Proposal for a Council Decision amending Decision (EU, Euratom) 2020/2053 on the system of own resources of the European Union
In “An Economy that Works for People”
On 22 December, the European Commission announced its proposal for the introduction of new own resources (OR). This amendment in the existing system of own resources is motivated (amongst other factors) by the longstanding consideration to boost the EU budget without requiring an increase of the GNI own resources or even to decrease their share in the revenue portfolio of the EU budget. Also, the proposed amendment aims to secure necessary resources to cover new budgetary expenditures such as the upcoming reimbursement of the financial costs of the €800 billion coronavirus recovery fund Next Generation EU (NGEU) and the newly created Social Climate Fund (SCF), without limiting the funding of the existing programmes and long-term commitments of the MFF (a recently appeared consideration). The Russian war in Ukraine creates further considerations for necessity of additional funds to provide for relevant EU policies.
The adopted 2021-2027 MFF came in a package that included the NGEU as a response to the pandemic's severe adverse effects on the EU economies. It was also linked to the Own Resources Decision. Ratified by all 27 Member States by 31 May 2021, the Own Resources Decision entered into force in June 2021. This first step of the own resources reform was necessary to allow the NGEU to come into force, increase the own resources ceiling and introduce the first new own resource - a new contribution based on non-recycled plastic packaging waste has been introduced as of 1 January 2021. This adoption of Own resources decision took approximately six months – an unusually short period compared to the period of 28 months it took in 2014.
A related Interinstitutional agreement (IIA) between the the European Parliament, the Council and the Commission was also reached on 16 December 2020 and included a roadmap for the introduction of new own resources. The IIA acknowledged that expenditure from the Union budget related to the repayment of the European Union Recovery Instrument should not lead to an undue reduction in programme expenditure or investment instruments under the Multiannual Financial Framework (MFF). The roadmap sets out steps to further reforms, which include the introduction of other new own resources, including the ones in the current proposal. The Commission did not meet the requirement under the IIA to submit proposals for these new own resources by June 2021 and publish them with a delay on 22 December 2021. Own resources reform involves some of the heaviest and lengthiest of all EU procedures, requiring unanimity in Council's decision and national ratification. Any delays according to the IIA roadmap raise concerns regarding the timely implementation of the new own resource system. There are also other own resources options to be considered according to the IIA at a later stage, i.e. a financial transaction tax. The Commission shall endeavor to make such a proposal of another package of new own resources in 2023 (earlier than the IIA agreed deadline by June 2024), based on impact assessments and the experience of the already implemented new own resources.
The proposed new OR package comprises the extended Emissions Trade Scheme (EU ETS), a Carbon Border Adjustment Mechanism (CBAM) and reallocated profits of very large multinational companies (based on Pillar 1 of the OECD/G20 agreement). The package also entails targeted amendments to the 2021-2027 Multiannual Financial Framework (MFF 2021-2027) to increase the ceilings for 2025-2027 in relation to the expenditure for the Social Climate Fund as well as an automatic adjustment mechanism to repay NGEU according to the amount of new OR collected.
(1) A share of the revenue obtained in accordance with the EU Emissions Trading Scheme (EU ETS) Directive: The amended proposal specifies that 25% of most revenues generated from allowances to be auctioned from the emissions trading will accrue to the EU budget. This includes revenues from the current Emissions Trading System for stationary installations and aviation for which additional allowances would be auctioned as well as its extension to maritime transport and the introduction of a separate emission trading for road transport and buildings. The total financial envelope of the Fund for the 2025-32 period will be EUR 72.2 billion in current prices, corresponding in principle to an amount equivalent to around 25% of the expected revenue from the new emissions trading system for buildings and road transport for the period 2026-2032.
(2) A share of revenues from the border carbon adjustment mechanism: This proposal establishes that a share of the revenues from the sale of carbon border adjustment mechanism certificates will be transferred to the EU budget as own resources in the form of a national contribution.
(3) Applying a uniform call rate to the share of residual profits of multinational companies reallocated to Member States: The proposal provides that Member States will make a national contribution to the EU budget based on the share of the residual profits of the largest and most profitable multinational enterprises re-allocated to Member States in case they are end market jurisdictions where goods or services are used or consumed under the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting agreement.
The Council needs to adopt its decision on the new OR proposal after consulting the European Parliament, although it is not obliged to follow Parliament's opinion. On 14 February 2022, the proposal was referred to the Committee for Budgetary affairs and the co-rapporteurs have been appointed - Valerie Hayer and Jose Manuel Fernandes. The 26 August 2022 draft report on the proposal for a Council decision amending Decision (EU, Euratom) 2020/2053 on the system of own resources of the European Union includes five amendment proposals. They remind of the other steps of the IIA roadmap, ensure consistency with the European Parliament’s long-standing position in support of the principles of unity and universality of the EU budget, and fight the perception and prevalence of the ‘net balance’ logic. On 4 November Budgetary committee report was tabled for Plenary.
On 23 November, the European Parliament adopted by 440 votes to 117, with 77 abstentions, in the framework of a special legislative procedure (Parliament’s consultation), a legislative resolution approving the proposal for a Council decision on the system of own resources of the European Union from December 2021. According to the resolution, the revenue from the application of a uniform rate of call equal to 100% (instead of 75%) of the revenue from the sale of certificates of the carbon adjustment mechanism at borders should constitute own resources entered in the EU budget. Furthermore, if by the end of 2023 the process of ratification of the OECD/G20 (IF) Pillar 1 Agreement has not started in a critical mass of countries as defined by the Multilateral Convention, the Commission should propose a new own resource in connection with the single market, such as a digital levy or a similar measure, in order to generate revenues by 2026.
- EP Legislative Observatory, Procedure file: System of own resources of the European Union, 2021/0430(CNS)
- Commission proposal for a Council Decision amending Decision (EU, Euratom) 2020/2053 on the system of own resources of the European Union, COM/2021/570 final
- European Parliament, Legislative resolution of 23 November 2022 on the proposal for a Council decision amending Decision (EU, Euratom) 2020/2053 on the system of own resources of the European Union (COM(2021)0570 – C9-0034/2022 – 2021/0430(CNS))
- European Parliament, Draft report on the proposal for a Council decision amending Decision (EU, Euratom) 2020/2053 on the system of own resources of the European Union
- Alessandro d’Alfonso, Own resources of the European Union: Reforming the EU's financing system
- Alessandro d’Alfonso, Implementing the Own Resources Decision.
Linked legislative trains:
- Revision of the EU emission trading system (ETS)
- Carbon border adjustment mechanism as part of the European green deal
- Legislative proposal on the implementation of the OECD global agreement on minimum effective taxation
- Proposal on the implementation of the OECD global agreement on re-allocation of taxing rights
- Digital levy and a proposal for digital levy as own resource
- Social Climate Fund
Author: Alina Dobreva, Members' Research Service, firstname.lastname@example.org