Budget of the European Union
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The European Union (EU) is an association of 27 independent member states. The Administration of the Union has a parliament, a civil service and a judiciciary that is distinct from those of the member states. These arms administer the application of treaties, laws and agreements between the member states and their expenditure on common policies throughout the Union. To pay for this, the administration of the Union has an agreed budget of €116 billion for the year 2007, and €862 billion for the period 2007-2013,[1] this represents around 1% of the EU's GDP. By comparison, the UK expenditure for 2004 alone was estimated at about €759 billion and France was estimated at about €801 billion. In 1960, the then "EU" (EEC) budget was 0.03% of GDP.[1]
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[edit] Setting a budget
The Adminstration of the European Union has three elements to its government: the Council of Ministers, the European Commission and the European Parliament. In addition, the European Court of Justice is funded from the budget of the Administration. All three take a part in setting the annual budget. The budget for a year, or period of years, is determined in advance, but final calculations of payments required from each member state are not completed until after the budget year is over and information about revenue and expenditure is available. The UK rebate is one of the last elements of the budget to be calculated (though it is estimated in advance) as it depends upon the balance of all EU revenue to and from the UK.
[edit] Revenue
The Administration obtains most of its revenue indirectly by payments from treasuries of member states. Revenue is divided into three categories.
Traditional own resources are taxes raised on behalf of the EU as a whole, principally import duties on goods brought into the EU. These are collected by the state where import occurs and passed on to the EU. States are allowed to keep a proportion of the revenue to cover administration (25%). The European Commission operates a system of inspectors to investigate the collection of these taxes in member states and ensure compliance with the rules. The effect of a state failing to collect these taxes is that other states will have to contribute more to the budget, so there is a potential conflict of interest on the part of the collecting authorities. Countries are liable to make good any loss of revenue due to their own administrative failure. [2]
VAT based own resources are taxes on EU citizens derived as a proportion of VAT levied in each member country. VAT rates and exemptions vary in different countries, so a formula is used to create the 'harmonised tax base', upon which the EU charge is levied. The starting point for calculations is the total VAT raised in a country. This is then adjusted using a weighted average of VAT rates applying in that country, producing the intermediate tax base. Further adjustments are made where there is a derogation from the VAT directive allowing certain goods to be zero-rated. The tax base is capped, such that it may not be greater than 50% of a country's Gross national income (GNI). The EU applies a call-up rate to the tax base, generally of 0.33%, but this is varied for some countries. For 2007-2013 the rate proposed for Austria is 0.225%, and Germany 0.15%, the Netherlands and Sweden 0.1%.
Countries are required to make an account of VAT revenues to the EU before the July after the end of the budget year. The EU examines the submission for accuracy, including control visits by officials from the Directorate-General for Budget and Directorate-General for Taxation, and reports back to the country concerned. The country may then respond to any issues raised in the report, and negotiations continue until both sides are satisfied, or the matter may be referred to the European Court of Justice for a final ruling. The Advisory committee on own resources, which has representatives from each member state, also receives and discusses the reports. In 2006, 9 countries were inspected by controllers, including 5 new member states who were participating in the procedure for the first time. It is anticipated that 11 countries will be visited in 2007. The EU may be working on figures for three years at any one time.
GNI based own resources currently forms the largest contribution to EU funding. A simple multiplier is applied to the calculated GNI for the country concerned. This is the last recourse for raising funding for a budget year, so the actual figure is adjusted within predetermined limits to obtain the budget total required. Revenue is currently capped at 1.24% of GNI for the EU as a whole.
GNI is determined by national accounts specialists working for Eurostat, on behalf of the Budget Directorate-General, according to agreed regulations. Basic information must be provided by the countries concerned before 22 September following the budget year concerned. There may then follow control visits or other negotiations to resolve any reservations. None of the member countries is currently wholly in agreement with the commission over the calculations.
Payments are made monthly by member states to the commission. Own resources payments are made monthly as they are collected, but monthly installments of VAT and GNI based returns are based upon the budget estimates made for that year, subject to later correction.
Other Revenue makes up approximately 1% of the EU budget. This includes interest on deposits or late payments, payments from non-EU organisations, underspent funding from community programs and any other surplus from the previous budget.
[edit] Expenditure
The largest single expenditure item is the Common Agricultural Policy (CAP) at around 45% of the total budget. The second largest element is the regional policy, at 30%. Foreign policy consumes 8%, administration 6%, research 5%.
[edit] State by state analysis
The table below shows individual contributions and receipts as a percentage of the total budget. This takes into account the special considerations given to the United Kingdom to reduce its contribution through a rebate (approximately 4.8 billion euros in 2006).
Expenditure in Luxembourg, Belgium and France include items for the EU administrative centres in each of those countries.
| Member State | Total Contribution (€, 2006) |
Total Contribution (%, 2006) |
Total Expenditure (€, 2006) |
Total Expenditure (%, 2006) |
Net (€, 2006) |
|---|---|---|---|---|---|
 European Union |
87,322,900,000 | 100% | 97,443,400,000 | 100% | 10,120,500,000 |
 Germany |
17,573,300,000 | 20.1% | 12,242,400,000 | 12.6% | -5,300,900,000 |
 France |
15,353,200,000 | 17.6% | 13,496,200,000 | 13.9% | -1,857,000,000 |
 Italy |
11,933,500,000 | 13.7% | 10,922,300,000 | 11.2% | -1,011,200,000 |
 United Kingdom |
9,830,200,000 | 11.3% | 8,294,200,000 | 8.5% | -1,536,000,000 |
 Spain |
8,601,900,000 | 9.9% | 12,883,000,000 | 13.2% | 4,281,100,000 |
 Netherlands |
4,487,100,000 | 5.1% | 2,190,400,000 | 2.2% | -2,296,700,000 |
.svg/22px-Flag_of_Belgium_(civil).svg.png){kind=small} Belgium |
2,635,200,000 | 3.0% | 5,625,100,000 | 5.8% | 2,989,900,000 |
 Sweden |
2,297,700,000 | 2.6% | 1,573,400,000 | 1.6% | -724,300,000 |
 Poland |
2,174,600,000 | 2.5% | 5,305,600,000 | 5.4% | 3,131,000,000 |
 Austria |
2,013,900,000 | 2.3% | 1,830,100,000 | 1.9% | -183,800,000 |
 Denmark |
1,869,700,000 | 2.1% | 1,501,900,000 | 1.5% | -367,800,000 |
 Greece |
1,629,700,000 | 1.9% | 6,833,700,000 | 7% | 5,204,000,000 |
 Finland |
1,429,600,000 | 1.6% | 1,280,400,000 | 1.3% | -149,200,000 |
 Ireland |
1,279,700,000 | 1.5% | 2,461,800,000 | 2.5% | 1,182,100,000 |
 Portugal |
1,260,700,000 | 1.4% | 3,634,800,000 | 3.7% | 2,374,100,000 |
 Czech Republic |
886,300,000 | 1.0% | 1,330,000,000 | 1.4% | 443,700,000 |
 Hungary |
678,300,000 | 0.8% | 1,842,200,000 | 1.9% | 1,163,900,000 |
 Slovakia |
346,500,000 | 0.4% | 696,200,000 | 0.7% | 349,700,000 |
 Slovenia |
243,800,000 | 0.3% | 406,000,000 | 0.4% | 162,200,000 |
 Luxembourg |
198,300,000 | 0.2% | 1,194,800,000 | 1.2% | 996,500,000 |
 Lithuania |
195,800,000 | 0.2% | 799,800,000 | 0.8% | 604,000,000 |
 Latvia |
132,700,000 | 0.2% | 402,600,000 | 0.4% | 269,900,000 |
 Cyprus |
120,700,000 | 0.1% | 239,600,000 | 0.2% | 118,900,000 |
 Estonia |
111,000,000 | 0.1% | 300,000,000 | 0.3% | 189,000,000 |
 Malta |
39,400,000 | 0.0% | 157,000,000 | 0.2% | 117,600,000 |
| Source: EU budget 2006 Financial Report | |||||
[edit] Future of the EU budget
The European Commission has launched a debate on the future of Europe's budget. What are the challenges Europe will have to face and how should the EU budget help tackle them? Commission presented recently (12/09/2007) a discussion paper setting out the key issues structuring this debate, and invited the public to contribute its views on these issues.
[edit] Criticisms
- "As it stands today [in 2003], the EU budget is a historical relic. Expenditures, revenues and procedures are all inconsistent with the present and future state of EU integration." - The Sapir Report, 2003, p 162.
[edit] See also
- Economy of the European Union
- Common Agricultural Policy
- Common Fisheries Policy
- European Union Regional policy
- European Anti-Fraud Office
- Directorate-General for Budget
[edit] References
- EU discussion of revenue
- Breakdown of revenue and expenditure
- EU Breakdown of revenue
- EU financial reports 2001 to 2006
- ^ EU budget at a glance. Europa, EU information website. Retrieved on 2007-11-06.
- ^ Revenue in Detail. Europa EU information website. Retrieved on 2007-11-06.
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