EU To Return Taxes Paid By Member States

by Ulrika Lomas, Tax-News.com, Brussels

15 February 2002

The EU has announced that member states will receive a refund on their 2001 contributions to the Union's budget, which are fixed as a proportion of countries' own VAT receipts. If the Union's budget is under-spent, as was the case for 2001, the surplus is returned to countries according to a complex formula based on national GDP but which also takes their receipts into account.

The total refund for 2001, which will be paid through 2002 from May in the form of monthly deductions from budgetary contributions, is about 10 billion euros ($8.7bn). Germany will get the largest refund, of 2.34 billion euros, followed by Britain at 1.81 billion euros. Ireland, as a relatively small economy, will receive just 119 million euros, while Luxembourg, even smaller, a still handy 23 million euros. The total refund amount represents some 10% of member states' direct contributions left unspent in 2001.

"In 2002, member states' contributions to the European budget will be reduced by considerable amounts, which may have an effect on their budgetary positions and figure in the size of estimated 2002 deficits," said Budget Commissioner Michaele Shreyer.

Schreyer said she had decided to make the refund amounts public because of debates taking place in EU countries over their own budgetary priorities, pointing for example to France. "In concrete terms," she said, "France will have to pay 1.65 billion euros less (in 2002) than planned... and that will be good news" for the French authorities.

Schreyer said the 2001 surplus came mostly from the farm sector, which accounts for more than half of all EU spending, and where "the situation was better than envisioned" in the dairy sector, despite madcow and foot-and-mouth disease flare-ups.

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