Legislative package for the system of Own Resources of the European Union after 2020

In “An Economy that Works for People”

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In May 2018, the European Commission proposed changes in the financing system of the EU budget for the period after 2020, with a view to simplifying it and enhancing its link to EU policies. The general provisions were included in a proposal for a Council Decision on the system of Own Resources of the European Union, while an accompanying proposal for a Council Regulation laid down implementing measures for the system. In addition, proposals for two further Council Regulations contained operational provisions.

In 2018, Council Decision 2014/335/EU set out the general provisions of the own resources system, applying indefinitely. However, the withdrawal of the UK from the EU and the potential contribution of the revenue side of the EU budget to wider EU objectives made the case for a new decision to be adopted. The EP, which deemed the system opaque and unfair, had long pushed for its reform, calling for the introduction of new genuine own resources and the elimination of all correction mechanisms. The final report of the High-Level Group on Own Resources included recommendations for changes along these lines.

In 2018 and 2019, successive presidencies of the Council carried out preparatory work on the MFF package. In July 2019, the Council debated the state of play of the discussions on the own resources system. Significant differences of views persisted. In December 2019, the Finnish Presidency presented an MFF negotiating box and the European Council discussed it, calling on its President Charles Michel to take the negotiations forward.

A special European Council devoted to the next MFF took place on 20-21 February 2020. In the European Council President's negotiating box, two possible new own resources were mentioned: a share of the revenues generated by the ETS; and a national contribution linked to non-recycled plastic packaging waste. However, no agreement on the MFF package was found at the level of Heads of State or Government.

Presented on 27 May 2020, the Commission's recovery plan from the consequences of the coronavirus pandemic implies some changes in the proposed reform. The own resources ceiling would be raised permanently to 1.4% of EU GNI and temporarily to 2%. The temporary component of the ceiling corresponding to 0.6% of EU GNI would last until 2058 and exclusively serve to ensure the financing of Next Generation EU (NGEU), the European recovery instrument. The Commission envisages additional proposals for new own resources, e.g. a carbon border adjustment mechanism and a digital tax, with a view to contributing to the repayment of the resources borrowed under Next generation EU. The elimination of corrections would be more gradual.

In the second longest European Council meeting ever (17-21 July 2020), Heads of State or Government reached political agreement on a package combining the new MFF, the recovery instrument and own resources. The own resources ceiling will be modified as proposed by the Commission. It will rise permanently from 1.20 % to 1.40 % of the EU GNI, while a temporary increase in the ceiling, worth a further 0.60 % of EU GNI, will be devoted exclusively to borrowing operations for NGEU and apply until December 2058 at the latest. This temporary increase enables the Commission to borrow on a much larger scale than in the past. A new own resource based on non-recycled plastic waste will be introduced as of January 2021, which should be a first step in a broader reform. The European Council invites the Commission to make proposals for other new own resources: a border carbon adjustment mechanism and a digital levy (with a view to their introduction by January 2023), and a revised proposal linked to the EU ETS. In addition, the EU will work on the introduction of other own resources, which may include a Financial Transaction Tax. The proceeds of new own resources introduced after 2021 will be used for early repayment of NGEU borrowing. Contrary to the Commission proposal, the corrections that reduce the contributions of five Member States (Austria, Denmark, Germany, the Netherlands and Sweden) to the EU budget will not be phased out, but maintained for the entire 2021-2027 period and, overall, increased. In addition, the collection costs that Member States retain on customs duties will rise from 20 % to 25 %.

During its September 2020 plenary part-session, Parliament adopted its legislative opinion on the own resources system (consultation procedure), with a view to expediting the launch of the borrowing operations of NGEU. Parliament reiterated its call for a binding timetable for the introduction of new own resources to be included in the interinstitutional agreement on budgetary matters.

Key initiatives planned for 2021 by the Commission include legislative proposals for a digital levy and a carbon border adjustment mechanism.

On 10 November 2020, Parliament and Council negotiators reached political agreement on the MFF, including the incorporation of a roadmap for new own resources in the new interinstitutional agreement on budgetary matters. The roadmap includes: an ETS-based resource (from 2023, possibly linked with a carbon border adjustment mechanism); a digital levy (from 2023); an FTT-based resource (from 2026); and a financial contribution linked to the corporate sector or a CCCTB (from 2026).

On 14 December 2020, the Council adopted the new Own Resources Decision. On 30 April 2021, the Council adopted the package of implementing legislation accompanying the decision, following the European Parliament's vote in March 2021.

By 31 May 2021, all Member States had notified the Council of their ratification of the Own Resources Decision. On 1 June 2021, Council Decision (EU, Euratom) 2020/2053 entered into force, enabling the Commission to start the borrowing operations for the Next Generation EU recovery instrument. The new own resources system retroactively applies from 1 January 2021.

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Author: Alessandro D'Alfonso, Members' Research Service, legislative-train@europarl.europa.eu

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As of 20/04/2024.