Financing Public Expenditure: Some Key Figures at EU and National Levels

15-01-2015

The Member States' structure of revenue is stable over time and their sources of revenue are diversified. Moreover, the size of the Member States' budget is generally increasing. Conversely, the financing structure of the European Union has changed over time and the sources of revenue are not diversified. The EU budget size is levelling off. Very small in size compared to national budgets, the EU budget is an investment budget with a strong leverage effect, i.e. one euro spent from the EU budget generates more than one euro in investment. Today, around 83% of the total EU revenue comes from two resources which are, in fact, financial transfers from national budgets (GNI- and VAT-based resources) and cannot be seen as true own resources for the EU as defined in the Treaty. In particular, the VAT-based resource, contrary to its name, is not levied on the final consumer but collected on a Member State statistically computed VAT base. In addition, specific arrangements granted to some Member States to reduce their contributions increase the inconsistency among Member States and the complexity of the system. Therefore, the current system to finance the EU is difficult to understand for most EU citizens.

The Member States' structure of revenue is stable over time and their sources of revenue are diversified. Moreover, the size of the Member States' budget is generally increasing. Conversely, the financing structure of the European Union has changed over time and the sources of revenue are not diversified. The EU budget size is levelling off. Very small in size compared to national budgets, the EU budget is an investment budget with a strong leverage effect, i.e. one euro spent from the EU budget generates more than one euro in investment. Today, around 83% of the total EU revenue comes from two resources which are, in fact, financial transfers from national budgets (GNI- and VAT-based resources) and cannot be seen as true own resources for the EU as defined in the Treaty. In particular, the VAT-based resource, contrary to its name, is not levied on the final consumer but collected on a Member State statistically computed VAT base. In addition, specific arrangements granted to some Member States to reduce their contributions increase the inconsistency among Member States and the complexity of the system. Therefore, the current system to finance the EU is difficult to understand for most EU citizens.