Financing the EU Budget: Moving Forward or Backwards? - Softcover

Cipriani, Gabriele

Softcover

ISBN 10: 178348330X ISBN 13: 9781783483303

Publisher: Centre for European Policy Studies, 2014

Synopsis

Often described as complex, opaque and unfair, the EU budget financing system is an “unfinished journey.” One of the most critical issues is that EU revenue, drawn from the cashbox of national taxation, remains impalpable to the general public.

The nature of the EU as a union of states and their nationals makes the visibility of EU revenue unavoidable. The political sustainability of a move that would put the legitimacy of EU revenue at the forefront of public discussion will depend on the European Commission’s ability to show that EU funds can achieve results that are truly beyond member states’ reach.

The value-added tax (VAT) is a natural choice for funding the EU budget, through a dedicated EU VAT rate as part of the national VAT and designed as such in fiscal receipts, whose use as a means for raising EU citizens’ awareness could be encouraged already in the current arrangements.

About this title

About the Author

Gabriele Cipriani is an official of the European Court of Auditors.

From the Back Cover

Often described as complex, opaque and unfair, the system of financing the EU budget remains an 'unfinished journey'. One of the most critical issues is the fact that citizens cannot trace the path of their individual contributions to the EU's coffers. This lack of transparency conveys the false idea that EU funds 'grow on trees' and militates against a proper account-giving of the funds spent. Funding the EU budget with a visible resource would acknowledge the status of the EU as a union of member states and their nationals. Such visibility may be achieved by introducing a dedicated EU Value Added Tax rate, to be designed as such in fiscal receipts and made financially neutral for consumers by an equivalent decrease of the national VAT rate. The political sustainability of such a move, which would put the legitimacy of EU revenues at the forefront of public discussion, will depend on the EU institutions and member states' ability to demonstrate that EU funds can achieve results far beyond what EU countries can attain individually.

Excerpt. © Reprinted by permission. All rights reserved.

Financing The EU Budget

Moving Forward or Backwards?

By Gabriele Cipriani

Rowman & Littlefield International, Ltd.

Copyright © 2014 Centre for European Policy Studies
All rights reserved.

ISBN: 978-1-78348-330-3

Contents

Preface, 
1. The EU budget revenue system, 
2. Simplicity, transparency, equity and democratic accountability, 
3. EU expenditure: The other side of the same coin, 
References, 

CHAPTER 1

THE EU BUDGET REVENUE SYSTEM

The EU revenue system should be considered in the context of the highly innovative and evolutionary nature of the European Union, which is neither an international organisation nor a federal state. Originating from the decision by its member states to pool selected aspects of their respective sovereignties, the EU's powers are founded on the principle of representation of interests.

The EU framework is based on a dual legitimacy, which "brings together states and peoples via a unique form of political integration", in a process of governance 'without government' organised around a single institutional framework. The European Union constitutes a new legal order of international law, the subjects of which comprise not only member states but also their nationals.

The EU revenue system has been a subject of intense debate for years, in particular concerning the nature of the resources financing the EU budget. Many academicians have provided detailed reviews of the functioning and peculiarities of the system and have formulated a number of proposals to address its drawbacks. Still, the EU revenue system seems unalterable. In particular, no satisfactory solution has been found to make visible to citizens their contribution to the EU budget (some &8364;140 billion in 2013, or an average of almost &8364;280 per capita).

EU revenue: A short history

The evolution of the EU budget financing can be charted along the following timeline.

1952-1969. The European Coal and Steel Community (ECSC, 1951, Treaty of Paris) was entitled to procure the funds necessary to carry out its tasks by setting levies on the production of coal and steel, which might be defined as the first Community tax (Article 49 ECSC). By contrast, the Treaty of Rome (EEC, 1957) provided that the budget of the European Economic Community would be initially financed from member states' contributions (Article 200 EEC), as shown in Table 1, with the option of replacing them by Community's own resources at a later stage (Article 201 EEC).

Member states' contributions were based on a percentage scale provided for in the Treaty, differentiated according to the type of expenditure (administrative or operational). These scales were the result of a political agreement, although close to countries' share in gross domestic product (GDP) at that time. The Council was entitled to modify the scales, by unanimous agreement. This happened notably in order to fund agricultural spending.

1970-1984. In 1970, after long and difficult negotiations, member states agreed that "the Communities shall be allocated resources of their own" and that "from 1 January 1975 the budget of the Communities shall, irrespective of other revenue, be financed entirely from the Communities' own resources". As a result, from 1971, customs duties, agricultural duties, and sugar and isoglucose levies (called 'Traditional own resources' or TOR) collected at EU entry were gradually transferred to the EU budget. In order to cover the administrative expenses for their collection, 10% of TOR was retained by the member states. Member states' contributions fr

Edition details

• Publisher: Centre for European Policy Studies
• Publication date: 2014
• Language: English
• ISBN 10: 178348330X
• ISBN 13: 9781783483303
• Binding: Paperback
• Number of pages: 112