Lucas has asked us through the form of EOM explains due to the way in which the European Union is financed in order to later offer subsidies and aid to different sectors.
The economic autonomy of the European Union dates back to 1970, when the European Council decided that it was necessary to provide the supranational organization with a budget that it completely controlled. Since then, the organization’s income has increased to reach 144.8 billion euros in 2018. To achieve this sum we can speak of several sources from which the EU receives income, among which are the so-called “own resources”, which They represent 97% of the total in 2018.
What the EU calls “own resources” consists of three elements. The first would be the fees applied in customs to goods from third countries or subject to particular treaties, which amount to 15% of the Union’s income. It is worth mentioning that the States that collect these fees keep 20% for collection expenses. These resources are made available to the European Commission and, in case of delays, sanctions are applied, increasing the interest to be paid. Previously, sugar contributions were also counted in this item, but these stopped being paid in 2017 as a result of the reforms of the Common Agricultural Policy.
On the other hand, there is also a part of the VAT collected by the States – a tax that has been harmonized in all EU countries to meet common criteria, although not all States impose the same tax rate – that is transferred to the Union European. Although only 0.3% of the total VAT received is sent, this item contributed 12.2% of the Union budget in 2017; The figure has decreased drastically compared to the figures of the 80s, when VAT contributed 60% of the budget.
Third, the largest source of revenue – around 70% – is the percentage paid by each Member State, which varies depending on its GDP and the financial year. It should be noted that the contribution of each country to the three previous sources varies, given that certain correction criteria are applied to homogenize the size of the contribution of the different Member States in relation to what they receive from the Union.
Beyond its own resources, the 3% of the remaining capital that the EU receives comes from other procedures such as taxes applied to the salaries of the institution’s public employees or fines administered to companies that do not comply with European regulations.
With its budget, the organization finances various projects, either through direct or indirect investments. Indirect financing from the European Union is distributed across five main funds, each earmarked for a specific area: the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF), the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF). The budget of the funds is administered nationally and the capital they move amounts to 80% of the institution’s budget. In addition, direct financing includes subsidies that the EU grants and contracts awarded through public tender.
Finally, it is worth mentioning the multiannual financial framework (MFF), which defines the Union’s economic strategy for periods of between five and seven years. The current MFP is for the period 2014-2020 and establishes objectives such as allocating 36% of the budget to rural and agricultural areas or 34.2% to regional policy issues, among others. With the new European legislature that has just begun, a new MFF for the years 2021-2027 must be approved, for which there are already proposals proposed by the previous European Commission.
To expand: “Brief instructions manual to understand the European Union”, Diego Mourelle in 2019