The Union’s revenue

The EU budget is financed mainly (99%) from own resources. Annual revenue must completely cover annual expenditure. Budget revenue is determined by the Council after consultation of the European Parliament. The decision on the system of own resources needs to be ratified by the Member States.

Legal basis

  • Articles 311 and 332(2) of the Treaty on the Functioning of the European Union and Articles 106a and 171 of the Treaty establishing the European Atomic Energy Community;
  • Council Decision 2014/335/EU, Euratom of 26 May 2014 on the system of own resources of the European Union[1], Council Regulation (EU, Euratom) No 608/2014 of 26 May 2014 laying down implementing measures for the system of own resources of the European Union[2], and Council Regulation (EU, Euratom) No 609/2014 of 26 May 2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements[3]. Following ratification, these legal acts entered into force on 1 October 2016 and apply retroactively as from 1 January 2014.


To provide the European Union with financial autonomy within the bounds of budgetary discipline.


While the European Coal and Steel Community (ECSC) was granted its own resources from the start, the European Economic Community (EEC) and the European Atomic Energy Community (Euratom) were initially financed by contributions from the Member States. The Own Resources Decision of 21 April 1970 provided the EEC with its own resources. Own resources to cover annual payment appropriations are currently limited to a maximum of 1.20% of EU gross national income (GNI). In practice, the current multiannual financial framework (MFF) 2014-2020 (1.4.3) sets the ceiling at around 1% of EU GNI. As the budget must balance, expenditure is also constrained by this ceiling (1.4.3).


1.‘Traditional’ own resources

These consist of customs duties, agricultural duties and sugar and isoglucose levies. They were created by the 1970 decision and have been collected ever since. In 2016, the ‘traditional’ own resources represented 14% of total revenue[4].

2.The VAT-based own resource

This currently consists of the transfer to the Union of a percentage of the estimated VAT collected by the Member States. Although provided for in the 1970 decision, this resource was not applied until the VAT systems of the Member States were harmonised in 1979. The VAT resource accounted for 10.9% of total revenue in 2016.

3.The GNI-based own resource

This own resource consists of a levy on Member States’ GNI of a uniform percentage set in each year’s budget procedure and was created by Council Decision 88/376/EEC. Originally it was only to be collected if the other own resources did not fully cover expenditure, but it now finances the bulk of the EU budget. The GNI-based resource has tripled since the late 1990s, and in 2016, it represented 65.4% of EU revenue.

4.Other revenue and the balance carried over from the previous year

Other revenue includes taxes paid by EU staff on their salaries, contributions from non-EU countries to certain EU programmes, and fines paid by companies that are found to be in breach of competition laws or other laws. The balance from each financial year is entered in the budget for the following year as revenue in the case of a surplus. Other revenue, balances and technical adjustments amounted in 2016 to 9.7% of total revenue.

5.Correction mechanisms

Correcting budgetary imbalances between Member States’ contributions is also part of the current own resources system. The ‘UK rebate’ agreed in 1984 consists of a reduction in the United Kingdom’s contribution equivalent to two thirds of the difference between its contribution (excluding traditional own resources) and what it receives back from the budget. This rebate was adjusted in 2007 in order gradually to exclude non-agricultural expenditure in Member States having acceded since 2004 from the calculation. This correction is financed by all the other Member States, except for Germany, the Netherlands, Austria and Sweden, which benefit from a reduction in their contributions to the financing of the UK rebate. Germany, the Netherlands, Austria and Sweden also benefited from a reduced rate of call of VAT for the 2007-2013 period, and the Netherlands and Sweden benefited from a reduction in their GNI contributions for the same period.

As regards current correction mechanisms, the existing correction mechanism for the UK and the financing thereof are being continued, as are the reduced rates of call of the VAT-based own resource for the 2014-2020 period for Germany, the Netherlands and Sweden (0.15%) and gross reductions in the annual GNI contribution for the 2014-2020 period for Denmark (EUR 130 million), the Netherlands (EUR 695 million) and Sweden (EUR 185 million), and for the 2014-2016 period for Austria (EUR 30 million in 2014, EUR 20 million in 2015 and EUR 10 million in 2016). As to collection costs for traditional own resources, the percentage that may be retained by Member States has been reduced from 25% to 20%.The latest adjustment to the system of own resources concerns a modification of the implementing decision so as to allow Member States to postpone until 1 September of the following year the making available of exceptionally high amounts resulting from adjustments to the own resources based on VAT and GNI

In its Reflection Paper on the Future of EU Finances presented in June 2017, the Commission presented five scenarios and their implications as regards the revenue side.

Role of the European Parliament

In a number of resolutions over the past few years (e.g. that of 17 December 2014 on the system of the European Communities’ own resources), Parliament has highlighted problems with the own resources system, particularly regarding its excessive complexity. It has put forward proposals to ensure that the Union is financially independent and to make revenue collection simpler, more transparent and more democratic.

The Treaty of Lisbon states that the budget should be financed wholly from own resources, and empowers the Council, after consulting Parliament, to unanimously adopt a decision on the system of own resources of the Union, including the possibility of establishing new categories of own resources and abolishing existing ones. Any such decision would need to be ratified by the Member States. However, the implementing measures in respect of such a decision may now be adopted by the Council only after it has obtained the consent of Parliament. This can be seen as a step in the direction of extending the Community method to the area of the Union’s own resources.

Building on the new provisions of the Treaty of Lisbon, Parliament has repeatedly called for an in-depth reform of the system of own resources, for example in its resolution of 15 April 2014 on negotiations on the MFF 2014-2020: lessons to be learned and the way forward.

In its legislative resolution of 16 April 2014 on the draft Council decision on the system of own resources, Parliament highlighted the importance of the high-level group on own resources, which was established as a result of Parliament’s insistence during the negotiations on the MFF for 2014-2020, by calling on it to take action. This high-level group, composed of representatives of Parliament, the Council and the Commission and chaired by Mario Monti, undertook a general review of the own resources system in dialogue with national parliaments.

The Monti group presented its final report in January 2017. For two years, the group had reflected on more transparent, simple, fair and democratically accountable ways to finance the European budget. The main conclusion is that the EU budget needs reform, both on the revenue and on the expenditure side, to address current challenges and to achieve tangible results for European citizens. In order to partially replace the GNI-based contributions, the group lists possible new resources, which could be based on a carbon tax, a common tax on fuel or other form of energy, an environmental tax, a common corporate income tax, a reformed VAT or a tax on the financial sector. These recommendations are compatible with the Treaties, and could be implemented under the next MFF.

The results of the work of the high-level group are now being assessed so that possible reforms can become operational at the time of the next MFF. The final report states that the ‘withdrawal of the UK from the EU entails the discontinuation of the UK correction mechanism and the related ‘rebates on rebates’’ (Recommendation #07 p. 13).

In its resolution of 6 July 2016 on ‘The preparation of the post-electoral revision of the MFF 2014-2020: Parliament’s input ahead of the Commission’s proposal’, Parliament called on the Commission to present, by the end of 2017, an ambitious legislative package on own resources as of 2021, with simplicity, fairness and transparency as guiding principles. In its resolution of 26 October 2016 on the mid-term revision of the MFF 2014-2020, Parliament again stressed the need to reduce the share of the GNI contributions and called for the VAT resource to be either substantially reformed or scrapped altogether. Parliament also called for the introduction of one or several new own resources, as well as the phasing-out of all forms of rebates. The Committee on Budgets is preparing strategic own-initiative reports on the MFF post-2020 and own resources, in which the recommendations of the Monti report will be assessed. The adoption of these reports is currently planned for early 2018. As part of the preparatory phase, the Committee on Budgets’ co-rapporteurs on own resources presented, in June 2017, a working document on reform of the European Union’s system of own resources.

[1]OJ L 168, 7.6.2014, p. 105.

[2]OJ L 168, 7.6.2014, p. 29.

[3]OJ L 168, 7.6.2014, p. 39.

[4] Consolidated annual accounts of the European Union - Financial year 2016.

Minna Ollikainen