European Union Budget

From Wikipedia, the free encyclopedia

The European Union (EU) has an independent parliament and civil service which is distinct from those of the 25 member states. It administers common laws between the member states and expenditure on common policies throughout the EU. To pay for this the EU has an agreed budget of €862 billion for the period 2007-2013. By comparison, the UK expenditure for 2004 alone was estimated at about €759 billion.

1 Setting a Budget
2 Revenue
3 Expenditure
4 See also
5 References

[edit] Setting a Budget

The EU has three elements to its government: the Council of Ministers, the European Commission and the European Parliament. All three take a part in setting the annual budget.

[edit] Revenue

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

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 state where import occurs and passed on to the EU. States are allowed to keep a proportion of the revenue to cover administration.

VAT based own resources 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, in the region of 0.3%, but this varies for some countries. For 2007-2013 the rate proposed for Austria is 0.225%, and Germany 0.15%, the Netherlands and Sweden 0.1%

GNI based own resources 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.

[edit] Expenditure

The largest single expenditure item is the Common Agricultural Policy (CAP) at around 45% of the total budget. The second largest element is the regional policy, at 30%. Foreign policy consumes 8%, administration 6%, research 5%.