Proposal for a Council Decision on the system of the European Union's own resources
Date: 1999-07-08
Institutions: European Commission
Subjects: financing of the EU budget, gross national product, own resources

28.9.1999

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Official Journal of the European Communities

C 274 E/39

Proposal for a Council Decision on the system of the European Union’s own resources

(1999/C 274 E/06)

COM(1999) 333 final (cid:151) 1999/0139(CNS)

(Submitted by the Commission on 12 July 1999)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Article 269 thereof,

Having regard to the Treaty establishing the European Atomic
Energy Community, and in particular Article 173 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the Court of Auditors,

Having regard to the opinion of
Committee,

the Economic and Social

Having regard to the opinion of the Committee of the Regions,

(1) Whereas Council Decision 94/728/EC, Euratom of 31
October 1994 on the system of the European Commun-
ities’ own resources (1) amended the determination of own
resources for the year 1999 by capping the base of the
VAT resource at 50 % of gross national product (GNP) at
market prices, and by reducing the maximum VAT call
rate to 1,0 %;

(2) Whereas according to the said Decision the maximum
ceiling of own resources for 1999 was set equal
to
the European Union GNP at market prices
1,27 % of
and an overall ceiling of 1,335 % of
the European
Union GNP was set for commitments appropriations;

(3) Whereas the European Council meeting in Berlin on 24

and 25 March 1999 reached certain conclusions;

(4) Whereas the Union’s own resources system must ensure
adequate resources for the orderly development of the
Union’s policies, subject to the need for strict budgetary
discipline;

(5) Whereas the system should be equitable, transparent, cost-

effective and simple;

(6) Whereas the system should be based on criteria which
best express each Member State’s ability to contribute;

improve

the new system of

the new system might result

(7) Whereas it is appropriate that the best quality data are
used for the purposes of
the EU budget and its own
resources; whereas the application, upon the entry into
force of a new decision repealing Council Decision
94/278/EC, Euratom, of
integrated
economic accounts in accordance with Council Regulation
the quality of
2223/96 (ESA 95) (2) will
measurement of national accounts data; whereas the use
of
in a change in the
maximum amount of resources made available to the
EU corresponding to the GNP ceilings expressed as a
percent of GNP; whereas it is appropriate to adapt the
ceiling expressed as a percent of GNP so as to maintain
unchanged the amount of financial resources put at the
disposal of the Union; whereas reliable estimates of EU
GNP according to both the ESA 95 and the ESA second
edition will become available with some delay; whereas it
is appropriate to establish a formula for the determination
of the new ceilings to be used in connection with the GNP
calculated according to ESA 95, to be applied at the time
of the entry into force of the current Decision;

(8) Whereas it is appropriate that the same methodology be
used in the future on the occasion of changes in the
national system of accounts which may have significant
effects on the level of GNP;

(9) Whereas the European System of Accounts (ESA 95)
adopted by the Council by Regulation 2223/96 does not
explicitly contain the concept of GNP and the definition of
GNP should be introduced therein; whereas it is necessary
to adapt Council Directive 89/130/EC, Euratom (3) to take
account of Regulation 2223/96 (ESA 95);

(10) Whereas an orderly progression of commitment appro-
priations and payment appropriations should be ensured;

(11) Whereas,

in order to further continue the process of
making allowance for each Member State’s ability to
contribute to the system of own resources and of
correcting the regressive aspects of the current system
for the least prosperous Member States the European
Council
the Union’s
the
financing rules will be amended as follows:

conclusion that

reached

(cid:151) the maximum rate of call of the VAT resource will be
reduced to 0,75 % in 2002 and 2003 and to 0,50 %
from 2004 onwards,

(cid:151) the value added tax base of the Member States will
continue to be restricted to 50 % of their GNP;

(1) OJ L 293, 12.11.1994, p. 9.

(2) OJ L 310, 30.11.1996, p. 1.
(3) OJ L 49, 13.2.1989, p. 26.

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Official Journal of the European Communities

28.9.1999

(12) Whereas the European Council has considered appropriate
to adapt the amount retained by Member States to cover
the costs of collection, monitoring,
fraud-fighting and
reporting in connection with the so-called traditional
own resources paid to the budget of
the European
Union; whereas it is desirable to improve further the effec-
tiveness of the management of these resources and, for
reasons of transparency and good financial management,
Member
anomalies
encountered in the operation of the collection systems;

States must

account

for

all

(13) Whereas the budgetary imbalances should be corrected in
such a way as not to affect the own resources available for
European Union policies;

(14) Whereas the European Council of 24 and 25 March 1999
concluded that the manner for calculating the correction
of budgetary imbalances defined in Decision 88/376/EEC,
Euratom and confirmed by the Decision 94/728/EC,
Euratom, should be modified to exclude the windfall
gains resulting from changes in the financing system
and from future enlargement;

the

(15) Whereas the European Council of 24 and 25 March 1999
correction of
financing of
concluded that
budgetary imbalances in favour of the United Kingdom
should be modified to allow Austria, Germany,
the
Netherlands and Sweden to see a reduction in their
financing share to 25% of the normal share;

the

(16) Whereas the monetary reserve, hereinafter referred to as
(cid:145)the EAGGF monetary reserve(cid:146),
the
financing of the Loan Guarantee Fund and the reserve
for emergency aid in non-member countries are covered
by specific provisions;

the reserve for

(17) Whereas the European Council of 24 and 25 March 1999
invited the Commission to submit, before 1 January 2006,
a report reviewing the operation of the own resources
system and, in particular, the effects of enlargement on
the financing of the budget; whereas the report should
also review the correction of budgetary imbalances
granted to the United Kingdom as well as the granting
to Austria, Germany, the Netherlands and Sweden of the
reduction in the financing of the budgetary imbalances in
favor of the United Kingdom; whereas the report should
also address the feasibility of creating new autonomous
own resources as well as arrangements for the possible
introduction of a fixed uniform rate applicable to the VAT
assessment bases;

(18) Whereas provisions must be laid down to cover the
from the system introduced by Decision

changeover
94/728/EC, Euratom to that arising from this Decision;

(19) Whereas the European Council provided that this Decision

should take effect on 1 January 2002,

HAS LAID DOWN THESE PROVISIONS, WHICH IT RECOMMENDS
TO THE MEMBER STATES FOR ADOPTION:

Article 1

The Union shall be allocated resources of its own in accordance
with the rules laid down in the following Articles in order to
ensure, in accordance with Article 269 of the EC Treaty and
Article 173 of the Euratom Treaty, the financing of its budget.

The budget of
the Union shall, without prejudice to other
revenue, be financed wholly from the Union’s own resources.

Article 2

Revenue

1.
resources entered in the budget of the Union:

following shall

from the

constitute own

(a)

levies, premiums, additional or compensatory amounts,
additional amounts or factors and other duties established
or to be established by the institutions of the Union in
respect of
trade with non-member countries within the
framework of the common agricultural policy, and also
contributions and other duties provided for within the
framework of the common organisation of the markets in
sugar;

(b) Common Customs Tariff duties and other duties established
or to be established by the institutions of the Union in
respect of trade with non-member countries and customs
duties on products coming under the Treaty establishing
the European Coal and Steel Community;

(c) the application of a uniform rate valid for all Member
States to the harmonised VAT assessment bases determined
according to EU rules. The assessment base to be taken into
account for this purpose shall not exceed 50 % of GNP for
each Member State;

(d) the application of a rate (cid:151) to be determined pursuant to
the budgetary procedure in the light of the total of all other
revenue (cid:151) to the sum of all the Member States’ GNPs.

Revenue deriving from any new charges

introduced
2.
within the framework of a common policy,
in accordance
with the Treaty establishing the European Community or the
Treaty establishing the European Atomic Energy Community,
provided the procedure laid down in Article 269 of the Treaty
establishing the European Community or in Article 173 of the
Treaty establishing the European Atomic Energy Community
also constitute own resources
has been followed,
entered in the budget of the Union.

shall

3. Member States shall retain, by way of collection, moni-
toring, fraud-fighting and reporting costs, 25 % of the amounts
referred to in paragraph 1(a) and (b), which have been estab-
lished after 31 December 2000. For amounts established or
which should have been established before that date,
the
applicable rate of retention shall be 10 %.

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The uniform rate referred to in paragraph 1(c) shall
4.
correspond to the rate resulting from the difference between:

Maximum commitment appropriations =

(a) the maximum rate of call of the VAT resource which is

fixed at

(cid:151) 0,75 % in 2002 and 2003

(cid:151) 0,50 % from 2004 onwards,

and

(b) a rate ((cid:145)frozen rate(cid:146)) equivalent to the ratio between the
amount of the compensation referred to in Article 4 and
the sum of
(established in
the VAT assessment bases
accordance with Article 2(1)(c)) of all Member States,
taking into account the fact that the United Kingdom is
excluded from the financing of its correction and that the
share of Austria, Germany, the Netherlands and Sweden in
the financing of the UK correction is reduced to one fourth
of its normal value.

1,335 % (cid:215)

1998 + 1999 + 2000 GNP ESA second edition
1998 + 1999 + 2000 GNP ESA 1995

An orderly ratio between commitment appropriations and
payment appropriations
shall be maintained to guarantee
their compatibility and to enable the ceilings mentioned in
paragraph 1 to be respected in subsequent years.

The Commission shall communicate to the budgetary
for own resources before 31

3.
authority the new ceilings
December 2001.

4.
The same procedure described in this Article, paragraphs
1 and 2, will be followed in the case of modifications of the
European system of integrated economic accounts (ESA) which
result in significant changes in the level of GNP.

Article 4

The rate fixed under paragraph 1(d) shall apply to the

5.
GNP of each Member State.

The United Kingdom shall be granted a correction in respect of
budgetary imbalances.

6.
If, at the beginning of the financial year, the budget has
not been adopted, the previous uniform VAT rate and rate
applicable to Member States’ GNPs, without prejudice to the
provisions adopted in accordance with Article 8(2) as regards
the EAGGF monetary reserve, the reserve for financing the
Loan Guarantee Fund and the reserve for emergency aid in
third countries, shall remain applicable until the entry into
force of the new rates.

7.
For the purposes of applying this Decision, the Council,
ruling unanimously on a Commission proposal and after
consultation with the European Parliament, will adopt by
means of a Regulation the definition of GNP which must be
incorporated in Regulation 2223/96 EC as well as a new GNP
Directive which will replace Directive 89/130/EC, Euratom.

Article 3

1.
The total amount of own resources assigned to the Union
to cover payments appropriations may not exceed a certain
percentage of
the Member States. This
percentage, expressed in two decimal places, will be determined
by the Commission in December 2001 on the basis of the
following formula:

the total GNPs of

Maximum own resources =

1,27 % (cid:215)

1998 + 1999 + 2000 GNP ESA second edition
1998 + 1999 + 2000 GNP ESA 1995

the Union must

The commitment appropriations entered in the general
2.
follow an orderly progression
budget of
resulting in a total amount, which does not exceed a certain
percentage of
the Member States. This
percentage, expressed in two decimal places, will be determined
by the Commission in December 2001 on the basis of the
following formula:

the total GNPs of

This correction shall be established by:

(a) calculating the difference, in the preceding financial year,

between:

(cid:151) the percentage share of the United Kingdom in the sum

of uncapped VAT assessment bases,

and

(cid:151) the percentage share of the United Kingdom in total

allocated expenditure;

(b) multiplying the difference thus obtained by total allocated

expenditure;

(c) multiplying the result under (b) by 0,66;

(d) subtracting from the result under (c) the effects arising for
the United Kingdom from the changeover to capped VAT
and the payments referred to in Article 2(1)(d), that is the
difference between

(cid:151) what the United Kingdom would have had to pay for
the amounts financed by the resources referred to in
Article 2(1)(c) and (d),
if the uniform rate had been
applied to non-capped VAT bases,

and

(cid:151) the payments of the United Kingdom resulting from the

application of Article 2(1)(c) and (d);

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Official Journal of the European Communities

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(e) from the year 2001 onwards, subtracting from the result
under (d) the gains of the United Kingdom resulting from
the increase in the percentage of resources referred to in
Article 2(1)(a) and (b) retained by Member States to cover
collection and related costs;

(f) at the time of each enlargement of the EU an adjustment to
the result under (e) shall be calculated to reduce the
compensation thereby ensuring that expenditure which is
unabated before
remains unabated after
enlargement. This adjustment shall be made by reducing
total allocated expenditure by an amount equivalent
to
the annual pre-accession expenditure in the acceding
countries.

enlargement

Provisions for the operation of those reserves shall be adopted
as necessary in accordance with Article 8(2).

Article 7

Any surplus of the Union’s revenue over total actual expen-
diture during a financial year shall be carried over to the
following financial year.

Any surpluses generated by a transfer from EAGGF Guarantee
Section chapters, or surplus from the Guarantee Fund arising
from external measures, transferred to the revenue account in
the budget, shall be regarded as constituting own resources.

so calculated shall be

All amounts
carried forward to
subsequent years and shall be adjusted annually by applying
the Euro GNP deflator used for the adaptation of the Financial
Perspective (1).

Article 5

1.
The cost of the correction shall be borne by the other
Member States in accordance with the following arrangements:

The distribution of the cost shall first be calculated by reference
to each Member State’s share of the payments referred to in
Article 2(1)(d), the United Kingdom being excluded;
it shall
then be adjusted in such a way as to restrict the share of
Austria, Germany, the Netherlands and Sweden to one fourth
of the shares resulting from this calculation.

2.
The correction shall be granted to the United Kingdom by
a reduction in its payments resulting from the application of
Article 2(1)(c) and (d). The costs borne by the other Member
States shall be added to their payments resulting from the
application for each Member State of Article 2(1)(c) and (d).

The Commission shall perform the calculations required

3.
for the application of Article 4 and this Article.

If, at the beginning of the financial year, the budget has
4.
not been adopted,
the correction granted to the United
Kingdom and the costs borne by the other Member States as
entered in the last budget
remain
applicable.

finally adopted shall

Article 8

The Union’s own resources referred to in Article 2(1)(a)
1.
and (b) shall be collected by the Member States in accordance
with the national provisions imposed by law, regulation or
administrative action, which shall, where appropriate, be
adapted to meet the requirements of Community rules. The
Commission shall examine at regular intervals the national
communicated to it by the Member States,
provisions
transmit
it deems
they comply with
necessary
authority.
Community rules
Member States
in
Article 2(1)(a) to (d) available to the Commission.

to the Member States the adjustments

shall make the resources provided for

to ensure
and report

to the budget

in order

that

shall

inform the Commission at

regular
Member States
intervals of any anomalies having financial impact encountered
in their collection process,
in particular those where they
erroneously failed to establish the Union’s entitlement to the
own resources referred to in Article 2(1)(a) and (b) or where
those entitlements were not established in due time.

2. Without prejudice to the auditing of the accounts and to
checks that they are lawful and regular as laid down in Article
248 of the Treaty establishing the European Community and
Article 160C of the Euratom Treaty, such auditing and checks
being mainly concerned with the reliability and effectiveness of
national systems and procedures for determining the base for
own resources accruing from VAT and GNP and without
prejudice to the inspection arrangements made pursuant to
Article 279(c) of
the
Euratom Treaty, the Council shall, acting unanimously on a
proposal
from the Commission and after consulting the
European Parliament, adopt the provisions necessary to apply
this Decision and to make possible the inspection of
the
collection,
the making available to the Commission and
payment of the revenue referred to in Articles 2 and 5.

the EC Treaty and Article 183(c) of

Article 6

Article 9

The revenue needed to cover in full or in part the EAGGF
monetary reserve, the reserve for the financing of the Loan
Guarantee Fund and the reserve for emergency aid in third
countries, entered in the budget shall not be called up from
implemented.
the
the Member States until

reserves are

(1) OJ C 172, 18.6.1999, p. 3.

The Commission shall submit, before 1 January 2006, a report
reviewing the operation of the own resources system and, in
particular, the effects of enlargement on the financing of the
budget. The report
shall also review the correction of
budgetary imbalances granted to the United Kingdom as well
as the granting to Austria, Germany,
the Netherlands and
the reduction referred to in Article 5(1). The
Sweden of

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report shall also address the possibility of modifying the
structure of the own resources by creating new autonomous
own resources as well as arrangements for the possible intro-
duction of a fixed uniform rate applicable to the VAT base.

Article 10

1. Member States shall be notified of this Decision by the
Secretary-General of the Council and the Decision shall be
published in the Official Journal of the European Communities.

Member States shall notify the Secretary-General of the Council
without delay of the completion of the procedures for the
adoption of this Decision in accordance with their respective
constitutional requirements.

This Decision shall enter into force on the first day on the
the notifications
month following receipt of
referred to in the second subparagraph. It shall take effect on
1 January 2002 except for Article 2(3) and (4), which shall take
effect on 1 January 2001.

the last of

2. (a) Subject to (b), Decision 94/728/EC, Euratom shall be
repealed as of 1 January 2002. Any references to the
Council Decision of 21 April 1970 on the replacement
of financial contributions from Member States by the
Communities own resources (1),
to Council Decision
85/257/EEC, Euratom of 7 May 1985 on the Commun-
to Decision
ities’
to Decision 94/728/EC,
88/376/EEC, Euratom (3), or
Euratom shall be construed as
to this
Decision.

resources (2),

system of

references

own

(b) Articles 2, 4 and 5 of Decisions 88/376/EEC, Euratom
and 94/728/EC, Euratom shall continue to apply to the
calculation and adjustment of revenue accruing from the
application of a uniform rate valid for all Member States
to the VAT base determined in a uniform manner and
limited between 50 % to 55 % of the GNP of each
Member State, depending on the relevant year, and to
budgetary
the
the
imbalances granted to the United Kingdom for
the
years 1988 to 2000.

calculation

correction

of

of

(1) OJ L 94, 28.4.1970, p. 19.
(2) OJ L 128, 14.5.1985, p. 15. Decision repealed by Decision

88/376/EEC, Euratom.

(3) OJ L 185, 15.7.1988, p. 24.