The imminent withdrawal of the UK from the European Union opened an intense and serious debate on the future of the EU. On the 1st of March, 2017 the White Paper on the Future of Europe represents the first official step towards the reforming of the EU. 

There are many different issues that have to be addressed; one of the most important being: the future finances and budget of the European Union. The withdrawal of the UK will signify the loss of an important partner and contributor to the financing of the EU policies and programs. The need to modernize the structure of the Multiannual Financial Framework (MFF) has been emphasized by Gunther Oettinger, the Commissioner for Budget and Human Resources and by Corina Cretu, the Commissioner for the Regional Policy in the reflection paper on the future of EU finances, published on the 28th of June, 2017. Both Commissioners have pointed out two different types of interventions that have to be made in order to modify the structure of the MFF.

The first method of intervention concerns the duration of the financial framework. Previous MFFs have almost always extended over 7 years, the last one included (2014-2020). Nowadays, however, five years are the minimum duration prescribed by the Treaty of Lisbon. Reducing the current 7 year duration to 5 could have a relevant impact on the investments, which would require more time for planning and implementation. However, a shorter duration of the MFF would bring more flexibility and would make it easier to adjust to the unforeseen needs and developments. Another option would be to structure the MFF on a 5+5 years basis, with an obligatory mid-term revision at the end of the fifth year.

Another important aspect is the concern with the issue of the revenue of the MFF. The issue has been resolved in the Final Report on the Future Financing of the EU, drafted the High-level group on own resources, chaired by the former Italian prime minister, Mario Monti (December 2016). Nowadays, the EU budget is mainly funded from the EU’s own resources, which represent 98% of the total budget. There are three kind of resources that derive from the EU: the “traditional own resources” which consist mainly of custom duties on imports from outside the EU (12% of the total budget); own resources, based on the value added tax (VAT), which represent the 11% of the total budget; own resources based on the GNI (80% of the total budget). In Commissioner Oettinger and Cretu’s opinion, the MFF should rely less on the “GNI own resources”. This could be done by finding new financing resources. Among different possible solutions, the Commissioners stress the importance of an ever closer harmonization of the different fiscal policies of the member states. Progress in tax-coordination in particular, in the field of corporate taxation and the taxation of financial transactions would facilitate some forms of “own resources”. Another possible option would be to establish other forms of taxation, like a common energy or environmental taxes that would also contribute to the global fight against climate change.

The Commission will present a proposal to reform the MFF by the middle of 2018.

 

Reflection Paper on the Future of EU Finances 

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