Reform of the EU system of own resources: State of play

Written by Alina Dobreva.

The tentative agenda for the forthcoming European Commission meeting of 20 June 2023 includes a proposal on a second basket of new own resources, with the title ‘An adjusted package for the next generation of own resources’. The proposal would be adopted together with the revision of the 2021-2027 multiannual financial framework (MFF). In the roadmap for new own resources annexed to the interinstitutional agreement (IIA) of 16 December 2020, the decision on the second basket was initially envisaged for 2024. The European Parliament approved the first basket back in November 2022. In a resolution of 10 May 2023, it called for the swift adoption of the second basket. The Council has yet to start debating the first basket of new own resources.

Background

Efforts to amend the existing own-resources system are based on the longstanding objective of boosting the EU budget’s ability to respond to growing demands and tackling newly occurring crises without increasing own resources based on gross national income (GNI). Another aim is to secure additional resources to cover the budgetary expenditure of Next Generation EU (NGEU) debt repayment.

European Commission proposals

The adoption of the 2021-2027 MFF and the NGEU in December 2020 was linked to two acts: the Own Resources Decision (EU, Euratom) 2020/2053 introducing a new own resource based on non-recycled plastic waste in 2021 and laying the groundwork for deeper reform of the own resources system; and the IIA on new own resources, which included a roadmap for the introduction of new own resources in three steps (see Figure 1 below).

In December 2022, 6 months later than initially scheduled in the roadmap, the Commission proposed the first basket of new own resources. It comprised revenues deriving from an extended emissions trading scheme (ETS), a carbon border adjustment mechanism (CBAM), and a share of the reallocated profits of very large multinational companies based on Pillar 1 of the OECD/G20 agreement. The proposal was to introduce the new own resources gradually as of 1 January 2023.

The Commission proposal for an adjusted package for the next generation of own resources is scheduled to figure on the Commission’s weekly agenda of 20 June 2023, together with the revision of the 2021‑2027 MFF. This is a year earlier than the date the IIA initially put forward for the second basket.

European Parliament and Council positions

Parliament has called repeatedly for a basket of new EU own resources that is ambitious, balanced, transparent and fiscally neutral for citizens. It has advocated the introduction of genuine own resources linked to EU policies and objectives, and a reduction of the GNI-based share of resource in the revenue mix.

On 23 November 2022, Parliament adopted a resolution approving the proposal for a Council decision amending Decision (EU, Euratom) 2020/2053 on the system of own resources of the EU, i.e. the first basket of new own resources.

On 10 May 2023, Parliament adopted a resolution, ‘Own Resources: A new start for EU finances. A new start for Europe’, emphasising its long-held position regarding the need to reform the EU budget’s revenue policy and the risks of detrimental effects on the EU’s future if this reform were to be blocked or postponed. Parliament calls for diversification of the EU’s financing sources and a new revenue balance. It also calls for an examination of the possibility of introducing new own resources, such as: corporate taxation (BEFIT); an EU ‘fair border mechanism’; a financial transaction tax (FTT); a tax on crypto-currencies; own resources based on statistics such as the gender pay gap, bio-waste or food waste; and revenue sources other than own resources. The proposed revision of the Own Resources Decision has to be adopted unanimously in Council after consulting the European Parliament. The Council has not yet started debating the decision relating to the first basket of new own resources. Reportedly, Council might wait for the arrival of the second basket, to be able to work on both baskets together. Decisions on own resources can only enter into force once they are approved by all Member States in line with their constitutional requirements.

Figure 1 – Roadmap to the introduction of new own resources

Read this ‘at a glance’ note on ‘Reform of the EU system of own resources: State of play‘ in the Think Tank pages of the European Parliament.