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The budget of the
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are Geography of the European Union, located primarily in Europe. The u ...
( The Union’s annual budget) is used to finance EU funding programmes (such as the
European Regional Development Fund The European Regional Development Fund (ERDF) is one of the European Structural and Investment Funds allocated by the European Union. Its purpose is to transfer money from richer regions (not countries), and invest it in the infrastructure and se ...
, the Cohesion Fund,
Horizon Europe Horizon Europe is a seven-year European Union scientific research initiative to help develop a sustainable and livable society in Europe. It is the ninth of the Framework Programmes for Research and Technological Development (FP9), and the succe ...
, or
Erasmus+ Erasmus+ is the European Commission's programme for education, training, youth, and sport for the 2021–2027 period, succeeding the previous programme (2014–2020). As an integrated programme, Erasmus+ offers more opportunities for the mobi ...
) and other expenditure at the European level. The EU budget is primarily an investment budget. Representing around 2% of all EU public spending, it aims to complement national budgets. Its purpose is to implement the priorities that all EU members have agreed upon. It provides European added-value by supporting actions which, in line with the principle of subsidiarity and proportionality, can be more effective than actions taken at national, regional or local level. The EU had a long-term budget of €1,082.5 billion for the period 2014–2020, representing 1.02% of the EU-28's Gross National Income (GNI) and of €1,074.3 billion for the 2021–2027 period.European Council conclusions, 10-11 December 2020
Retrieved 15 January 2021.
The long-term budget, also called the
Multiannual Financial Framework The Multiannual Financial Framework (MFF) of the European Union (EU), also called the financial perspective, is a seven-year framework regulating its European Union, EU Budget of the European Union, annual budget. Proposed by the European Commiss ...
, is a seven-year spending plan, allowing the EU to plan and invest in long-term projects. Initially, the EU budget used to fund mainly agriculture. In the 1980s and 1990s,
Member States A member state is a state that is a member of an international organization or of a federation or confederation. Since the World Trade Organization (WTO) and the International Monetary Fund (IMF) include some members that are not sovereign states ...
and the
European Parliament The European Parliament (EP) is one of the two legislative bodies of the European Union and one of its seven institutions. Together with the Council of the European Union (known as the Council and informally as the Council of Ministers), it ...
broadened the scope of EU competences through changes in the Union's founding Treaties. Recognising the need to support the new single market, they increased the resources available under the Structural Funds to support economic, social and territorial cohesion. In parallel, the EU enhanced its role in areas such as transport, space, health, education and culture,
consumer protection Consumer protection is the practice of safeguarding buyers of goods and services, and the public, against unfair practices in the marketplace. Consumer protection measures are often established by law. Such laws are intended to prevent business ...
, environment, research, justice cooperation and foreign policy. Since 2000, the EU budget has been adjusted to the arrival of 13 new
Member States A member state is a state that is a member of an international organization or of a federation or confederation. Since the World Trade Organization (WTO) and the International Monetary Fund (IMF) include some members that are not sovereign states ...
with diverse socioeconomic situations and by successive EU strategies to support jobs and growth and enhanced actions for the younger generation through the Youth Employment Initiative and Erasmus+. In 2015, it has set up the European Fund for Strategic Investments (EFSI), "so called Juncker plan" allowing to reinforce investments in the EU. The largest share of the EU budget (around 70% for the period 2014–2020) goes to agriculture and regional development. During the period 2014–2020, the share of EU spending on farming is set at 39%. In 1985, 70% was spent on farming. Farming's relatively large share of the EU budget is because it is the only policy funded almost entirely from the common budget. This means that EU spending replaces national expenditure to a large extent. The second share of EU spending goes to regional development (34% for the period 2014–2020). EU funding for regional and social development is an important source for key investment projects. In some EU countries that have otherwise limited means, European funding finances up to 80% of public investment. However, EU regional spending does not just help poorer regions. It invests in every EU country, supporting the economy of the EU as a whole. 6% of the EU budget goes for the administration of all the European Institutions, including staff salaries, pensions, buildings, information technology, training programmes, translation, and the running of the
European School A European School () is a type of international school emphasising a multilingual and multicultural pedagogical approach to the teaching of nursery, primary and secondary students, leading to the European Baccalaureate as their secondary lea ...
system for the provision of education for the children of EU staff.


EU budget lifecycle

The EU budget is adopted through the budgetary procedure by the European Parliament and the Council of the European Union. The EU budget must remain within the limits set out in the
Multiannual Financial Framework The Multiannual Financial Framework (MFF) of the European Union (EU), also called the financial perspective, is a seven-year framework regulating its European Union, EU Budget of the European Union, annual budget. Proposed by the European Commiss ...
(MFF) and the Own Resource Celling.Article 312(1) o
the Treaty on the Functioning of the European Union
The MFF is the EU's long-term budget. It is established at least for five years (usually seven years).


Adoption

The European Commission submits the draft budget no later than 1 September each year. The Council of the European Union adopts its position no later than 1 October. If the European Parliament may accept the Council's position or fails to take a decision within 42 days, then the budget is adopted. If the Parliament adopts its position then the Conciliation Committee is convened. The Conciliation Committee has 21 days to adopt a joint text if the committee fails to adopt a joint text or the joint text is not adopted within 14 days by the Council and the Parliament the budgetary procedure needs to start again.


Implementation

The European Commission, in cooperation with Member States, is responsible for the implementation of the EU budget in accordance with th
Financial Regulation
The EU budget is implemented in accordance with the principles of unity and of budgetary accuracy, annuality, equilibrium, unit of account, universality, specification, sound financial management and performance and transparency. The EU programmes are managed in three ways: * direct management (the programmes are executed by the Commission directly or by its executive agencies), * indirect management (third parties, such as international organisation, oversee the execution), or * shared management (the Member States authorities oversee the execution).


Audit and discharge

The Commission reports on how it has implemented the budget in various ways, most importantly by publishing the Integrated Financial Reporting Package, which consists of the annual accounts, the Annual Management and Performance Report, and other accountability reports. The annual discharge procedure allows the European Parliament and the Council to hold the Commission politically accountable for the implementation of the EU budget. The European Parliament decides, after a recommendation by the Council, on whether or not to provide its final approval, known as 'granting discharge', to the way the Commission implemented the EU budget in a given year. When granted, it leads to the formal closure of the accounts of the institution for a given year. When deciding whether to grant, postpone or refuse the discharge, the Parliament takes into consideration the Integrated Financial Reporting Package prepared by the Commission along with the
European Court of Auditors The European Court of Auditors (ECA; French: ''Cour des comptes européenne'') is the supreme audit institution of the European Union (EU). It was established in 1975 in Luxembourg City, Luxembourg and is one of the Institutions of the European ...
' Annual Report on how the budget has been spent and any relevant Special Reports from the Court. More particularly, every year the European Court of Auditors, which is the EU's independent external auditor, examines the reliability of accounts, whether all revenue has been received and all expenditure incurred in a lawful and regular manner, and whether the financial management has been sound.   The European Court of Auditors has signed off the EU accounts every year since 2007. In October 2018, the European Court of Auditors gave the EU annual accounts a clean bill of health for the 11th year in a row, finding them true and fair. The Court has given, for a second year in a row, a qualified opinion on the 2017 payments. The report thus shows further improvements in terms of compliance and performance, and confirms that the commission is on the right path. While a clean opinion means that the figures are true and fair, a qualified opinion means that there are minor issues still to be fixed. If Member States or final beneficiaries are found to spend EU money incorrectly, the Commission takes corrective measures. In 2017, the Commission recovered €2.8 billion, equal to 2.1% of the payments to the EU budget. Therefore, the actual amount at risk is below the 2% threshold, once corrections and recoveries have been taken into account.2% of any public budget is very high however hence the qualification.


Revenue

The EU obtains its revenue from four main sources: # Traditional own resources: Customs duties on imports from outside the EU and levies collected on behalf of the EU. # VAT-based own resources: comprising a percentage of Member State's
standardised Standardization (American English) or standardisation (British English) is the process of implementing and developing technical standards based on the consensus of different parties that include firms, users, interest groups, standards organiza ...
value added tax A value-added tax (VAT or goods and services tax (GST), general consumption tax (GCT)) is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared wi ...
(VAT) base. # GNI-based own resources: comprising a percentage of each member state's
gross national income The gross national income (GNI), previously known as gross national product (GNP), is the total amount of factor incomes earned by the residents of a country. It is equal to gross domestic product (GDP), plus factor incomes received from ...
(GNI). # Other revenue: including taxes from EU staff salaries, bank interest, fines and contributions from third countries.


Traditional own resources

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 Member States and passed on to the EU. Member States are allowed to keep a proportion of the duty to cover administration (20%), 25% as per 2021. The European Commission operates a system of inspections to control the collection of these duties in Member States and thus ensure compliance with the EU rules. In 2017, the EU's revenue from customs duties was €20,325 million (14.6% of its total revenue). A production charge paid by sugar producers brought in revenue of €134 million. The total revenue from TORs (customs duties and sugar levies) was €20,459 million (14.7% of the EU's total revenue). Countries are liable to make good any loss of revenue due to their own administrative failure. As per the 2021-2027 period an additional system of own resources will be introduced relying on levies collected by the EU.


VAT-based own resources

The VAT-based own resource is a source of EU revenue based on the proportion of VAT levied in each member country. VAT rates and exemptions vary in different countries, so a formula is used to create the so-called "harmonised VAT 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 rate 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 exempt. The tax base is capped, such that it may not be greater than 50% of a Member State's gross national income (GNI). In 2017, eight Member States saw their VAT contribution reduced thanks to this 50% cap (
Estonia Estonia, officially the Republic of Estonia, is a country in Northern Europe. It is bordered to the north by the Gulf of Finland across from Finland, to the west by the Baltic Sea across from Sweden, to the south by Latvia, and to the east by Ru ...
,
Croatia Croatia, officially the Republic of Croatia, is a country in Central Europe, Central and Southeast Europe, on the coast of the Adriatic Sea. It borders Slovenia to the northwest, Hungary to the northeast, Serbia to the east, Bosnia and Herze ...
,
Cyprus Cyprus (), officially the Republic of Cyprus, is an island country in the eastern Mediterranean Sea. Situated in West Asia, its cultural identity and geopolitical orientation are overwhelmingly Southeast European. Cyprus is the List of isl ...
,
Luxembourg Luxembourg, officially the Grand Duchy of Luxembourg, is a landlocked country in Western Europe. It is bordered by Belgium to the west and north, Germany to the east, and France on the south. Its capital and most populous city, Luxembour ...
,
Malta Malta, officially the Republic of Malta, is an island country in Southern Europe located in the Mediterranean Sea, between Sicily and North Africa. It consists of an archipelago south of Italy, east of Tunisia, and north of Libya. The two ...
,
Poland Poland, officially the Republic of Poland, is a country in Central Europe. It extends from the Baltic Sea in the north to the Sudetes and Carpathian Mountains in the south, bordered by Lithuania and Russia to the northeast, Belarus and Ukrai ...
,
Portugal Portugal, officially the Portuguese Republic, is a country on the Iberian Peninsula in Southwestern Europe. Featuring Cabo da Roca, the westernmost point in continental Europe, Portugal borders Spain to its north and east, with which it share ...
and
Slovenia Slovenia, officially the Republic of Slovenia, is a country in Central Europe. It borders Italy to the west, Austria to the north, Hungary to the northeast, Croatia to the south and southeast, and a short (46.6 km) coastline within the Adriati ...
). Member countries generally pay 0.3% of their harmonised VAT base into the budget, but there are some exceptions. The rate for Germany, the Netherlands and Sweden is 0.15% for the 2014-2020 period, while
Austria Austria, formally the Republic of Austria, is a landlocked country in Central Europe, lying in the Eastern Alps. It is a federation of nine Federal states of Austria, states, of which the capital Vienna is the List of largest cities in Aust ...
also had a reduced rate in the 2007-2013 period. The EU's total revenue from the VAT own resource was 16,947 million euros (12.2% of total revenue) in 2017. Member States are required to send a statement of VAT revenues to the EU before July after the end of the budget year. The EU examines the submission for accuracy, including inspection visits by officials from the Directorate-General for Budget and
Eurostat Eurostat ("European Statistical Office"; also DG ESTAT) is a department of the European Commission ( Directorate-General), located in the Kirchberg quarter of Luxembourg City, Luxembourg. Eurostat's main responsibilities are to provide statist ...
, who report back to the country concerned. The country has a legal obligation to respond to any issues raised in the report, and discussions continue until both sides are satisfied, or the matter may be referred to the
European Court of Justice The European Court of Justice (ECJ), officially the Court of Justice (), is the supreme court of the European Union in matters of European Union law. As a part of the Court of Justice of the European Union, it is tasked with interpreting ...
for a final ruling. The ''Advisory Committee on Own Resources'' (''ACOR''), which has representatives from each Member State, gives its opinion where Member States have asked for authorisations to leave certain calculations out of account or to use approximate estimates. The ACOR also receives and discusses the inspection results. In 2018, 15 inspections were reported by inspectors to the ACOR. It is anticipated that 12 countries will be visited in 2019.


GNI-based own resources

The Gross National Income (GNI)-based resource is an 'additional' resource that provides the revenue required to cover expenditure in excess of the amount financed by traditional own resources, VAT-based contributions and other revenue in any year. These national contributions from the Member States are the largest source of the EU budget and are calculated based on gross national income. The GNI-based resource ensures that the general budget of the Union is always initially balanced. The GNI call rate is determined by the additional revenue needed to finance the budgeted expenditure not covered by the other resources (VAT-based payments, traditional own resources and other revenue). Thus a uniform call rate is applied to the GNI of each of the Member States. Due to this covering mechanism the rate to be applied to the Member States' gross national income varies from one financial year to another. Nowadays this resource represents the largest source of revenue of the EU Budget (generally around 70% of the total financing). In 2017, due to the higher than usual other revenues and surplus from the previous year the rate of call of GNI was 0.5162548% and the total amount of the GNI resource levied was €78,620 million (representing 56.6% of total revenue). In 2017,
Denmark Denmark is a Nordic countries, Nordic country in Northern Europe. It is the metropole and most populous constituent of the Kingdom of Denmark,, . also known as the Danish Realm, a constitutionally unitary state that includes the Autonomous a ...
, the Netherlands and Sweden benefited from an annual gross reduction in their GNI-based contribution (of respectively €130 million, €695 million and €185 million – all amounts are expressed in 2011 prices). The total amount of own resources that may be collected for the EU Budget from Member States in any given year is limited with reference to Member States' GNI. Currently, the total amount of own resources allocated to the Union to cover annual appropriations for payments cannot exceed 1.20% of the sum of all the Member States' GNI. The ''GNI for own resource purposes'' is calculated by National Statistical Institutes according to European law governing the sources and methods to compile GNI and the transmission of GNI data and related methodological information to the commission (Eurostat). Basic information must be provided by the countries concerned to Eurostat before 22 September in the year following the budget year concerned. Eurostat carries out information visits to the National Statistical Institutes forming part of the European Statistical System. Based on assessment reports by Eurostat, the Directorate-General for Budget of the Commission may notify to the Permanent Representative of the Member State concerned required corrections and improvements in the form of reservations on the Member State's GNI data. Payments are made monthly by Member States to the commission. Own resources payments are made monthly. Custom duties are made available by Member States after their collection. Payments of VAT- and GNI-based resources are based upon the budget estimates made for that year, subject to later correction.


Other revenue

Other revenue accounted for 12.4% of EU revenue in 2017. This includes tax and other deductions from EU staff remunerations, contributions from non-EU countries to certain programmes (e.g. relating to research), interest on late payments and fines, and other diverse items. As the balance from the previous year's budget is usually positive in comparison to the budget estimates, there is usually a surplus at the end of the year. This positive difference is returned to the Member States in the form of reduced contributions the following year.


Expenditure


Proportional outgoings

Approximately 94% of the EU budget funds programmes and projects both within member states and outside the EU. Less than 7% of the budget is used for administrative costs, and less than 3% is spent on EU civil servants' salaries.


2014–2020 period

For the period 2014–2020, the EU budget had expenditures amounting to a total of €1,050,851 million: €900,638.1 million for the EU-28 member states, €62,021.8 million for non-EU expenditures, €56,022.9 million earmarked, and €32,168 million for other expenditures. The expenditures were divided into six categories or "headings": # Smart and inclusive growth – aimed at enhancing competitiveness for growth and jobs and economic, social and territorial cohesion. # Sustainable growth: natural resources - included the
common agricultural policy The Common Agricultural Policy (CAP) is the agricultural policy of the European Commission. It implements a system of agricultural subsidies and other programmes. It was introduced in 1962 and has since then undergone several changes to reduce ...
(CAP),
common fisheries policy The Common Fisheries Policy (CFP) is the fishery, fisheries policy of the European Union (EU). It sets quotas for which Member state of the European Union, member states are allowed to catch each type of fish, as well as encouraging the fishin ...
, rural development and environmental measures. # Security and citizenship – included justice and home affairs, border protection, immigration and asylum policy, public health, consumer protection, culture, youth, information and dialogue with citizens. # Global Europe - covered all external action ("foreign policy") by the EU, such as development assistance or humanitarian aid, with the exception of the European Development Fund (EDF). # Administration – covered the administrative expenditure of all the European institutions and European Schools, as well as pensions. # Compensations – temporary payments designed to ensure that Croatia, which joined the EU in July 2013, did not contribute more to the EU budget than it benefited from it in the first year following its accession. Besides those six categories, there were also expenditures allocated to "special instruments" (Emergency Aid Reserve, European Union Solidarity Fund, etc.).


2021–2027 period

The EU budget for the 2021–2027 period has expenditures of €1,074.3 billion. It goes together with the
Next Generation EU Next Generation EU (NGEU) is a European Commission economic recovery package to support the EU member states to recover from the COVID-19 pandemic, in particular those that have been particularly hard hit. It is sometimes styled NextGenerationEU ...
recovery package of €750 billion in grants and loans over the period 2021–2024 to meet the unparalleled economic challenge of the
COVID-19 pandemic The COVID-19 pandemic (also known as the coronavirus pandemic and COVID pandemic), caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), began with an disease outbreak, outbreak of COVID-19 in Wuhan, China, in December ...
. An important part (95.5 billion euros) of the budget goes to the framework programme for research and development Horizon Europe. Around 25 billion euros are dedicated to Excellent Science (Pillar I), 53,5 billion euros to Global Challenges and European Industrial Competitiveness (Pillar II), and 13,5 billion euros to Innovative Europe (Pillar III). The transversal part about Widening the Participation and Strengthening the European Research Area receives around 3,3 billion euros.


Funding by member states

Net receipts or contributions vary over time, and there are various ways of calculating net contributions to the EU budget, depending, for instance, on whether countries' administrative expenditure is included. Also, one can use either absolute figures, the proportion of
gross national income The gross national income (GNI), previously known as gross national product (GNP), is the total amount of factor incomes earned by the residents of a country. It is equal to gross domestic product (GDP), plus factor incomes received from ...
(GNI), or per capita amounts. Different countries may tend to favour different methods, to present their country in a more favourable light.


EU-27 contributions (2007–13)

''Note: in this budget period, "EU 27" meant the 27 member states prior to the accession of Croatia.''


EU-28 contributions (2014–2020)

In the 2014–2020 period, the EU budget had revenues amounting to total of €1,069,945.7 million: €825,759.1 million from national contributions (VAT-based own resources and GNI-based own resources), €139,351.6 million from traditional own resources (TOR) and €104,835 million from other revenues.


EU-27 contributions (2023)

The 2023 draft EU budget has a total in own resources of 154,186 M€, decomposed into: total in national contributions own resources: 132,596 M€ and total in net traditional own resources: 21,590 M€.


Correction mechanisms

The EU budget has had a number of correction mechanisms designed to re-balance contributions by certain member states: # The UK rebate, which reimbursed the UK by 66% of the difference between its contributions to the budget and the expenditures received by the UK. This rebate was not paid to the UK, but was rather deducted from the amount the UK was due to pay. The effect of this rebate was to increase contributions required from all other member states, to make up the loss from the overall budget. Austria, Germany, the Netherlands and Sweden all had their contributions to make up for the UK rebate capped to 25% of their base contributions. As of the UK's departure from the EU, the rebate is no longer in effect. #
Lump-sum A lump sum is a single payment of money, as opposed to a series of payments made over time (such as an annuity). The United States Department of Housing and Urban Development distinguishes between " price analysis" and " cost analysis" by whether ...
payments to reduce annual GNI contributions for Austria, Denmark, the Netherlands and Sweden in the 2014-2020 budget (€60 million, €130 million, €695 million and €185 million respectively). (Austria's reduction expired in 2016.) # A reduced VAT call rate of 0.15% (versus the regular rate of 0.30%) for Germany, the Netherlands and Sweden in the 2014-2020 budget. The United Kingdom withdrawal from the European Union has led the EU to reconsider its funding mechanisms, with the rebates likely to change. European Commissioner for Budget and Human Resources Günther Oettinger has stated that "I want to propose a budget framework that does not only do without the mother of all rebates he U.K.'sbut without all of its children as well". The Multiannual Financial Framework for the 2021-2027 period will shift €53.2 billion as national rebates to Germany and the
frugal Four The Frugal Four was the nickname of an informal cooperation among like-minded fiscally conservative European countries, including Austria, Denmark, the Netherlands and Sweden. It partly evolved as a successor of the New Hanseatic League that wa ...
funded by the Member States according to their GNI.Special meeting of the European Council, 17-21 July 2020 – paragraph A30
Retrieved 15 November 2020.


See also

* United Kingdom rebate *
Economy of the European Union The economy of the European Union is the joint economy of the member states of the European Union (EU). It is the second largest economy in the world in nominal terms, after the United States, and the third largest at purchasing power parit ...
* European Green Deal *
Common Agricultural Policy The Common Agricultural Policy (CAP) is the agricultural policy of the European Commission. It implements a system of agricultural subsidies and other programmes. It was introduced in 1962 and has since then undergone several changes to reduce ...
*
Common Fisheries Policy The Common Fisheries Policy (CFP) is the fishery, fisheries policy of the European Union (EU). It sets quotas for which Member state of the European Union, member states are allowed to catch each type of fish, as well as encouraging the fishin ...
*
Regional policy of the European Union The Regional Policy of the European Union (EU), also referred as Cohesion Policy, is a policy with the stated aim of improving the economic well-being of region (Europe), regions in the European Union and also to avoid regional disparities. Mor ...
*
European Anti-Fraud Office The European Anti-Fraud Office (commonly known as OLAF, from the ) is a body mandated by the European Union (EU) with protecting the Union's financial interests. It was founded on 28 April 1999, under the European Commission Decision 1999/352. ...
* Directorate-General for Budget


References


External links


OpenSpending Project's "Where Does the EU's Money Go? – A Guide to the Data"
EU Commission website on the long-term budget proposals

Information about the 2011 Budget
European Commission > Financial Programming and Budget
European Parliament website (12 November 2008)

* Iain Begg
An EU Tax: Overdue Reform or Federalist Fantasy?
Friedrich-Ebert-Stiftung, February 2011, PDF 140 KB {{DEFAULTSORT:Budget of the European Union Finance in the European Union
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are Geography of the European Union, located primarily in Europe. The u ...
European Union European Economic Area European Atomic Energy Community