Report from the Commission to the European Parliament and the Council on the application of Council Regulation (EC, Euratom) No 1287/2003 on the harmonisation of gross national income at market prices (GNI Regulation)
Date: 2006-05-08
Institutions: European Commission
Subjects: EU statistics, European accounting system, committee (EU), data transmission, gross national product, market prices, own resources, report

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 8.5.2006 
COM(2006) 199 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

on the application of Council Regulation (EC, Euratom) No 1287/2003 on the 
harmonisation of gross national income at market prices (GNI Regulation) 

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1. 

INTRODUCTION 

Council  Regulation  (EC,  Euratom)  No  1287/2003  of  15  July  2003  on  the  harmonisation  of 
gross  national  income  at  market  prices  (GNI  Regulation)1  establishes  the  procedures  to 
facilitate  the  verification,  and  where  necessary  the  improvement,  of  the  comparability, 
reliability  and  exhaustiveness  of  Member  States’  estimates  of  gross  national  income  (GNI). 
The adoption of the GNI Regulation followed Council Decision 2000/597/EC, Euratom of 29 
September 2000 on the system of the Communities’ own resources2. 

GNI  in  application  of  the  European  System  of  Accounts  (ESA  95)  according  to  Council 
Regulation  (EC)  2223/96 of  25 June 1996 on the European system of national and regional 
accounts  in  the  Community3  has  been  the  basis  for  the  Communities’  fourth  own  resource 
since 1 January 2002. GNI replaces gross national product (GNP) which was used to assess 
the fourth own resource for the years before 2002.  

The predecessor of the GNI Regulation was the so-called GNP Directive, Council Directive 
89/130/EEC,  Euratom  of  13  February  1989  on  the  harmonization  of  compilation  of  gross 
national product at market prices4. The GNP Directive set up a procedure to verify and assess 
the comparability, reliability and exhaustiveness of GNP within the GNP Committee in which 
Member States and the Commission cooperated closely from 1989 to 2003. A good level of 
comparability was achieved. The GNI Regulation builds on and adjusts this procedure to take 
account of GNI for the purposes of own resources and establishes the GNI Committee. 

The GNI Committee held its first meeting on 5-6 November 2003 which, at the same time, 
was the last meeting of the GNP Committee. At that meeting the GNI Committee adopted its 
Rules of Procedure as stipulated under Article 4 (3) of the GNI regulation. 

The  purpose  of  this  document  is  to  report  on  the  application  of  the  GNI  Regulation,  as 
foreseen by Article 7 of the Regulation. It summarises the progress made by the Commission 
and  the  GNI  Committee  on  the  harmonisation  of  GNI  and  the  application  of  the  GNI 
Regulation since its entry into force. Chapter 2 describes measures taken to ensure a precise 
definition of gross national income at market prices. Chapter 3 describes the measures taken 
to ensure the timely forwarding of GNI data and additional information by the Member States 
to  the  Commission.  Chapter  4  describes  the  actions  taken  by  the  Commission  to  verify  the 
sources  and  methods  used  by  the  Member  States  to  calculate  GNI.  Chapter  5  draws 
conclusions on the application of the GNI Regulation since its entry into force. 

2. 

DEFINITION AND CALCULATION OF GROSS NATIONAL INCOME AT MARKET PRICES 

Article  1  of  the  GNI  Regulation  provides  that  GNI  and  gross  domestic  product  (GDP)  for 
budget  purposes  shall  be  defined  in  accordance  with  the  European  system  of  national  and 
regional accounts (ESA 95). ESA 95 is applied by Member States under Council Regulation 
(EC) No 2223/96 of June 1996 on the European system of national and regional accounts in 
the Community (ESA 95 Regulation). Since the GNI Regulation 1287/2003  was adopted in 

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4 

OJ, L 181, 19.7.2003, p. 1. 
OJ L 253, 7.10.2000, p. 42. 
OJ L 310 of 30.11.1996, p. 1. 
OJ L 49 of 21.2.1989, p. 26. 

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2003,  the  first  data  to  which  it  referred  were  those  delivered  in  September  2003  for  budget 
year 2002. 

Member States have already been calculating GDP and GNI according to ESA 95 since April 
1999  under  the  ESA  95  Regulation.  Since  that  time,  GNP  according  to  the  former  ESA 
second edition has been derived for own resource purposes from GDP according to ESA 95 
by  making  specific  conceptual  adjustments.  The  principal  conceptual  adjustments  were  laid 
down in Commission Decision 97/178/EC, Euratom of 10 February 1997 on the definition of 
a methodology for the transition between ESA 95 and ESA second edition5. The Commission 
(Eurostat) and the GNP Committee therefore invested a lot of work in the harmonisation of 
calculations according to ESA 95, even before the new GNI Regulation entered into force. 

Once the GNI Committee was established in November 2003, it took steps to ensure that the 
previous  work  of  the  GNP  Committee  on  harmonising  national  accounts  concepts  and 
definitions would remain valid for the harmonisation of GNI, whenever relevant. It also took 
measures  to  clarify  and  further  define  conceptual  changes  which  were  newly  introduced  by 
ESA 95. 

One step was to confirm and update several legal acts related to GNP and equally relevant to 
GNI. As a consequence, the following Commission regulations were initiated and passed: 

–  Commission  Regulation  (EC)  No  109/2005  of  24  January  2005  on  the  definition  of  the 
economic  territory  of  Member  States  for  the  purposes  of  Council  Regulation  (EC, 
Euratom) No 1287/2003 on the harmonisation of gross national income at market prices6 

–  Commission Regulation (EC, Euratom) No 116/2005 of 26 January 2005 on the treatment 
of  repayments  of  VAT  to  non-taxable  persons  and  to  taxable  persons  for  their  exempt 
activities,  for  the  purposes  of  Council  Regulation  (EC  Euratom)  No  1287/2003  on  the 
harmonisation of gross national income at market prices7 

–  Commission  Regulation  (EC)  No  1722/2005  of  20  October  2005  on  the  principles  for 
estimating  dwelling  services  for  the  purpose  of  Council  Regulation  (EC,  Euratom)  No 
1287/2003 on the harmonisation of gross national income at market prices8. 

A  second  step  was  that  the  GNI  Committee  adopted  several  recommendations  on  specific 
conceptual ESA 95 issues which had previously been agreed by the GNP Committee, namely 
on: 

–  The measurement of gross fixed-capital formation in software; 

–  The measurement of insurance services; 

–  The  treatment  of  import  duties  paid  by  non-residents  (The  “Rotterdam  effect”  on  import 

duties); 

–  Measurement of imputed social contributions; 

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8 

OJ L 75 of 15.3.1997, p. 44. 
OJ L 21, 25.1.2005, p. 3. 
OJ L 24, 27.1.2005, p. 6. 
JO L 276, 21.10.2005, p. 5. 

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–  The treatment of the correction in favour of the United Kingdom. 

In  addition  the  GNI  Committee  adopted  recommendations  produced  by  the  following  Task 
Forces:  

–  Task Force on entertainment, literary and artistic originals; 

–  Task Force on consumption of fixed capital for public infrastructure; 

–  Task Force on reinvested earnings on foreign direct investment. 

3. 

FORWARDING OF GNI DATA AND ADDITIONAL INFORMATION 

Transmission of GNI data 

According to Article 2(1) and (2) of the GNI Regulation Member States shall establish GNI in 
the context of regular national accounting and provide the Commission (Eurostat) before 22 
September each year with figures for aggregate GNI and its components. This means that the 
deadline  for  transmitting  GNI  data  to  the  Commission  for  own  resource  purposes  has  been 
advanced  by  eight  days  compared  with  the  GNP  Directive  which  set  1  October  as  the  date 
before which Member States had to provide their GNP data. 

There  have  been  no  major  problems  with  this  new  deadline.  Only  in  2003,  the  first  year  of 
application,  when  the  regulation  had  been  adopted  only  in  July,  a  small  number  Member 
States delivered according to the old schedule. In 2004 and 2005 all Member States provided 
their GNI data on time. 

Each year, in early July, the GNI Committee has reached agreement on a common structure of 
the  transmission  tables  (“GNI  questionnaire”)  to  be  used  by  Member  States  in  order  to 
facilitate  the  provision  of  their  GNI  data.  Shortly  after  the  July  GNI  Committee  meeting, 
Eurostat  has  sent  to  each  Member  State  a  template  (in  Excel-format)  of  the  agreed 
questionnaire, requesting a timely return of the completed GNI questionnaire.  

The  questionnaire  also  includes  additional  tables  and  formulae  which  help  to  check  the 
consistency  of  the  data  provided  and  to  detect  and  avoid  possible  errors.  In  addition,  it  is 
accompanied  by  detailed  instructions  on  how  to  fill  in  the  questionnaire  correctly.  These 
measures  have  greatly  helped  to  harmonise  and  further  improve  the  data  submitted  by  the 
Member States to Eurostat. 

Annual report on the quality of GNI data 

The GNI Regulation also obliges Member States to transmit an annual report on the quality of 
their  GNI  data  to  Eurostat  (Article  2(3)).  The  purpose  of  this  report  is  to  supply  the 
Commission  with  the  information  necessary  to  show  how  the  figures  were  reached,  to 
describe any significant changes in the procedures and basic statistics used and to explain the 
revisions made to earlier GNI estimates. 

The  common  content  and  format  of  this  report  was  agreed  by  the  GNI  Committee  at  its 
meeting in July 2004.  Subsequently  all Member States  provided a  quality  report along with 
their  GNI  data  in  September  2004.  The  reports  were  of  good  quality  and  gave  the 
Commission the necessary background information to assess the Member States’ data.  

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However,  despite  a  common  format  and  instructions  on  how  to  compile  the  quality  reports, 
there were still considerable differences among the Member States in the length and structure 
of their reports. In 2005 Eurostat, with the agreement of the GNI Committee, therefore gave 
more precise instructions for the compilation of the quality reports. This further improved the 
comparability and usefulness of the quality reports transmitted in September 2005. 

Integrating the new Member States into the GNI process 

Contributions by the new Member States to the fourth own resource are based on GNI data 
starting in 2004, the year of their accession to the European Union. GNI data for 2004 had to 
be provided to the Commission for the first time in September 2005.  

The new Member States were integrated into the process of providing GNI data well before 
that time. In 2003 the new Member States provided GNI data for 2002. This was repeated in 
2004 with revised GNI data for  2002  and a first transmission  of GNI  figures  for 2003, also 
including a quality report. 

Thanks  to  these  trial  exercises,  the  transmission  of  GNI  data  in  2005  for  the  new  Member 
States went as smoothly as for the old Member States. 

GNI inventories 

The main purpose of the annual GNI quality reports is to provide information on cases where 
there have been significant changes to and revisions of the Member States’ GNI calculations. 
The  quality  report  is  therefore  intended  to  give  a  brief  and  concise  update  on  a  Member 
State’s methodology, sources and results where necessary. 

In contrast to these short reports, a fully detailed account of the methods and sources used to 
calculate final GNI  figures and its components is given in the inventories of  the  procedures 
and  basic  statistics  used  to  calculate  GNI  and  its  components  (GNI  inventories).  Member 
States are obliged to compile and provide to Eurostat such inventories under Article 3 of the 
GNI  Regulation.  These  inventories  are  one  of  the  main  instruments  enabling  Eurostat  to 
assess the comparability, reliability and exhaustiveness of the Member States’ GNI data. 

Since the procedures and basic statistics for compiling final GDP and GNI data do not change 
significantly every year, but only during major revisions at longer intervals, it is not necessary 
to  rewrite  the  GNI  inventories  every  year.  The  GNI  Committee  suggested  at  its  July  2005 
meeting that countries should, as a general rule, update their GNI inventories within one year 
of a major benchmark revision, or, where no benchmark revision policy exists, at least every 
five years. 

At  the  moment  GNI  inventories  exist  for  the  15  old  Member  States  (as  well  as  the  EEA 
countries Norway and Iceland). These inventories date mostly from between 2001 and 2003 
(a  few  also  from  2004),  comprise  typically  between  300  and  500  pages  and  were  used  by 
Eurostat  in  the  last  round  of  GNP  controls  in  the  old  Member  States  (see  chapter  4  of  this 
report). 

The writing of GNI Inventories for the new Member States is currently well under way. This 
process has been financially supported by the Phare programme and there has been significant 
assistance to new Member States from old Member States. 

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Member States are required to draft their inventories according to an agreed structure in order 
to ensure that their contents are fully comparable. To this end, Eurostat has developed a new 
GNI  inventory  guide,  which  was  adopted  by  the  GNI  Committee  in  July  2005.  This  guide 
builds  on  an  earlier  version  from  1999,  as  well  as  on  the  experience  gained  from  the  latest 
inventories for the old Member States. 

As for timing, the GNI Committee agreed in November 2005 that all Member States should 
provide a new or updated version of their GNI Inventory by 31 December 2006 at the latest. 
At the beginning of 2006, the Commission wrote to Member States to remind them that any 
reduction  in  their  contributions  to  the  Communities’  budget  attributable  to  delays  in  the 
revision  of  GNI  inventories  could  give  rise  to  a  request  for  interest  for  late  payment  in 
conformity  with  Article  11  of  Council  Regulation  (EC,  Euratom)  n°  1150/2000  of  22  May 
2000 implementing Decision 2000/597/EC, Euratom on the system of the Communities’ own 
resources.9 

Improving  the  quantitative  description  of  GNI  calculations:  Process  tables  and  the  tabular 
approach 

Accuracy  and  exhaustiveness  are  key  elements  for  high  quality  GNI  data.  Both  the  GNI 
Committee and its predecessor, the GNP Committee, have made great efforts to improve the 
measurement and assessment of accuracy and exhaustiveness of national accounts data. 

In 1999 the GNP Committee set up a Task Force to review all relevant aspects of accuracy 
assessment  in  the  basic  data  sources,  to  examine  the  feasibility  of  accuracy  assessment  in 
national  accounts  ,  and  to  make  recommendations  for  a  possible  extension  of  the  reporting 
requirements  for  the  GNI  data  for  the  fourth  own  resource.  The  outcome  of  this  Accuracy 
Task Force has been a set of recommendations on the compilation of so-called Process Tables 
which  are  a  tool  to  describe  the  quantitative  dimension  of  the  specific  steps  in  the  GNI 
compilation process from the source statistics to the final national accounts aggregate.  

This Process Table approach was subsequently tested by ten Member States. The experience 
obtained  from  those  tests  was  used  to  refine  the  recommendations  further  and  to  draw  up  a 
Process Table compilation guide, which was approved by the GNI Committee at its meeting 
in July 2005. At the same meeting, Eurostat suggested that all Member States should compile 
Process  Tables  as  a  minimum  at  each  benchmark  revision  and  integrate  them  in  their  GNI 
inventories. 

Eurostat  has  also  been  working  on  the  so  called  tabular  approach  to  exhaustiveness,  a  tool 
which  can  provide  additional  quantitative  information  for  the  assessment  of  GNI  data.  This 
approach was developed within Phare projects with the then candidate countries and provides 
a complete, consistent and practical framework for ensuring exhaustiveness and comparability 
of the accounts. It can be seen as complementary to the process tables as it provides further 
detail on the exhaustiveness adjustments already described in the process tables. 

The GNI Committee voiced broad support for the principle of the tabular approach at its July 
2005 meeting. There have, however, been concerns about the significant additional workload 
which would result from the introduction of this approach.  

9 

OJ, L 130, 31.5.2000, p. 1. Regulation as last amended by Regulation (EC, Euratom) No 2028/2004 (OJ 
L 352 of 27.11.2004 p. 1.). 

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4. 

PROCEDURES AND CHECKS ON THE CALCULATION OF GNI 

Responsibilities within the Commission for verifying GNI 

According to Article 5(1) of the GNI Regulation, the Commission shall verify the sources and 
methods used by Member States to calculate GNI. The division of responsibilities within the 
Commission  for  checking  GNI  own  resources  has  been  agreed  in  a  memorandum  of 
understanding  between  Eurostat  and  DG  Budget,  signed  by  the  Director  Generals  of  both 
services in 2004, which is an update of a similar memorandum signed in 1992. 

Relation between GNI Committee and GNP Committee  

A joint statement of the GNP and GNI Committees was adopted at their joint meeting of 5-6 
November 2003. According to this statement the GNP Committee, considering that all GNP 
data  used  for  own  resource  purposes  are  derived  from  ESA95-based  national  accounts, 
accepts henceforth the opinion of the GNI Committee on ESA 79-based GNP data. 

Verification of the Member States’ GNI calculations 

Between 2002 and 2004 Eurostat undertook an intensive analysis of the statistical sources and 
methods  of  all  old  Member  States  plus  Norway  and  Iceland.  This  analysis  drew  on 
information gained both from the countries’ GNI inventories and from GNI control missions 
to their national statistical institutes.  

The aim of this exercise was to validate the reliability, comparability and exhaustiveness of 
the countries’ national accounts data for own resource purposes. It also had as an objective to 
determine  on  which  specific  points  the  Commission  needed  to  reserve  its  position  on  the 
Member States’ GNP data. Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000 
implementing  Decision  2000/597/EC,  Euratom  on  the  system  of  the  Communities’  own 
resources allows for the possibility of placing reservations on the GNP data of the Member 
States.  According  to  Article  10(8)  of  that  Regulation,  changes  to  GNP  shall  no  longer  be 
taken into account after four years following a given financial year, except on points notified 
within this time limit either by the Commission or by the Member State.  

As an outcome of the analysis of the Member States’ sources and methods, Eurostat was able 
to replace former general reservations on the old Member States’ GNP data for the years 1995 
to 2001 by specific reservations. In total, 68 specific reservations were set in 2004 and 2005, 
affecting  14  Member  States.  In  2005,  the  work  on  5  of  these  specific  reservations  could 
already be completed and the specific reservations could be lifted. The Member States have 
until September 2006 to address their specific reservations. 

These  specific  reservations  concern  GNP  and  its  components  and  cover  the  years  1995  to 
2001. The GNI Committee agreed in October 2005 to place in July 2006 a general reservation 
on the old Member States’ GNI data for 2002, which would otherwise become final for own 
resource  purposes  in  2006.  The  general  reservation  will  remain  in  place  until  Eurostat  has 
undertaken a new round of analysis of the updated GNI Inventories, which are to be provided 
by the Member States before the end of 2006. 

The GNI data of the new Member States for 2004, the year of accession, will remain open for 
own resource purposes until 2008. Eurostat will verify their sources and methods in the same 

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way as for the old Member States once their GNI Inventories have become available, also at 
the end of 2006. 

Annual  examination  of  and  formal  opinion  on  the  appropriateness  of  GNI  data  for  own 
resource purposes 

Article 5(2) of the GNI regulation requires the examination of the GNI data provided to the 
Commission each year by the GNI Committee. The Committee must then give its opinion on 
the appropriateness of Member States’ GNI data for own resource purposes. 

To  this  end,  Eurostat  conducts  a  thorough  annual  check  of  the  GNI  data  provided  by  22 
September. Several measures have been taken over the past three years to further improve the 
workflow,  checks  and  documentation  for  verifying  the  incoming  data.  Once  verified,  these 
data are presented to and examined by the GNI Committee which then adopts its opinion on 
the appropriateness of the data of the old Member States. Once the appropriateness of the data 
is established, the opinion, together with the data, is forwarded to DG Budget.  

The GNI Committee has not yet been in a position to form an opinion on the appropriateness 
of the GNI data of the new Member States in view of the fact that their inventories of sources 
and methods are not yet available to the Committee. 

Examination of the Commission’s controls by the European Court of Auditors 

The Commission’s work on controlling and verifying the Member States’ GNP and GNI data 
has  been  thoroughly  examined  by  the  European  Court  of  Auditors  on  an  annual  basis.  A 
detailed account of the Court’s activities with respect to the GNP and GNI own resource can 
be found in its Annual Reports on the Implementation of the Budget, as well as in a series of 
sector  letters  and  preliminary  findings,  and  most  recently,  in  the  latest  Annual  Report 
concerning  the  financial  year  200410.  In  this  report  the  Court  gives  an  positive  overall 
assessment, noting that “… on the basis of data supplied by the Member States, the VAT and 
GNI resources in all material respects had been correctly calculated, collected and entered in 
the Community accounts by the Commission” (see paragraph 3.53 of the Annual report). 

5. 

CONCLUSIONS 

The  transition  in  2003  from  the  GNP  Directive  to  the  GNI  Regulation  worked  well  and 
smoothly.  Adequate  steps  were 
legal  acts  and 
to 
recommendations  for  the  purposes  of  the  GNI  Regulation.  In  addition,  new  conceptual 
recommendations were developed in order to further harmonise GNI data among the Member 
States and work will continue in this field, with respect to, e.g., the recording of production 
from illegal activities as required under ESA 95. 

implement  and  update 

taken 

Measures have also been taken to ensure the timely and harmonised transmission of GNI data, 
to improve and update the documentation of methods and sources used to calculate GNI and 
its  components,  and  to  develop  a  better  quantitative  picture  of  the  accuracy  and 
exhaustiveness  of  GNI  figures.  The  new  Member  States  have  been  successfully  integrated 
into the GNI progress. 

10 

OJ, C301, 30.11.2005, p. 1. 

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On the procedural side, it has been ensured that the responsibilities within the Commission for 
verifying  GNI  data  have  been  clearly  defined  and  that  there  has  been  a  clear  institutional 
transition from the GNP Committee to the GNI Committee. Progress has been made on the 
examination  and  checks  of  the  GNI  calculations.  The  very  good  cooperation  between  the 
Commission  and  the  Member  States,  both  in  the  GNI  Committee  and  during  information 
visits  of  the  Commission  to  the  national  statistical  institutes  has  also  been  helpful  in  this 
process. 

In  the  coming  years,  the  Commission  and  the  GNI  Committee  will  continue  their  efforts  to 
maintain  and  further  improve  comparability,  reliability  and  exhaustiveness  of  GNI  data.  In 
2006 the old Member States will address any outstanding reservations on specific components 
of  their  GNP  data  for  1995  to  2000.  The  Commission  will  reserve  its  position  on  the  old 
Member States GNI data for 2002, pending a verification to be conducted on the basis of new, 
updated  documentation  to  be  provided  by  the  Member  States  by  the  end  of  2006.  The  new 
Member States are also due to provide a first full documentation of their methods and sources 
by the end of 2006. This will be followed by a thorough control by the Commission.  

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