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EU BUGETARY ISSUES II

EU BUGETARY ISSUES II. Łukasz Konopielko, PhD. Projekt : „Odpowiedź na wyzwania gospodarki opartej na wiedzy: nowy program nauczania na WSHiP”. Projekt współfinansowany ze środków Unii Europejskiej w ramach Europejskiego Funduszu Społecznego. Structure of expenditures.

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EU BUGETARY ISSUES II

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  1. EU BUGETARY ISSUES II Łukasz Konopielko, PhD

  2. Projekt : „Odpowiedź na wyzwania gospodarki opartej na wiedzy: nowy program nauczania na WSHiP”. Projekt współfinansowany ze środków Unii Europejskiej w ramach Europejskiego Funduszu Społecznego.

  3. Structure of expenditures • 1960s-1980s CAP accounted for circa 80% of EU budget. Only non-cofinanced expeditures, financed with no multi-annual programme. • First Financial Perspective (aka Delors I) 1988-1992. Repated attempts of the EU to reduce the share of CAP in favour of other policies. Budget ceiling 1,2% of the EU GNP. • 1988- CAP 60%, structural expenditure 17%, R&D 2,5%. • 1992 – CAP 56%, structural expenditure 25%, R&D 4,5%.

  4. Delors II Financial Perspective • 1993-1999. By 199 CAP dropped to 47%, structural expenditure up to 36%, internal policy 6% and also external expenditures had risen to 7%. Maximum ceiling raised to 1,27% of EU GNP (Dlors required 1,37%!). • An attempt to compensate partially short-term effects of fiscal discipline imposed by Maastricht Treaty (entered into force in 1993) – Cohesion Fund in favour of the poorest countires of the EU. • Substantial financial assistance to the then candidate countries of Eastern Europe in support of their effort for joining the EU, mostly directed at improving administrative capacity of the candidate countries.

  5. Agenda 2000 • Santer Commission FP 2000-2006 known as Agenda 2000. • Three substantial reforms: CAP, simplification and and concentration of structural expenditures in the poorest areas, strengthening of the pre-acccession stratedy. • However, CAP reform only partially undertaken due to the lack of political support. • In this framework by the end of 2006 budget was supposed to spend 43% on CAP, 36%-structural expenditures, 5% on external expenditures and 8% on research (this time for UE-25).

  6. Comparison of FP over time Source: Altamonte, Nava (2005)

  7. FP 2007-2013 • Major assumptions: • completion of the internal market to help in achieving the broader objective of sustainable development; • •completion of an area of freedom, justice, security and access to basic goods in order to promote “the political concept of European citizenship”; and • projection of a coherent role for “the EU as a global partner”. • Net contributors: UK, France, Germany, Austria, Sweden and the Netherlands

  8. FP 2007-2013 • Change of the structure of FP from its 8 headings (agriculture, structural operations, internal policies, external action, administration, reserves, pre-accession, post –enlargement compensation) into: sustainable growth (competitiveness and cohesion), sustainable managemen and protection of natural resources, citizenship&freedom &security, global partner, residual administration.

  9. FP 2007-2013 • After 2013 move to five-year cycle. • Current system has performed relatively well from the financial point of view, but has been criticised on the grounds of insufficient transparency for EU citizens, limited financial autonomy, and coplexity and opacity. • 3 main candidates to replace GNI contribution: tax on corporate income, genuine VAT resource or energy tax.

  10. FP 2007-2013 in numbers • Total 1,025,035 mln EUR at 2004 prices • 2007: 44,6% sustainable growth (only 9,1% competitiveness), natural resources 42,8% (agriculture 32,5%), global partner 8,5%, administration 2,6%. • 2013: 48,4% sustainable growth (16,3% competitiveness), natural resources 36,5% (agriculture 26,7%), global partner 9,9%, administration 2,8%. • Volume: 133,5 in 2007, 158,4 in 2013 (mld EUR)

  11. Own Resources (ORD) • Continuous attempt to marry financial autonomy and sufficiency of own resources. • Treaty of Rome – budget should be fully financed via direct contributions from member states. So, lack of financial autonomy of the EU budget the member states.

  12. ORD cont. • Luxembourg Council (1970): three resources (a) agricultural and sugar levies (from 1971), (b) custom duties (introduced 1971-5), (c) VAT (fully implemented in 1978). • 1984 – Fontainebleau Council – UK rebate • 1988 – Delors I – fourth resource aka GNP resource

  13. TOR • Traditional own resources: revenues of Common External Tariff, sugar production and stocking levy. • Custom duties are withheld by national customs authorities and transferred directly (after deduction of agreed collection fee for the given member state) • 70s-80s TOR used to represent about 50% of EU budget. 2013 no more than 10%.

  14. VAT resource • Introduced progressively. Computed by applying a common EU VAT rate to a VAT base commonly calculated across each EU country. Marginal resource to balance. • If the calculated VAT base exceeds 50% of GNP, VAT rate is applied to 50% of the GNP. Common VAT rate is 0,5%. • Still diversity between member countries with respect to common VAT base.

  15. VAT resource cont. • As exceptions exist, the VAT rate is not applied to the VAT actually cashed but to a VAT base recalculated by eliminating the financial impact of the exception. • VAT resource is therefore a share of the VAT that would be cashed by a given country if the VAT base were totally harmonised and no exception were in place. • No clear link between VAT paid by citizens and VAT paid into the EU coffers.

  16. GNP resource • From 1988 on. Effect of enlargements (Greece, Portugal and Spain - 60% of per capita EU average income). • Marginal resource ie. its amount is equal to the shortfall between the total expenditure and the revenues raised by the first three revenues. • This means that the texpayers of the GNP resources are the governments and not citizens directly. Lack of EU autonomy.

  17. Other revenues • Surplus of the previous year • Interest due from members on late payments • Fines and other sanctions • Taxes on EU civil servants’ wages and pensions. • Increasing importance of „allocated revenues” which do not go to the budget but to specific beneficiaries.

  18. Assessment of revenue side • Resource adequacy and sufficiency – no expenditure has to be postponed because of lack of resources. • Equity of gross contribution – proportionality of budget contribution to contibutive capacity with one notable exemption ie. UK • Transparency and simplicity (no UK) • Cost efficiency – only 25 taxpayers! • Financial autonomy -???

  19. Marbella effect Houdini effect

  20. Projekt : „Odpowiedź na wyzwania gospodarki opartej na wiedzy: nowy program nauczania na WSHiP”. Projekt współfinansowany ze środków Unii Europejskiej w ramach Europejskiego Funduszu Społecznego.

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