Explanatory Memorandum to COM(2021)327 - Amendment of Regulation (EU, Euratom) No 609/2014 in order to enhance predictability for Member States and to clarify procedures for dispute resolution when making available the traditional, VAT and GNI based own resources - Main contents
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| dossier | COM(2021)327 - Amendment of Regulation (EU, Euratom) No 609/2014 in order to enhance predictability for Member States and to clarify ... |
|---|---|
| source | COM(2021)327  |
| date | 25-06-2021 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The purpose of this proposal is to lay down, in accordance with Article 322(2) of the Treaty on the Functioning of the European Union, provisions necessary to determine the methods and procedures for the making available of own resources.
This proposal responds to the European Council conclusions of July 2020 1 , which invited the Commission “to assess presenting a proposal for the revision of the Making Available Regulation in order to tackle some of the challenges with respect to making available own resources”.
This proposal aims to amend Council Regulation (EU, Euratom) No 609/2014 2 , which together with the Own Resources Decision 3 , establishes the procedures and deadlines for the making available to the EU budget of traditional own resources, Value-Added Tax-based own resources and Gross National Income-based own resources.
While Council Regulation (EU, Euratom) No 609/2014 has provided a solid and stable anchor for the financing mechanics of the EU, improvements to the existing provisions on the making available of own resources seem desirable namely in order to enhance predictability for Member States and to enact procedures for dispute resolution.
This proposal sets forth a carefully calibrated system to ensure regular and timely payments to the EU budget, which is essential for the smooth functioning of the EU system of own resources, the daily management of the Union budget and, in turn, the functioning of the EU as a whole.
One of the novelties is a review procedure for dispute resolution, which many Member States have asked for. The procedure codifies and strengthens the procedural rules applicable to the exchanges between the Commission and the Member States on the making available of own resources. The proposal also reflects the current practice of the payment under reservation, which opens the possibility to initiate an action for unjust enrichment against the Commission in accordance with Article 268 TFEU and Article 340(2) TFEU.
The proposal amends the rules for interest on late payments at different levels. Council Regulation (EU, Euratom) 2016/804 had already capped the increase in interest above the base rate to 16 percentage points. The present proposal extends the capping on the increase of interests to all cases. This addresses directly comments received from Member States about the very high interest rates provided for by Council Regulation (EU, Euratom) No 609/2014 for cases already known before 1 October 2016. The proposal also raises the threshold to waive interest from EUR 500 to EUR 1,000. In addition, a time limit of 10 years is introduced for keeping traditional own resources amounts in the B accounts.
In order to increase the predictability of national contributions to the EU budget, the proposal amends the annual balances adjustment and postpones the making available by Member States of the adjustments to year N+2. This was a request by many Member States to facilitate the national budgetary procedures.
In addition, the proposal includes a new Article that codifies the procedure of advance payments, again a request from Member States. The proposal also inserted the possibility for the Commission to establish a centralised own resources account.
The proposal is part of a broader package that includes Council Regulation (EU, Euratom) 2021/770 on the calculation of the own resource based on plastic packaging waste that is not recycled, on the methods and procedure for making available that own resource, on the measures to meet cash requirements, and on certain aspects of the own resource based on gross national income 4 and proposals for new own resources expected to be soon adopted, in line with the Interinstitutional agreement of 16 December 2020 5 .
Finally, Germany is proposed to be included as beneficiary of lump-sum corrections and the reference to the United Kingdom correction is deleted.
The Commission’s proposal is explained in more detail in section five below. This explanatory memorandum also includes in section six the Commission’s assessment of Council Regulation (EU, Euratom) No 609/2014 requested in the European Council conclusions of July 2020.
The making available provisions for all own resources should be merged at the occasion of their future revision including new proposed Regulations related to the making available of new own resources.
• Consistency with existing policy provisions in the policy area
The legal basis for this Regulation is Article 322(2) TFEU. The proposal complements other own resources legislation such as Council Decision (EU, Euratom) 2020/2053 6 , Council Regulation (EU, Euratom) 2021/768 7 , Council Regulation (EU, Euratom) 2021/769 8 and Council Regulation (EU, Euratom) 2021/770.
• Consistency with other Union policies
The management of the own resources relies on the correct application of other Union policies:
–Traditional own resources (mainly customs duties, trade defence duties and sugar levies) are linked to the customs union, the common commercial policy, and the common agricultural policy;
–Own resources based on Value Added Tax are linked to the Single Market and taxation policy.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The legal basis for this proposal is Article 322(2) TFEU.
• Subsidiarity (for non-exclusive competence)
Not applicable.
• Proportionality
The scope of the proposal is to enhance predictability for Member States in the making available of own resources to the EU budget and to enact procedures for dispute resolution. The proposal is consistent with the principle of proportionality because it does not go beyond what is necessary and is proportionate to achieve this objective satisfactorily.
• Choice of the instrument
Article 322(2) TFEU does not specify the instrument to be used 9 . However, Article 8(2) of Council Decision 2014/335/EU, Euratom and Article 9(3) of Council Decision (EU, Euratom) 2020/2053 require Member States to make the resources available to the Commission ‘in accordance with regulations’ adopted under Article 322(2) TFEU.
Furthermore, the proposal amends Council Regulation (EU, Euratom) No 609/2014 on the making available of own resources. In this context, the use of a Regulation as a choice of instrument is appropriate.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
In preparation for this proposal, the Commission submitted a detailed questionnaire to the Member States, the European Parliament and the European Court of Auditors to assess the substance and practical functioning of Council Regulation (EU, Euratom) No 609/2014. The replies to the questionnaire confirmed that said Regulation functioned generally well. However, Member States also put forward several requests for improvement.
The proposal was also informed by a comprehensive discussion of the system under Council Regulation (EU, Euratom) No 609/2014 held in the Council Working Party on Own Resources and by a series of bilateral meetings between the Commission and Member States, the European Parliament and the European Court of Auditors.
4. BUDGETARY IMPLICATIONS
The proposal aims to strengthen the functioning of Council Regulation (EU, Euratom) No 609/2014 and, in particular, improves the procedures for the making available of own resources by Member States. Therefore, the proposal contributes to improving the current own resources system.
When compared to Council Regulation (EU, Euratom) No 609/2014, the proposal would not change the human and administrative resources required. However, the extension of the capping on the increase of interest to all cases will lead to a decrease of interest revenue collected for the EU budget. Its financial impact, based on reference amounts of the past years (as from the entry into force of Council Regulation (EU, Euratom) 2016/804) is estimated at EUR 27.5 million/year.
5. OTHER ELEMENTS
• Detailed explanation of the specific provisions of the proposal
The application of the own resources legislation, including the methods and procedures for making available own resources, is discussed on a regular basis in the Advisory Committee on Own Resources.
The Commission proposal can be summarised as follows:
Chapter I and II on ‘General provision’ and ‘Accounts for own resources’
No amendments are made in these chapters.
Chapter III on ‘Making available of own resources’
Under Article 9(1) the possibility is inserted for the Commission to establish a centralised own resources account. Currently, only Member States keep these own resources accounts. The Commission should in the future be able to modernise the management of accounts opened in its name. The reduction in the number of bank accounts used for collection of own resources will bring efficiency and allow pooled approach to cash management.
Under 10a(2) on making available the VAT and GNI-based own resources, a specific paragraph is added to allow advance payments on a case-by-case basis. The provision ensures that any cost associated with the advance payment will be borne by the Member State making it.
Article 10b(5) postpones the date of making available the adjustments to the VAT and GNI-based own resources of previous financial years to the first working day of March of the year following that in which the Commission informed Member States of these amounts.
Article 10b(7) defines the period when Member States may request the Commission to review the making available of the VAT-based own resource, while Article 13(5) defines this period for traditional own resources.
In order to prevent the accumulation of very high amounts of interest, Council Regulation (EU, Euratom) 2016/804 introduced a capping on the increase of the interest rate to 16 percentage points for late payment of own resources. That capping applied to late payment interests of own resources that were due after the date of entry into force of that Regulation – 1 October 2016, or were due prior to that date, where those own resources only became known to the Commission or to the Member State concerned after that date. That rule is contained in Article 12(5), third subparagraph of Council Regulation (EU, Euratom) No 609/2014. The proposal extends the capping on the increase of interest to cases to which the current capping does not apply. However, the capping will not apply to any amount of interest that has already been notified to a Member State before the entry into force of this proposal.
Under Article 12(3), it is also proposed to increase the threshold for waiving interest from EUR 500 to EUR 1,000.
Under Article 13(2) fifth subparagraph, for irrecoverable amounts, a general time limit for amounts to be taken out of the separate account is introduced to ensure that the cases in the separate accounts are regularly reviewed.
Finally, Articles 6 and 10a are aligned with the new Own Resources Decision to include Germany as beneficiary of lump-sum corrections and the reference to the United Kingdom correction has been deleted from both articles.
Chapter III bis on ‘Payment under reservation and review procedure’
A new Chapter III bis is added. It provides under a new article 13a the possibility for Member States to make available amounts under reservation. This option is codifying current practice.
A new Article 13b introduces a review procedure in case of manifest disagreement between a Member State and the Commission. This new procedure provides for clear deadlines and obligations for both the Member States and the Commission. It ensures a constructive dialogue on the disputed amounts in question and aims to facilitate reaching an agreement between both sides.
6. ANNEX
• Commission assessment of Council Regulation (EU, Euratom) No 609/2014
In line with the European Council’s mandate, the Commission has assessed Council Regulation (EU, Euratom) No 609/2014 on substance, bearing in mind the need to guarantee the legality and regularity of the own resources payments. This is particularly important also in view of the upcoming new own resources.
Notwithstanding the overall largely positive track-record of the functioning of that Regulation, Member States have asked for changes in several areas. In the course of the discussions in the Council Working Party on Own Resources during the last two years, particular attention has been drawn to:
·Applicable interest rules for belated payments
·Conditional payments and Member States’ rights of defence
·Advance payments of own resources
·Derogations on making available under Article 13(2), second subparagraph
·Assessment of write-off cases
·Adjustments of the GNI-based and VAT-based own resources
·Merging provisions on making available own resources
In its review, the Commission assessed in detail all the issues that Member States raised regarding the functioning of the making available of own resources and reached the conclusions explained below. These conclusions formed the amendment proposal that the Commission has adopted.
Contents
The budget of the EU depends on payments made on time. Interests for belated payment are a powerful incentive for that purpose. The Court of Justice of the European Union has many times, most recently in its ruling C-575/18 P, confirmed that the obligation to pay default interest is inseparable from the obligation to make the own resources available to the Commission.
A significant decrease of the amounts of interest due is noticeable since the entry into force of the capping on the increase of interest rate on 1 October 2016. Before that date, the interest rate accrued without any ceiling as long as the principal was not paid. With the introduction of the capping, the increase in interest became limited to 16 percentage points for the entire period of delay. A sample of 22 cases involving capping shows a total decrease of MEUR 9 in interest due as compared to the method applicable before the capping. In these cases, Member States have been released from paying an amount of late interest equivalent to 83% of the amount of interest that has been actually requested.
However, the capping on the increase of interest is applicable for cases after 1 October 2016 only. For cases already known before 1 October 2016, the capping does not apply. This resulted in several cases where the amount of interest due was quite high. An extension of the capping to all cases is associated with a moral hazard risk but it seems nonetheless useful to simplify the currently rather complex system.
Conditional payments and Member States’ rights of defence
For what concerns the Member States’ rights of defence and judicial protection, the recent Court judgment in case C-575/18 P confirms that the existing own resources legislation already affords Member States effective rights of defence. However, in the interest of clarity and transparency, it is useful to set clearer time-limits for the dialogue and exchanges between the Commission and the Member States in case of disagreement.
Council Regulation (EU, Euratom) No 609/2014 does not contain a provision allowing for the advance payment of own resources. However, there have been cases, namely involving the late adoption of amending budgets (e.g. AB8/2013, AB6/2016 and AB6/2018) where Member States paid, after having requested and received the Commission’s agreement, their national contributions in advance of the due date. In those cases, the Commission has not objected to the payments if specific conditions were respected. In the interest of legal certainty, the Commission proposes expressly providing for this possibility.
Article 13 of Regulation No 609/2014 provides for a procedure, known as “write-off procedure, to monitor Member States' potential financial responsibility for irrecoverable amounts of traditional own resources over EUR 100,000. The last amending Council Regulation (EU, Euratom) 2016/804 introduced in Article 13(2), second subparagraph the possibility for Member States to be released from the obligation to make available to the Union's budget amounts that prove irrecoverable due to deferred entry in the accounts or notification of customs debts, in order not to prejudice criminal investigations affecting the financial interests of the Union. Since the changes introduced in 2016, no Member State has presented a write-off case to the Commission based on Article 13(2), second subparagraph. The Commission continues to monitor carefully the developments in this regard, but no changes seem necessary or warranted for now.
The ”write-off” procedure under Article 13 of Council Regulation (EU, Euratom) No 609/2014 monitors Member States' potential financial responsibility for irrecoverable amounts of traditional own resources over EUR 100,000. Under this procedure, the Commission issues its opinion on whether the traditional own resources became irrecoverable for reasons not attributable to the Member States. The purpose of the Commission's examination of the write-off reports is to assess the degree of diligence shown by the Member States in carrying out their efforts to establish and recover from the economic operators the traditional own resources (customs duties). The Commission has always strived to give its comments on the so-called write-off reports in a timely manner. Article 13 i of Council Regulation (EU, Euratom) No 609/2014 requires the Commission to issue its comments within six months as soon as the necessary information is available. Currently, this is the only legal deadline for the Commission, which has always respected it.
However, the Commission acknowledges that the assessment of individual write-off cases frequently requires repeated exchanges with Member States that could be accelerated by joint efforts of Member States and the Commission. More importantly, Member States’ requests for review of disputed cases following the first Commission assessment have so far not been subject to legal deadlines, and accumulated sometimes considerable delays. In this light, the Commission proposes additional binding deadlines for communication with the Member States.
Currently, Member States are required to make available the adjustments to the VAT and GNI-based own resources of previous financial years (“balances”) on the first working day of June of the year n+1. There is an immediate redistribution of the overall amount of adjustments among Member States according to their respective shares in the GNI-based own resource to avoid that Member States pay larger amounts upfront and only get their share of the redistribution of the total amount of the adjustment months later. These annual adjustments are entirely neutral to the EU budget but may have significant financial implications for Member States. Several Member States have requested changes to the procedure to improve predictability and facilitate their national budget procedures. It is appropriate to propose a corresponding amendment proposal, shifting the making available of the adjustments by Member States to the following year, even though it is recognised that this will also correspondingly delay the cashing of negative adjustments by Member States. Member States have not raised any objections to this delay.
The new Own Resources Decision under approval in Member States already includes a new own resource, the plastics-based one, and the corresponding making available Council Regulation [MAR2, no 2018/0131] has been proposed and is under consideration by the Council and the European Parliament.
In line with the inter institutional agreement from 16 December 2020, the Commission intends to make proposals on a digital levy, a carbon border adjustment mechanism and a revised EU Emissions Trading System as well as an accompanying proposal to introduce new own resources on that basis by June 2021 with a view to their introduction by 1 January 2023.
The making available provisions for all own resources should be merged at the occasion of their future revision including new proposed Regulations related to the making available of new own resources.