EU Member States’ contributions to the EU budget are calculated based on their relative economic strength, as measured by their Gross National Income (GNI), thereby ensuring 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 is reimbursed by 66% of the difference between its contribution and what it receives back from the budget. The cost of the UK rebate is divided among EU member countries in proportion to the share they contribute to the EU's GNI. However, since 2002 this has been 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 benefit from gross reductions in their annual GNI contribution of EUR 130 million, EUR 695 million and EUR 185 million respectively (expressed in 2011 prices). 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 are 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 can 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 proposes to modernise and simplify the existing Own Resources system and diversify the sources of revenue in the next Multiannual Financial Framework 2021-2027.
With the withdrawal of the United Kingdom, the associated budgetary rebate will end. 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 will automatically expire at the end of 2020.
This presents an opportunity to simplify and reform the system, and to strengthen the alignment with Union policies and priorities. The Commission proposes to gradually eliminate all corrections on the revenue side as part of a fair and balanced budget package.