Opinion No 2/2006 on a proposal for a Council Decision on the system of the European Communities' own resources
Date: 2006-06-28
Institutions: European Court of Auditors
Subjects: Community budget, Member States' contribution, budget policy, budgetary equilibrium, own resources, transparency in decision-making

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on a proposal for a Council Decision on the system of the European Communities’ own resources

OPINION No 2/2006

(pursuant to the second subparagraph of Article 248(4) of the EC Treaty)

(2006/C 203/02)

THE COURT OF AUDITORS OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Commu-
nity and in particular Article 248(4), second subparagraph
thereof,

Having regard to the Treaty establishing the European Atomic
Energy Community and in particular Article 160c(4),

Having regard to the Council Decision of 29 September 2000 on
the system of the European Communities’ own resources (1),

Having regard to the Council Regulation of 25 June 2002 on the
Financial Regulation applicable to the general budget of the Euro-
pean Communities (2),

Whereas the Brussels European Council of 16 and 17 December
2004 took note of the presentation by the Commission of the
report on the operation of the own resources system as well as
the proposal to introduce a generalised correction mechanism (7)
and called on the Commission and the Council to continue the
examination of all issues arising in this connection, including a
possible simplification of the system,

Whereas the Brussels European Council of 15 and 16 December
2005 reached agreement (8), inter alia, that the own resources
arrangements should be guided by the overall objective of equity,
that these arrangements should therefore ensure, that no Mem-
ber State sustains a budgetary burden which is excessive in rela-
tion to its relative prosperity and that these arrangements should
accordingly introduce provisions covering specific Member
States,

Having regard to the previous opinions given by the Court of
Auditors on the system of the European Communities’ own
resources and its Opinion No 4/2005 (3) in particular,

HAS ADOPTED THE FOLLOWING OPINION:

Having regard to the Council’s request, dated 26 April 2006, for
the Court of Auditors’ opinion on the proposal (4) for a Council
Decision on the system of the European Communities’ own
resources,

Whereas the Fontainebleau European Council of 25 and 26 June
1984 concluded (5), inter alia, that expenditure policy is ultimately
the essential means of resolving the question of budgetary imbal-
ances; that, however, any Member State sustaining a budgetary
burden which is excessive in relation to its relative prosperity may
benefit from a correction at the appropriate time,

Whereas the Berlin European Council of 24 and 25 March 1999
concluded (6), inter alia, that the Union’s own resources system
should be equitable, transparent, cost-effective and simple and
that it must be based on criteria which best express each Member
State’s ability to contribute,

(1) OJ L 253, 7.10.2000, p. 42.
(2) OJ L 248, 16.9.2002, p. 1.
(3) Opinion No 4/2005 on a proposal for a Council Decision on the sys-
tem of the European Communities’ own resources and on a proposal
for a Council Regulation on the implementing measures for the cor-
rection of budgetary imbalances in accordance with Article 4 and 5 of
the Council Decision of (…) on the system of the European Commu-
nities’ own resources (OJ C 167, 7.7.2005, p. 1).

(4) COM(2006) 99 final of 8 March 2006.
(5) See Bulletin EC 6-1984.
(6) See Bulletin EU 3-1999.

I. INTRODUCTION

1.
The Commission proposes a new Council decision on the
system of the European Communities’ own resources. Following
its adoption by Member States (9), it would replace the Council
Decision of 29 September 2000 which is at present in force.

2.
The Commission proposal aims to implement the agree-
ment on the 2007 to 2013 Financial Perspective reached by the
Brussels European Council on 15 to 16 December 2005 (10).

This agreement does not fundamentally change the cur-
3.
rent system; in particular, the correction granted to the United
Kingdom in respect of budgetary imbalances (the UK correction)
is maintained, along with the reduced financing of the correction
benefiting, Austria, Germany, the Netherlands and Sweden.

(7) COM(2004) 501 final of 14 July 2004.
(8) See paragraph 6 of the Presidency Conclusions (Council Document
15914/1/05, REV 1, CONCL 3 of 30 January 2006) refering to Coun-
cil Document 15915/05 CADREFIN 268 of 19 December 2005,
and in particular paragraph 77 thereof.

(9) In accordance with Member States’ respective constitutional require-

ments pursuant to Article 269 of the Treaty.

(10) See Council Document 15915/05 CADREFIN 268 of 19 December

2005.

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The calculation of the UK correction will be adjusted to
4.
take enlargement into account. The United Kingdom will progres-
sively participate in the financing of the costs of enlargement,
except for Common Agricultural Policy market expenditure.
However, for the period 2007 to 2013, the additional contribu-
tion from the UK will not exceed a maximum amount of 10,5 bil-
lion euro at 2004 prices.

5.
In addition, special arrangements are introduced. Austria,
Germany, the Netherlands and Sweden will benefit from reduced
rates of call on the VAT resource. The Netherlands and Sweden
will, furthermore, benefit from a reduction in their annual GNI
contributions. These reductions will apply for the period 2007 to
2013 only.

6.
As requested by the European Council, the Commission
proposal is accompanied by a Commission working document
on the calculation, financing, payment and entry in the budget of
the correction of budgetary imbalances in favour of the United
Kingdom.

7.
The European Council has agreed that changes to the cur-
rent system of own resources should enter into force from no
later than the beginning of 2009. They should take effect from 1
January 2007, and be applied retroactively if necessary.

The Court has examined the proposal in the light of the
8.
principles for the Communities’ system of own resources laid
down by European Councils since 1984. The Court has also taken
into account its previous opinions (1) and the results of its audit
work related to the current system of own resources.

II. GENERAL OBSERVATIONS

9.
The overall objective of the Brussels European Council of
15 and 16 December 2005 was to strive for equity and to avoid
a situation where a budgetary burden would be excessive in rela-
tion to the relative prosperity of a Member State. The Court notes,
however, that:

(a) no criteria have been laid down to determine on an objective
basis whether a budgetary burden is excessive and when a
Member State should benefit from a correction;

(b)

there is no mechanism for monitoring, over time, whether a
budgetary burden continues to be excessive and whether it is
still justified that a Member State benefit from a correc-
tion (2); and

(c)

there is no mechanism which would allow Member States
other than those explicitly mentioned in the proposal to
qualify for a correction (2).

However other serious shortcomings in the system analy-
11.
sed by the Court in its previous opinion (3) have still not been
addressed. These shortcomings lead to numerous problems, in
particular regarding administration, consistency, complexity of
the system and lack of transparency.

12.
The proposal adds further complication through the
increased number of special arrangements for certain Member
States. On the whole, therefore, the new provisions tend to be
even more complex and opaque than the existing system.

III. SPECIFIC REMARKS

The Court welcomes the Commission’ proposal that sig-
13.
nificant statistical changes to the compilation of GNI should apply
for own resources purposes. As the Court has already pointed
out (4), this would avoid situations where GNI figures used for
own resources purposes do not match published national figures,
thus preserving transparency.

14.
The concept of allocated expenditure needs to be clari-
fied. Article 4 of the proposal merely mentions allocated expen-
diture, but the concept is only developed in the Commission
working document on the UK correction (5). The Court recalls its
observations in paragraphs 29 to 31 of its Opinion 4/2005,
which are still valid in respect of the definition of allocated
expenditure.

15.
The Court considers that the inclusion of provisions on
the calculation, financing, payment and entry in the budget of the
correction of budgetary imbalances in favour of the United King-
dom in a Commission working document is not compatible with
Article 279 (6) of the EC Treaty and infringes the principle of
transparency.

IV. CONCLUSIONS AND RECOMMENDATIONS

16.
The rules and arrangements in the proposed new Coun-
cil Decision for the system of the European Communities’ own
resources tend to be even more complex and lacking in transpar-
ency than the existing system. The proposal moves further away
from an own resources system based on clear and generally
applied mechanismss, towards national contributions negotiated
on a country by country basis.

10.
The Court acknowledges that an effort has been made to
streamline the own resources decision, namely by abolishing the
so-called VAT ‘frozen rate’.

(1) See Opinion No 4/2005 (OJ C 167, 7.7.2005, p. 1), Opinion
No 7/2003 (OJ C 318, 30.12.2003, p. 1) and Opinion No 8/99 (OJ C
310, 28.10.1999, p. 1).

(2) See paragraph 14 of Opinion No 4/2005.

(3) See in particular paragraphs 6 to 15 of Opinion No 4/2005.
(4) See paragraph 23 of Opinion No 4/2005.
(5) See point 3.2.
(6) Article 279(2) stipulates that ‘the Council, acting unanimously on a
proposal from the Commission and after consulting the European Par-
liament and obtaining the opinion of the Court of Auditors, shall
determine the methods and procedure whereby the budget revenue
provided under the arrangements relating to the Community’s own
resources shall be made available to the Commission (…).’

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The Court acknowledges that the Commission proposal
17.
reflects the result of complex negotiations between the European
Parliament, Council and Commission and within the European
Council and is considered as an interim solution.

The Court welcomes the fact that the Commission has
18.
been mandated to undertake a full, wide-ranging review of the
own resources system, on which it is to report in 2008/2009. The
Court draws attention to the repeated experience that thorough
reform of the Communities’ system of own resources is very dif-
ficult to achieve if the discussion of such a reform is directly com-
bined with negotiations on financial ceilings and amounts to be

spent for Community policies under a multiannual Financial Per-
spective. The Court therefore welcomes the fact that the review
clause agreed by the Brussels European Council of 15 and 16
December 2005 allows the preparation and adoption of an over-
all reform of the own resources system well in advance of the
expiry of the new Financial Perspective.

19.
The Court calls on the Commission to reconsider the
legal form of the document setting out provisions on calculation,
financing, payment and entry in the budget of the correction of
budgetary imbalances in favour of the United Kingdom.

This Opinion was adopted by the Court of Auditors in Luxembourg at its meeting of 28 June
2006.

For the Court of Auditors
in the absence of Hubert Weber
President
François COLLING
Member of the Court