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 judiciary 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 EU had an agreed budget of €120.7 billion for the year 2007 and €864.3 billion for the period 2007-2013,^[1] representing 1.10% and 1.05% of the EU-27's GNI forecast for the respective periods. 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 budget of the six member state EEC was 0.03% of GDP.^[2]

[edit] Setting a budget

The Administration 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

Pie chart showing EU25 total revenue in millions of euros for 2006.^[3]

     GNI-based own resource: 70,132.1 (approx 65%)      VAT-based own resource: 17,206.2 (approx 16%)      Traditional own resources: (TOR) 15,028.3 (approx 14%)      Total other: 6,056.5 (approx 6%)
Total revenue = 108,423 million

The Administration obtains most of its revenue indirectly by payments from treasuries of member states. Revenue is divided into four categories.

[edit] Traditional own resources

Traditional own resources^[4] 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.^[4]

[edit] VAT based own resources

VAT based own resources^[4] 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.

[edit] GNI based own resources

GNI based own resources^[4] 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.

[edit] Other Revenue

Other Revenue^[4] 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] State by state analysis

Choropleth map showing Open Europe estimate of total budget expenditure in euros for the whole period 2007-2013 per capita (based on Eurostat 2007 population estimates).

Net contributors      -5,000 to -1,000 euro per capita      -1,000 to -500 euro per capita      -500 to 0 euro per capita
Net recipients
     0 to 500 euro per capita      500 to 1,000 euro per capita      1000 to 5,000 euro per capita      5000 to 10,000 euro per capita      10,000 euro plus per capita      n/a

Above data depicted as a cartogram (Luxembourg not shown).

Bar chart showing Open Europe estimate of total budget expenditure in euros for the whole period 2007-2013 per capita (based on Eurostat 2007 population estimates).

A 2007 briefing note^[5] by the eurosceptic research and advocacy organization "Open Europe" gave its estimates for total contributions to the EU and total receipts from it for each member state over the budget period 2007-2013. Those figures are given in the table below, along with the Eurostat population figures for the beginning of 2007.^[6] The calculated net contributions/receipts for each member state are depicted on the diagrams to the right.

[edit] Belgium and Luxembourg

The figures for Luxembourg may be inflated by the large number of companies based there with parents or subsidiaries based outside it. The ultimate beneficiary of EU expenditure to such companies may actually be those parents or subsidiaries instead.^[3] A similar situation pertains in Belgium.^[3]

[edit] Expenditure

Pie chart showing EU total expenditure in millions of euros for 2006.^[3]

     Agriculture: 49,798.8 (approx 46.7%)      Structural Actions: 32,399.3 (approx 30.4%)      Internal Policies: 9,013.7 (approx 8.5%)      Administration: 6,699.7 (approx 6.3%)      External Actions: 5,186.2 (approx 4.9%)      Pre-Accession Strategy: 2,276.7 (approx 2.1%)      Compensations: 1,073.5 (approx 1.0%)      Reserves: 127.6 (approx 0.1%)
Total expenditure = 106,575.5 million

In the 2006 budget, the largest single expenditure item was agriculture (direct aid, export refunds, storage, rural development and other) with around 46.7% of the total budget. Next came structural actions (Objective 1, Objective 2, Objective 3, other structural measures, community initiatives, innovatory measures and technical assistance, other specific structural operations and the cohesion fund) with approximately 30.4% of the total. Internal policies (training, youth, culture, audiovisual, media, information, energy, Euratom nuclear safeguards and environment, consumer protection, internal market, industry and Trans-European networks, research and technological development, other internal policies) took up around 8.5%. Administration accounted for around 6.3%. External actions, the pre-accession strategy, compensations and reserves brought up the rear with approximately 4.9%, 2.1%, 1% and 0.1% respectively.

[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] External links

• The European Parliament's Budget Focus Everything you need to know about the 2009 Budget (29/01/2009)
• European Commission > Financial Programming and Budget^[4][3]
• Interview with EP Budget discharge rapporteur, European Parliament website (12 November 2008)

[edit] References

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