Lightweight suggestion from the Commission to reform the financing of the EU budget

EU budget is currently financed almost fully by Own Resources, which are based on customs, Gross National Income, and statistically corrected VAT bases of the Member States. Marginal income is provided by activities of the EU, such as fines. Furthermore, rebates received by the large net payers influence markedly the actual amount of contributions paid.

The reform proposal published in May 2018 by the European Commission on the new system of Own Resources does not markedly improve the financing structure of the EU budget. The proposal simplifies the calculation of the VAT-based Own Resource. In addition, it introduces three new Own Resources based on CCCTB, ETS allowances and the amount of non-recycled plastic packaging waste.

The largest contributions continue to come from the GNI-based Own Resources, Traditional Own Resources, and the VAT-based Own Resources. Environmental effects would be modest. The implementation of CCCTB would improve the conditions in Internal Markets and increase tax revenues, but independently of the use of the proceeds as Own Resource in the EU budget. Strongest resistance is expected to be generated by the suggestion of removing gradually all the rebates of the large net payers.

JEL: H77, H87
Date: 09.05.2018
Pages: 5
Language: Finnish
ISSN: 2323-2463
ETLA Muistio – ETLA Brief 65