The European Union by Simon Usherwood & John Pinder

Author:Simon Usherwood & John Pinder
Language: eng
Format: epub
ISBN: 9780192536853
Publisher: Oxford University Press
Published: 2017-11-06T00:00:00+00:00

The total expenditure in the budget for 2017 was €157.9 billion, or 1.04 per cent of EU GNP. This has to remain below 1.23 per cent of GNP unless that ceiling is raised by a decision ratified by all the member states; and the financial perspective for the years 2014–20 keeps spending below 1.23 per cent of GNP in each year.

‘Own resources’

Unlike international organizations that depend on contributions from their member states, the EU’s revenue from taxes is a legal requirement under the treaty, subject, like other treaty obligations, to the authority of the Court of Justice. This is to prevent member states from holding the EU to ransom by withholding contributions. The consequences of such behaviour are demonstrated by the financial state of the United Nations (UN), weakened for many years by the refusal of Congress to sanction payment of the US contribution—ironically enough, since the failure of American states to pay their contributions in the 1780s under the Articles of Confederation was a powerful argument in favour of the establishment of the US federal constitution. The same argument influenced the EC’s founding fathers to make payment of tax revenue to the Community a legal obligation.

The EU has no physical means of enforcement should a member state not hand over the money. But the rule of law has been of sufficient value to the member states to be respected by them.

Initially the EEC’s tax revenue, called in the treaty ‘own resources’ to underline the point that they belong to the EC not the states, comprised the takings from customs duties and agricultural import levies. But these were not enough to pay for the CAP, and the EC was allocated a share of value-added tax at a rate of 1 per cent of the value of the goods and services on which VAT is levied (see Chart 5).

Chart 5. Sources of revenue, 2015.

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