# C_2018054EN.01007201.xml

| 13.2.2018 | EN | Official Journal of the European Union | C 54/72 |
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13.2.2018

EN

Official Journal of the European Union

C 54/72

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Opinion of the European Committee of the Regions — Reform of EU own resources within the next MFF post-2020

(2018/C 054/13)

| Rapporteur: | Isabelle Boudineau (FR/PES) Vice-president of the Nouvelle-Aquitaine Regional Council |
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Rapporteur:

Rapporteur:

Isabelle Boudineau (FR/PES) Vice-president of the Nouvelle-Aquitaine Regional Council

POLICY RECOMMENDATIONS

POLICY RECOMMENDATIONS

THE EUROPEAN COMMITTEE OF THE REGIONS

A historic opportunity to reform the own resources system

A historic opportunity to reform the own resources system

| 1. | points out that Article 311 of the TFEU stipulates that the Union shall provide itself with the means necessary to attain its objectives and carry through its policies; it also stipulates that without prejudice to other revenue, the budget shall be financed wholly from own resources; |
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1.

points out that Article 311 of the TFEU stipulates that the Union shall provide itself with the means necessary to attain its objectives and carry through its policies; it also stipulates that without prejudice to other revenue, the budget shall be financed wholly from own resources;

the Union shall provide itself with the means necessary to attain its objectives and carry through its policies

without prejudice to other revenue, the budget shall be financed wholly from own resources

| 2. | underlines the challenges that the post-2020 EU budget will face in meeting evolving challenges in areas of European added value, in particular with regard to the need to strengthen policies on defence and counter-terrorism, the management of migrants and refugees, combating climate change, and to tackle demographic challenges, in addition to the other priorities already supported within the multiannual financial framework (MFF); |
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2.

underlines the challenges that the post-2020 EU budget will face in meeting evolving challenges in areas of European added value, in particular with regard to the need to strengthen policies on defence and counter-terrorism, the management of migrants and refugees, combating climate change, and to tackle demographic challenges, in addition to the other priorities already supported within the multiannual financial framework (MFF);

| 3. | notes that the UK's exit from the EU will have an impact on the future of the budget after 2020, with a decrease of approximately EUR 10 billion per year (1) and delays in the timetable for negotiations on the next MFF, the start of which has already been postponed to summer 2018; |
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3.

notes that the UK's exit from the EU will have an impact on the future of the budget after 2020, with a decrease of approximately EUR 10 billion per year (1) and delays in the timetable for negotiations on the next MFF, the start of which has already been postponed to summer 2018;

1

| 4. | points out that the CoR has already taken a position in favour of a substantial reform of own resources (2); |
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4.

points out that the CoR has already taken a position in favour of a substantial reform of own resources (2);

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| 5. | welcomes the publication of the final report of the high-level group on own resources (the Monti report), and in particular its recommendations on the principles of European added value and subsidiarity, but regrets that this report does not address the size of the EU budget in the light of the priorities set by the EU; |
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5.

welcomes the publication of the final report of the high-level group on own resources (the Monti report), and in particular its recommendations on the principles of European added value and subsidiarity, but regrets that this report does not address the size of the EU budget in the light of the priorities set by the EU;

| 6. | considers that this particular landscape, marked by the various crises, the UK's withdrawal from the EU, and the reflection process on the future of Europe, as well as the recommendations in the Monti report, provides an opportunity to create a vision of the priorities to be funded in the medium and long term in the framework of the EU budget and to reform its current system of funding; |
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6.

considers that this particular landscape, marked by the various crises, the UK's withdrawal from the EU, and the reflection process on the future of Europe, as well as the recommendations in the Monti report, provides an opportunity to create a vision of the priorities to be funded in the medium and long term in the framework of the EU budget and to reform its current system of funding;

| 7. | welcomes the publication of the Commission's reflection paper on the future of EU finances, particularly the section on ‘Revenues to support EU policies’. The CoR endorses the reference in the letter of intent sent by the Commission to the European Parliament and the Council on 13 September 2017, regarding the intended reform of the own resources system. However, the CoR would like to see specific proposals presented alongside or in conjunction with the proposal for the MFF (by May 2018). The CoR would also urge both the Council and the Member States to support the aim of overhauling the current own resources system by making it more straightforward, fair and transparent; |
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7.

welcomes the publication of the Commission's reflection paper on the future of EU finances, particularly the section on ‘Revenues to support EU policies’. The CoR endorses the reference in the letter of intent sent by the Commission to the European Parliament and the Council on 13 September 2017, regarding the intended reform of the own resources system. However, the CoR would like to see specific proposals presented alongside or in conjunction with the proposal for the MFF (by May 2018). The CoR would also urge both the Council and the Member States to support the aim of overhauling the current own resources system by making it more straightforward, fair and transparent;

An EU budget stifled by the ‘fair return’ rationale

An EU budget stifled by the ‘fair return’ rationale

| 8. | points out that for several decades now, national contributions calculated on the basis of gross national income (GNI) have made up the bulk of the EU budget (3); |
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8.

points out that for several decades now, national contributions calculated on the basis of gross national income (GNI) have made up the bulk of the EU budget (3);

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| 9. | considers the current system to be sub-optimal, in particular because it is too dependent on national contributions and encourages governments to accept only a combination of expenditure that maximises their supposed net gain in terms of public finances. This approach tends to disregard the benefits of the single market and of certain EU policies and place the focus solely on the rate of return. It has also fuelled a division between Member States that are ‘net contributors’ and those that are ‘net beneficiaries’, which appears to be artificial insofar as the calculation only factors in the public accounts and not the external benefits for the real economy in the Member States. This approach also fails to take into account the cost of ‘non-Europe’; |
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9.

considers the current system to be sub-optimal, in particular because it is too dependent on national contributions and encourages governments to accept only a combination of expenditure that maximises their supposed net gain in terms of public finances. This approach tends to disregard the benefits of the single market and of certain EU policies and place the focus solely on the rate of return. It has also fuelled a division between Member States that are ‘net contributors’ and those that are ‘net beneficiaries’, which appears to be artificial insofar as the calculation only factors in the public accounts and not the external benefits for the real economy in the Member States. This approach also fails to take into account the cost of ‘non-Europe’;

| 10. | points out that during the procedure for adopting the annual budget, the compromises reached between the institutions often lead to a reduction in the budget compared with the goals set by the MFF. This creates a widening gap between commitments and payments, which leads to a payment crisis; |
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10.

points out that during the procedure for adopting the annual budget, the compromises reached between the institutions often lead to a reduction in the budget compared with the goals set by the MFF. This creates a widening gap between commitments and payments, which leads to a payment crisis;

A reform aimed at more transparency, simplification and creating a closer link to the citizen

A reform aimed at more transparency, simplification and creating a closer link to the citizen

| 11. | notes that the complexity of the structure of the EU budget and its funding system, marked by rebates and correction mechanisms, is hampering the overall clarity of EU action and feeding into the crisis of confidence among the public towards Europe; therefore calls for all of the correction mechanisms and rebates to be abolished; |
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11.

notes that the complexity of the structure of the EU budget and its funding system, marked by rebates and correction mechanisms, is hampering the overall clarity of EU action and feeding into the crisis of confidence among the public towards Europe; therefore calls for all of the correction mechanisms and rebates to be abolished;

| 12. | believes that the lack of trust between the public, the Member States and the European institutions partly explains the excessive complexity involved in the management of the European structural and investment funds. In order to enhance how the EU is perceived by the public, EU policies, particularly cohesion policy, must be simplified after 2020; |
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12.

believes that the lack of trust between the public, the Member States and the European institutions partly explains the excessive complexity involved in the management of the European structural and investment funds. In order to enhance how the EU is perceived by the public, EU policies, particularly cohesion policy, must be simplified after 2020;

| 13. | points to a lack of harmonisation and transparency in the way that Member States' contributions to the EU budget are presented. Only four Member States currently declare their contributions to the EU budget in their national accounts, but this is classified as expenditure and not as an investment; |
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13.

points to a lack of harmonisation and transparency in the way that Member States' contributions to the EU budget are presented. Only four Member States currently declare their contributions to the EU budget in their national accounts, but this is classified as expenditure and not as an investment;

Towards an increase in genuine own resources, a more predictable and balanced budget

Towards an increase in genuine own resources, a more predictable and balanced budget

| 14. | feels that the aim of this reform should be to create a clearer, more provident and balanced budget that responds to European challenges and is based on a larger proportion of new own resources and a reduction in national contributions, while seeking to minimise additional burdens on taxpayers. The key objective is to propose a distribution of own resources that is more transparent and understandable to the public and a budget that is more autonomous and democratic, with greater involvement of the European Parliament, particularly regarding the revenue side of the EU's budget. This reform should also involve the CoR and take account of the territorial dimension in debates on the EU budget; |
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14.

feels that the aim of this reform should be to create a clearer, more provident and balanced budget that responds to European challenges and is based on a larger proportion of new own resources and a reduction in national contributions, while seeking to minimise additional burdens on taxpayers. The key objective is to propose a distribution of own resources that is more transparent and understandable to the public and a budget that is more autonomous and democratic, with greater involvement of the European Parliament, particularly regarding the revenue side of the EU's budget. This reform should also involve the CoR and take account of the territorial dimension in debates on the EU budget;

| 15. | considers that this reform should address the issue of the size of the MFF. The reform needs to ensure that there is consistency between all of the priorities set by the EU and the adoption of an MFF that is commensurate with those goals; |
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15.

considers that this reform should address the issue of the size of the MFF. The reform needs to ensure that there is consistency between all of the priorities set by the EU and the adoption of an MFF that is commensurate with those goals;

| 16. | stresses that the post-2020 MFF should be both focused on future challenges as well as having a provision for risks set within the budget. This is important so that it can maintain its strategic focus and planning certainty for regional and local authorities as well as respond to any crises that emerge and prevent the creation of ad hoc funds outside the MFF; |
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16.

stresses that the post-2020 MFF should be both focused on future challenges as well as having a provision for risks set within the budget. This is important so that it can maintain its strategic focus and planning certainty for regional and local authorities as well as respond to any crises that emerge and prevent the creation of ad hoc funds outside the MFF;

| 17. | believes that creating a link between taxes levied and specific priority EU policies would have an educational value, which would lead to increased acceptability. The CoR recommends maintaining the principle of the universality of the EU budget (4). However, a more flexible approach to the ‘non-assignment’ rule could be considered; |
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17.

believes that creating a link between taxes levied and specific priority EU policies would have an educational value, which would lead to increased acceptability. The CoR recommends maintaining the principle of the universality of the EU budget (4). However, a more flexible approach to the ‘non-assignment’ rule could be considered;

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| 18. | considers that any proposal for the post-2020 budget should involve reforms on the expenditure side, in order to take into account the new EU priorities, ensure more efficient use of EU Funds but also to improve absorption rates, and on the revenue side, so as to increase the new own resources. In any case, these reforms must ensure adequate provision to maintain those policies that have contributed the greatest amount to the European project, namely: a common agricultural and food policy, cohesion and rural development policies, and a social agenda based on quality employment for EU citizens; |
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18.

considers that any proposal for the post-2020 budget should involve reforms on the expenditure side, in order to take into account the new EU priorities, ensure more efficient use of EU Funds but also to improve absorption rates, and on the revenue side, so as to increase the new own resources. In any case, these reforms must ensure adequate provision to maintain those policies that have contributed the greatest amount to the European project, namely: a common agricultural and food policy, cohesion and rural development policies, and a social agenda based on quality employment for EU citizens;

| 19. | underlines that the principle of subsidiarity and the concept of European added value should be taken into account in the reform. The CoR calls for the ‘subsidiarity tests’ proposed in the Monti report to be looked into. It should be ensured, however, that subsidiarity is not exploited for the purposes of renationalising EU policies, and that no more funds are transferred to Member States in a way that could weaken those policies that have contributed the greatest amount to the European project, namely: the common agricultural policy, cohesion and rural development policies, and a social agenda based on quality employment for EU citizens; |
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19.

underlines that the principle of subsidiarity and the concept of European added value should be taken into account in the reform. The CoR calls for the ‘subsidiarity tests’ proposed in the Monti report to be looked into. It should be ensured, however, that subsidiarity is not exploited for the purposes of renationalising EU policies, and that no more funds are transferred to Member States in a way that could weaken those policies that have contributed the greatest amount to the European project, namely: the common agricultural policy, cohesion and rural development policies, and a social agenda based on quality employment for EU citizens;

| 20. | highlights the extent to which the collection of ‘traditional’ own resources, such as customs duties or revenue from the fight against fraud affecting the Union's financial interests, is dependent on sincere cooperation on the part of the Member States. |
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20.

highlights the extent to which the collection of ‘traditional’ own resources, such as customs duties or revenue from the fight against fraud affecting the Union's financial interests, is dependent on sincere cooperation on the part of the Member States.

| 21. | stresses that the reform of own resources should be considered in connection with the possibility of establishing a fiscal capacity for the euro-area Member States; |
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21.

stresses that the reform of own resources should be considered in connection with the possibility of establishing a fiscal capacity for the euro-area Member States;

| 22. | however, considers that in view of the rigorous requirements imposed on the Member States under the Six Pack, the Two Pack and the Fiscal Compact (structural budget balance to be maintained, spending ‘brake’, reducing the debt-to-GDP ratio), it is essential that countries also continue to have enough latitude to ensure the necessary (national) revenues by being able to determine their own tax regimes to meet spending commitments which in some areas (e.g. welfare, health or social care) are rising disproportionately; |
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22.

however, considers that in view of the rigorous requirements imposed on the Member States under the Six Pack, the Two Pack and the Fiscal Compact (structural budget balance to be maintained, spending ‘brake’, reducing the debt-to-GDP ratio), it is essential that countries also continue to have enough latitude to ensure the necessary (national) revenues by being able to determine their own tax regimes to meet spending commitments which in some areas (e.g. welfare, health or social care) are rising disproportionately;

Opinion on the new own resources set out in the Monti report

Opinion on the new own resources set out in the Monti report

| 23. | recommends assessing and proposing the new own resources in the form of a ‘package’ comprising various taxes, in order to balance out the effects of the new own resources on all levels of government, businesses and citizens; |
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23.

recommends assessing and proposing the new own resources in the form of a ‘package’ comprising various taxes, in order to balance out the effects of the new own resources on all levels of government, businesses and citizens;

| 24. | welcomes the option of an EU corporate income tax by means of a common consolidated corporate tax base (CCCTB). In a previous opinion, the CoR welcomed the positive effects that the CCCTB could have on economic growth, employment and tax equity as well as on public finances, including those of local and regional authorities. In addition to this tax, the CoR calls on the EU institutions to look into the introduction of a specific tax on multinational companies. Supports the Commission's initiative announcing that, as a follow-up to the Communication of 21 September 2017 on A Fair and Efficient Tax System in the European Union for the Digital Single Market, it will by spring 2018 present a legislative proposal on EU rules for the taxation of profits in the digital economy. Points out, however, that the scope of tax harmonisation at EU level is limited by the provisions of Article 113 TFEU to the elements necessary for the functioning of the internal market and to avoid distortions of competition and that the power to levy and collect taxes remains central to the sovereignty of the Member States; |
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24.

welcomes the option of an EU corporate income tax by means of a common consolidated corporate tax base (CCCTB). In a previous opinion, the CoR welcomed the positive effects that the CCCTB could have on economic growth, employment and tax equity as well as on public finances, including those of local and regional authorities. In addition to this tax, the CoR calls on the EU institutions to look into the introduction of a specific tax on multinational companies. Supports the Commission's initiative announcing that, as a follow-up to the Communication of 21 September 2017 on A Fair and Efficient Tax System in the European Union for the Digital Single Market, it will by spring 2018 present a legislative proposal on EU rules for the taxation of profits in the digital economy. Points out, however, that the scope of tax harmonisation at EU level is limited by the provisions of Article 113 TFEU to the elements necessary for the functioning of the internal market and to avoid distortions of competition and that the power to levy and collect taxes remains central to the sovereignty of the Member States;

| 25. | takes the view that a reformed VAT own resource could help increase the own resources. The current VAT resource suffers from excessive complexity and should be reformed in accordance with the system proposed by the high-level group, by applying a single EU rate to a wider harmonised base. However, this reform should not have adverse effects on the citizen and on the less developed Member States; |
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25.

takes the view that a reformed VAT own resource could help increase the own resources. The current VAT resource suffers from excessive complexity and should be reformed in accordance with the system proposed by the high-level group, by applying a single EU rate to a wider harmonised base. However, this reform should not have adverse effects on the citizen and on the less developed Member States;

| 26. | is in favour of a financial transaction tax (FTT). This would enable the Member States to reduce their national contributions (5). However, the limited number of Member States committed to an FTT and its unpredictability in terms of revenue limits its potential; |
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26.

is in favour of a financial transaction tax (FTT). This would enable the Member States to reduce their national contributions (5). However, the limited number of Member States committed to an FTT and its unpredictability in terms of revenue limits its potential;

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| 27. | considers that an own resource based on seigniorage could be envisaged, despite the risks related to its volatility and the fact that it concerns only the Member States of the euro area; |
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27.

considers that an own resource based on seigniorage could be envisaged, despite the risks related to its volatility and the fact that it concerns only the Member States of the euro area;

| 28. | believes that the carbon taxes at national level, that which could be established at European level and that using the revenue from the emissions trading system at EU level have significant benefits, particularly as regards incentivising the reduction of CO2 emissions, contributing to the implementation of the Paris Agreement and establishing a stronger link with Europe's goals on sustainable development, climate and the environment. However, this would have an impact on industry and transport. Such taxes could also create a new divide between the economically less developed Member States with more carbon-intensive economies and the more developed Member States, whose economies have the capacity to acquire cleaner means of energy production. In addition, the introduction of such carbon taxes should make provision for compensation mechanisms for islands and outermost regions, which are totally dependent on air and sea transport and yet firmly committed to reducing emissions; |
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28.

believes that the carbon taxes at national level, that which could be established at European level and that using the revenue from the emissions trading system at EU level have significant benefits, particularly as regards incentivising the reduction of CO2 emissions, contributing to the implementation of the Paris Agreement and establishing a stronger link with Europe's goals on sustainable development, climate and the environment. However, this would have an impact on industry and transport. Such taxes could also create a new divide between the economically less developed Member States with more carbon-intensive economies and the more developed Member States, whose economies have the capacity to acquire cleaner means of energy production. In addition, the introduction of such carbon taxes should make provision for compensation mechanisms for islands and outermost regions, which are totally dependent on air and sea transport and yet firmly committed to reducing emissions;

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| 29. | considers that the electricity tax proposal would certainly have the advantage of clarity and of being in line with the EU's objectives on energy efficiency, but feels there is a risk that it would be unpopular and punitive for deprived households. It should therefore be ruled out for households; |
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29.

considers that the electricity tax proposal would certainly have the advantage of clarity and of being in line with the EU's objectives on energy efficiency, but feels there is a risk that it would be unpopular and punitive for deprived households. It should therefore be ruled out for households;

| 30. | would propose ruling out the fuel tax. In addition to the problem of public acceptability, this tax would have a negative impact at local level, as it constitutes a source of revenue for certain local and regional authorities; |
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30.

would propose ruling out the fuel tax. In addition to the problem of public acceptability, this tax would have a negative impact at local level, as it constitutes a source of revenue for certain local and regional authorities;

| 31. | feels that the tax on flights proposed by the Commission in 2011 (6) could be reconsidered, and recommends that it be applied to flights within Europe; |
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31.

feels that the tax on flights proposed by the Commission in 2011 (6) could be reconsidered, and recommends that it be applied to flights within Europe;

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| 32. | calls on the Commission to conduct a detailed impact assessment on the new own resources and their effect on national and sub-national budgets and on citizens; |
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32.

calls on the Commission to conduct a detailed impact assessment on the new own resources and their effect on national and sub-national budgets and on citizens;

A reform within the framework of the timetable for the post-2020 MFF

A reform within the framework of the timetable for the post-2020 MFF

| 33. | calls on the Commission to present a legislative proposal for the post-2020 MFF providing for an ambitious reform of own resources. This reform should be carried out gradually, within the framework of the EU Treaties, and retain, albeit to a lesser extent, the national contributions; |
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33.

calls on the Commission to present a legislative proposal for the post-2020 MFF providing for an ambitious reform of own resources. This reform should be carried out gradually, within the framework of the EU Treaties, and retain, albeit to a lesser extent, the national contributions;

| 34. | notes that the UK's withdrawal from the EU timetable and the renewal of the terms of office of the European Parliament and the Commission could delay the timing of the proposals for the post-2020 EU budget. Calls on the Commission, in the event of long delays, to propose an extension of the MFF in accordance with Article 312(4) TFEU, in order to avoid adversely affecting the functioning of EU public policies, in particular cohesion policy. |
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34.

notes that the UK's withdrawal from the EU timetable and the renewal of the terms of office of the European Parliament and the Commission could delay the timing of the proposals for the post-2020 EU budget. Calls on the Commission, in the event of long delays, to propose an extension of the MFF in accordance with Article 312(4) TFEU, in order to avoid adversely affecting the functioning of EU public policies, in particular cohesion policy.

Brussels, 11 October 2017.

The President of the European Committee of the Regions

Karl-Heinz LAMBERTZ

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(1)  Brexit and the EU budget: threat or opportunity? http://www.delorsinstitute.eu/media/brexiteubudget-haasrubio-jdi-jan17.pdf.

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Brexit and the EU budget: threat or opportunity?

(2)  CoR opinion 2016/0009 on the Mid-term revision of the multiannual financial framework (MFF).

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Mid-term revision of the multiannual financial framework (MFF)

(3)  In the 2017 budget, this amounted to 69,63 %.

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(4)  http://ec.europa.eu/budget/financialreport/2011/overview/budget_management/index_en.html.

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(5)  CoR opinion on A common system of financial transaction tax, CdR 332/2011.

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A common system of financial transaction tax

(6)  Financing the EU budget: report on the operation of the own resources system, SEC(2011) 876 final.

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Financing the EU budget: report on the operation of the own resources system

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