule is to prevent less wealthy Member States from having to pay a disproportionate amount (in low income countries VAT generally accounts for a higher percentage of national income).

Own resource based on the Gross National Income (GNI).

A standard percentage is levied on the GNI of each EU Member State.

It is used to fund the part of the EU budget which is not covered by other own resources, with the aim of balancing EU revenue with expenditure.

The other sources of revenue are:

• taxes on EU staff salaries
• contributions from non-EU countries to certain programmes
• fines on companies for breaching competition laws, etc.

3. What are the existing corrections on the revenue side?

Corrections are mechanisms to compensate or correct budgetary imbalances of some Member States.

The main corrections are:

• The UK rebate - approximately EUR 3.6 billion in 2011 - and the rebates on the financing of the UK rebate.
• Lump-sum payments to the Netherlands and Sweden - a reduction of their annual GNI payments for the period 2007-2013 (in 2004 prices):
  - Netherlands - EUR 605 million
  - Sweden - EUR 150 million.
• Reduced VAT call rates for 4 Member States for 2007-2013:
  - Austria: 0.225%
  - Germany: 0.15%
  - Netherlands: 0.1% 
  - Sweden: 0.1%.

All forms of corrections, be it on the revenue or on the expenditure side, are based on two principles agreed upon at the European Council of Fontainebleau in 1984:

1. Expenditure policy is ultimately the essential means of resolving the question of budgetary imbalances.
2. 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.

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Which changes to the own resources system did the Commission propose?