Financing the European Union. Commission report on the operation of the own resources system

The present report was adopted by the European Commission on 14 July 2004. It presents the Commission's analysis and assessment of the current system of financing of the European Union's budget and the resulting conclusions on how to improve the operation of the EU financing system. The report and the related legislative proposals are part of the overall package of Commission proposals for the next financial framework of the European Union, covering the period 2007-2013.

To briefly summarise the conclusions of this report, the current financing system has provided the EU with stable and sufficient revenue. However, there is virtually no direct link between the financing of the budget and EU citizens. Instead, the budget is in practice almost entirely financed by national contributions from Member States, which is far from the original notion of EU 'own resources' established by the first own resources decision of 1970. This tends to encourage a narrow perception of each Member State's benefit from EU membership in terms of 'net budgetary balances' from the budget, instead of focussing on EU citizens' common concerns and the general goals to be achieved through EU policies. Finally, the financing system has grown increasingly and unnecessarily complex, largely because of the current mechanism of correcting budgetary imbalances. To improve the system of financing of the EU budget, the report draws two main conclusions: In the long term, the share of tax-based own resources should increase. To this end, the Commission intends to prepare in due time a roadmap to introduce a genuinely tax-based own resource by 2014 and calls on the Council to discuss the proposed options. As a short-term solution to the issue of excessive budgetary imbalances, the current UK correction should be replaced by a generalised mechanism in favour of any Member State that fulfils the relevant criteria.