Analytics, Budget, Economics, EU – Baltic States, Financial Services, Funds, Modern EU

 In 1980, the UK government led by the U.K. Prime Minister Margaret Thatcher called for the UK's contributions to the then EEC to be adjusted, warning that otherwise the UK would withhold VAT payments. "I want my money back!" she famously exclaimed.

The battle lasted four years and finally ended in victory for Thatcher but damaged relations with other EC countries. Source: http://www.bbc.com/news/uk-politics-11598879

For several decades, the EU member states question the amounts they are paying into the common EU budget, sparkling extensive battles every seven years in the multi-annual financial framework, i.e. the EU budget or MFF.

Examples

It took two ugly summits at the end of 2013 to agree on the 2014-2020 budget; Britain and Germany managed to secure the first ever reduction in overall EU payments, arguing that Brussels should apply the same austerity to itself as it prescribed for some indebted member countries.

The new options recommended to the European Commission and Parliament presently in January 2017 are - for raising revenue directly for Europe and diminishing the amount handed over to Brussels by national treasuries.

That is “simpler, more transparent, equitable and democratically accountable” way of levying so-called “own resources” for the EU without increasing the overall budget.

The potential new sources of income has been identified by the M. Monty group to include the following sources: a share of taxes on corporate income and financial transactions; an electricity tax; a carbon levy or proceeds from the EU’s Emissions Trading System; a motor fuel levy or fossil fuel excise duty; and other revenue from EU policies such as border control, the digital single market, environmental protection and energy efficiency.

http://www.politico.eu/article/eu-spots-opportunity-in-brexit-to-fix-funding-wars-budget-tax-contributions/

EU’s traditional Own Resources - EUOR

The “own resources” is money received from customs duties on goods imported into Europe, plus a share of Value Added Tax revenue collected in the member states.  

Over the decades, the share of customs revenue in EU funding has dwindled to about 14 percent as tariffs have fallen. The VAT Own Resource also makes up about 14 percent of funding; together they make one-third of EU “common income”.

On the other side, it means the rest of common finances or more than two-thirds of the EU’s income now comes from a levy on member states’ Gross National Income (GNI), which is about 1 per cent per EU state’s GDP.

The EU limits its total Own Resources to 1.2% of EU’s gross national income. In practice, expenditure is lower at just 1.05 percent of the Union’s economic output in 2016, or €155 bln - barely 1/40^th of national budgets.

Since the Union is not allowed to run a deficit or borrow money, each year’s budget must be balanced, which becomes increasingly tricky since spending on long-programmed infrastructure projects is higher toward the end of each seven-year period. 

Mario Monti’s proposal

Letting the EU gather more of its Own Resources, as the founding fathers intended from the outset, would be a good start. That is the message of a blue-ribbon panel, chaired by former Italian Prime Minister Mario Monti, which will recommend new options to the European Commission and Parliament at the end of January 2017 for raising revenue directly for Europe and diminishing the amount handed over to Brussels by national treasuries.

The U.K’s departure, the Monti reports says, “provides a unique window of opportunity to review how we measure the real costs and benefits of the EU.”

Monti fears that a combination of morally “corrupt” (his word) national politics, structural holes in the Brussels machine, and external crises may trigger the collapse of the EU.

In his view, the Council’s rise to prominence has been coupled with the steady drift of national political discourses towards nationalism, populism and a focus on the short-term. “The degree of mistrust and sheer prejudices between North and South and between East and West has never been so high and so unashamedly voiced,” he said.

There is also a declining trust in national authorities, a declining participation in votes, a growing impatience with the lack of performance by national governments, he added.

Source: http://www.politico.eu/article/catching-up-with-mario-monti/