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Budget correction mechanisms

An overview of the budgetary correction mechanisms introduced over the course of the years to compensate certain Member States for their financial contributions to the 2014-2020 EU budget.

EU Member States’ contributions to the EU budget are calculated based on their relative economic wealth, as measured by their Gross National Income (GNI). In other words, the richer the country, the larger its contribution to the EU budget. This ensures solidarity and fairness on the revenue side of the EU budget.

In the past, some Member States felt that they were paying too much towards the EU budget, compared to others, even if based on objective economic criteria. Measures were taken to correct (compensate) financial contributions that appeared excessive, including:

  • the 'UK rebate' – the UK was reimbursed by 66% of the difference between its contribution and what it received back from the budget. The cost of the UK rebate was divided among EU member countries in proportion to the share they contribute to the EU's GNI. However, since 2002 this was limited to 25% of their normal financing share for Germany, the Netherlands, Austria and Sweden.
  • For the period 2014-2020 only, Denmark, the Netherlands and Sweden benefited from gross reductions in their annual GNI contribution of EUR 130 million, EUR 695 million and EUR 185 million respectively. Austria benefited from a gross reduction in its annual GNI contribution until 2016.
  • For the period 2014-2020 only, reduced VAT call rates for Germany, the Netherlands and Sweden were fixed at 0.15% (normal call rate is 0.30%).

A high-level group on Own Resources was established in 2014 to examine how the system of financing the EU budget could be made more transparent, fair, simple and democratically accountable. Its final report and recommendations on the “Future Financing of the EU” were published on 17 January 2017. In line with the recommendations, the Commission proposed to modernise and simplify the existing Own Resources system and diversify the sources of revenue in the Multiannual Financial Framework (the EU's long term budget) 2021-2027.

With the withdrawal of the United Kingdom, the associated budgetary rebate ended. The same is true for the rebates on the United Kingdom rebate that have been granted to some Member States. Rebates related to reduced call rates for the Value Added Tax-based Own Resource and the lump sum reductions for contributions based on gross national income automatically expired at the end of 2020.

30 OCTOBER 2018
European Union Public Finance (5th edition, 2014)
(5.22 MB - PDF)

High-level group on own resources

Information on the high-level group chaired by Mario Monti to make the post-2020 EU revenue system more transparent, accountable, and fair.