Explanatory Memorandum to COM(2015)447 - Amendment of Regulation 609/2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and the measures to meet cash requirements - Main contents
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| dossier | COM(2015)447 - Amendment of Regulation 609/2014 on the methods and procedure for making available the traditional, VAT and GNI-based own ... |
|---|---|
| source | COM(2015)447  |
| date | 14-09-2015 |
Contents
The Council and the Commission agreed on a joint declaration attached to the Council minutes of 26 May 2014 when the own resources legislative package, consisting of Decision 335/2014 on the system of Union’s own resources (the Own Resources Decision), Regulation No 608/2014 laying down implementing measures and Regulation No 609/2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements, was adopted.
The Own Resources Decision is the key legal instrument laying down the main elements of the system, such as the list of own resources and the ceilings for commitment and payment appropriations (hence the size of the Union’s budget). The implementing measures for the own resources system stem from two Articles of the Treaty on the Functioning of the European Union (TFEU):
– The newly introduced Regulation No 608/2014 laying down implementing measures is based on Article 311 i TFEU (introduced by the Lisbon Treaty) and currently contains rules on calculation and budgeting of the annual balance, and on control and supervision measures.
– Regulation No 609/2014, which is a recast of Regulation 1150/2000, is based on Article 322(2) TFEU and deals with the rules on making own resources available and the measures to meet cash requirements. It contains practical arrangements in respect of the establishment of traditional own resources, conservation of supporting documents, administrative cooperation, the applicable rate for the GNI-based own resource, accounts to be kept for own resources, the timing for making them available and for making adjustments and provisions concerning cash management and irrecoverable amounts.
Both Regulations will enter into force on the same day as Decision 335/2014 after this Decision has been approved by all Member States in accordance with their respective constitutional requirements. The package will apply retroactively from 1 January 2014.
In the above-mentioned joint declaration of 26 May 2014, the Commission committed to submit a proposal for Article 12 of Regulation 609/2014 in order to allow a revision of the procedure for calculating the interest on amounts made available belatedly. The declaration further indicates that the rate(s) of interest shall respect the principle of proportionality while ensuring a smooth functioning of the system to meet the cash requirements.
Apart from the interest rules this proposal based on Article 322(2) TFEU is addressing also the procedure for the annual adjustment of the VAT and GNI-based own resources as the most recent amendment introduced in the context of the unprecedented size of the adjustments in 2014 will no longer apply after the entry into force of Regulation No 609/2014.
In addition, some other clarifications and improvements to the current arrangements, mainly of technical nature, are proposed. They reflect the most recent experience and lessons learnt as regards the accounts for own resources, the management of Commission’s treasury resources in the first semester, the assessment of GNI data by the Commission (Eurostat), the impact of criminal investigations on the establishment and making available of traditional own resources and the reporting of irrecoverable amounts of traditional own resources.
The motivation for the amendments proposed by the Commission is presented hereafter.
Accounts of the Commission for own resources (Article 9 of Regulation No 609/2014)
According to Article 9 of Regulation No 609/2014 Member States have to keep an account for own resources in the name of the Commission with their Treasuries or appoint a body for this purpose. In practice, all Member States which have not opted for the Treasury have appointed the national central bank. Article 9 should reflect this practice by specifying that only central banks may be appointed. In addition, this will prevent the EU budget from being exposed to any potential financial risks linked with the Commission keeping own resources in accounts opened with commercial banks; such situation is to be avoided given the limitations imposed by this Regulation on the possibilities for the Commission to draw funds from the own resources accounts. In order to ensure consistency this amendment is also inserted in Article 6 of Regulation No 609/2014 dealing with the entry in the accounts and reporting and in Article 15 dealing with the execution of payment orders.
These accounts opened by the Member States in the name of the Commission pursuant to Article 9 of Regulation 609/2014, for the purpose of depositing EU own resources, until they need to be used by the Commission for payment, should not only be kept free of charges, but also free of interest (positive or negative). The purpose of this provision is to prevent losses for the EU budget.
Given the provisions of Article 14(1) of Regulation No 609/2014, which limit the possibility for the Commission to draw funds to the extent needed to implement the budget, any charge applied to those accounts would be equivalent to a reduction of the funds available to the EU budget. In this respect, negative interest should equally be avoided as it has the same negative effect as charges. The application of charges or negative interest to some of these Commission's accounts would also lead to unequal treatment of Member States as, in line with the principles of solidarity and joint financing of the EU budget, the other Member States have to compensate this loss through the GNI-based resource. Therefore, it is proposed that the Member State concerned should compensate the EU budget for any charge or negative interest applied to the account for own resources it has opened in the name of the Commission pursuant to Article 9 of Regulation 609/2014.
This amendment further ensures that the EU budget is not negatively affected by Decision 2014/337/EU (ECB/2014/23) of the European Central Bank of 5 June 2014 1 , providing for a negative interest rate which entails a payment obligation of the deposit holder to the relevant national central bank (NCB) including the right of that NCB to debit the relevant government deposit account accordingly, or by similar decisions by other EU central banks where EU own resources have to be kept in accordance with Article 9 of Regulation No 609/2014. The obligation to provide compensation should ensure that the cost of any negative interest already applied to accounts for own resources following this ECB Decision is not borne by the EU budget, i.e. by all Member States. In this context, it should be recalled that, so far, the Commission has not requested Member States to remunerate accounts for own resources in case of positive ECB deposit rates.
In the interest of legal certainty it should be clarified that the Commission’s own resources accounts referred to under Article 9 may only be debited on Commission’s instruction where the net amount of own resources due on a given date is negative (i.e. where a Member State is to receive funds). Any entries in this account shall be made in accordance with the above principle. This is an explicit clarification of already existing requirements.
Bringing forward monthly twelfths of VAT and GNI-based own resources (Article 10 i of Regulation No 609/2014)
Pursuant to Article 10 i of Regulation 609/2014, depending on the Union’s cash position, for the specific needs of European Agricultural Guarantee Fund (EAGF) payments, Member States may be invited to bring forward by one or two months in the first quarter of the year monthly twelfths of the VAT and GNI-based own resource.
In the last years, due to high monthly payments for European Agricultural Guarantee Fund (EAGF) and European Structural and Investment Funds (ESIF) in the first months of the year, the Commission has been repeatedly confronted with difficulties in implementing all payments timely due to temporary shortages of treasury resources amounting to up to EUR 6 billion during the first semester of the year. Therefore it should be possible that another twelfth can be brought forward in the first six months of the year if necessary, and this also for paying expenditure of the European Structural and Investment Funds (ESIF).This limited additional flexibility would help the Commission to comply with the regulatory requirements for payments.
Streamlining the annual adjustments to the VAT and GNI-based own resources (Article 10 i to (7) of Regulation No 609/2014)
Pursuant to Article 10 of Regulation No 1150/2000, the adjustment to the own resources based on VAT and GNI takes place every year on the first working day of December.
These adjustments vary from year to year and may be positive (additional payments required by Member States) or negative (amounts to be refunded to Member States). Under exceptional circumstances these adjustments may result in very high amounts. For Member States the obligation to make available such high amounts may represent a high financial burden which may cause a severe fiscal strain, particularly towards the end of the year. Similarly, the obligation for the Commission to refund high amounts, if the total amount of adjustments is negative, may lead to a difficult treasury situation at this period of the year.
As the data received in September/October 2014 demonstrate, adjustments may be exceptionally high for the GNI own resource because of major revisions made by Member States to their GNI data for previous years.
Therefore, upon a proposal by the Commission, on 18 December 2014 the Council adopted Regulation 1377/2014 amending Regulation 1150/2000 2 , allowing Member States, retroactively as of 30 November 2014, to make available the adjustments until the first working day of September of the following year in exceptional circumstances.
Regulation 1150/2000 as amended by Regulation 1377/2014 will be repealed once Regulation No 609/2014 enters into force, i.e. on the same day as Own Resources Decision No 335/2014 after this Decision has been approved by all Member States in accordance with their respective constitutional requirements. Therefore, the present amendment should also address the issue of VAT and GNI adjustments.
While the proposed amendment maintains the calculation method it modifies the timing for the communication and the due date for making available the adjustments. In addition, it addresses the issue of high negative adjustments.
The Member States have to transmit to the Commission in year n the VAT and GNI data for year n-1 and previous years in accordance with Article 7(1) of Regulation No 1553/89 and Article 2(2) of Regulation No 1287/2003. On this basis, the Commission will calculate the adjustments and the exact final amounts will be formally notified to Member States in January of year n+1.
At the same time the Commission would provide a calculation redistributing the total amount of adjustments among Member States, according to their respective share in the GNI of all Member States (“the GNI key”) of the budget of year n+1 3 . There will be no more amending budget to this effect as adjustments will be automatically and immediately redistributed. This is a major simplification of the current system.
The difference between the individual amount of the VAT and GNI adjustments for a given Member State and the result of the redistribution for that Member State, shall be entered in the own resources accounts under Article 9 on the first working day of June of year n+1. As Member States would be informed well in advance under the proposed procedure, there should be no more need for special rules for amounts which are exceptionally high. The new timing of the VAT and GNI adjustments will no longer coincide with the opt-out adjustment under Article 11 of Regulation No 609/2014 for Member States not taking part in the financing of a specific Union action or policy. For the opt-out adjustment, whose financial impact is limited 4 , the current due date is maintained, i.e. the first working day of December.
The EU national accounting rules are set out in the European System of Accounts (ESA 2010). These rules apply the accruals principle to the recording of economic flows – “when economic value is created, transformed or extinguished, or when claims and obligations arise, are transformed, or are cancelled”. Under ESA 2010, Member States’ VAT and GNI-based budgetary contributions are recorded as general government expenditure, as another current transfer under the dedicated category D.76, and impacting on the government deficit. Contributions returned to EU Member States are netted off these current transfers. The point of recording of the government expenditure impact of the adjustments to VAT and GNI-based own resources should be made when those amounts are irrevocably fixed and therefore they are due to be paid. Taking into account that it is proposed that the amounts are irrevocably fixed and due to be paid in year n+1, this is this year which should be relevant for statistical recording of the adjustments, as well as for the purposes of the Stability and Growth Pact.
Postpone time-barring of GNI data in the fourth year after a given financial year (Article 10(7) of Regulation No 609/2014)
Currently, Member States should provide the Commission with figures for aggregate GNI and its components by 22 September each year (Article 2(2) of Regulation No 1287/2003) while changes to GNI can only be taken into account until 30 September of the fourth year after a given financial year. Consequently, there is a very short period for assessing any changes transmitted in year n+4 in relation to year n. In order to ensure that GNI data for year n can still be verified and validated by the GNI Committee the limitation period under Article 10(7) of Regulation No 609/2014 should be extended from 30 September to 30 November of year n+4.
Accordingly, the minimum period under Article 3 of Regulation No 609/2014 for keeping supporting documents relating to the statistical procedures and bases referred to in Article 3 of Regulation No 1287/2003 should also be extended from 30 September to 30 November of year n+4.
Streamlining the structure of Article 10 of Regulation No 609/2014
Article 10 of Regulation No 609/2014 currently contains 9 paragraphs and more than 20 subparagraphs. In order to improve readability it should be split into 3 separate Articles, titles should be added to each of them and paragraphs should be numbered whenever appropriate.
Interest rate (Article 12 of Regulation No 609/2014)
The interest rate in Article 12 currently provides for a basic rate (ECB – or non-euro national central bank - main refinancing rate), a fixed annual increase by 2 percentage points and a variable increase by 0,25 of a percentage point per month of delay. The rate is applicable to the whole period of delay.
As the Commission, in the normal course of budget execution, cannot overdraw on its accounts, timely payment of own resources is essential. The current system has been instrumental in ensuring that the own resources needed for the execution of the budget are made available timely and in full 5 . The revised rules on interest should preserve this incentive. In addition, the uniformity of the rules should also be maintained in the interest of clarity and legal certainty.
In order to reinforce the smooth functioning of the system, namely that own resources are paid timely and in full, the fixed increase should be raised to 3,5 percentage points (this is inter alia the rate applicable to amounts to be recovered pursuant to Article 83(2)b of the Rules of Application of the Financial Regulation where the obliging event is not a public supply or service contract). This should ensure that payment of own resources is not withheld where the refinancing costs on money markets would be lower than the interest payable. The proposal should in particular prevent (short) delays in making available the monthly twelfths of the VAT and GNI-based own resources, which currently constitute more than 80 % of the EU budget revenue.
On the other hand, as the current rules may lead to very high interest rates for long time periods of delay, the maximum annual increase to the basic rate should be capped at 20 percentage points, the increased rate being applicable to the whole period of delay. This capping ensures proportionality as after 5,5 years of delay there will be no further increase in the interest rate. This amendment should address the main concern of some Member States as regards individual cases of very high interest rates due to long delays in the area traditional own resources. In fact, on the basis of the data on amounts of interest recovered in the last 5 years the 20 percentage points cap would result in a decrease of the interest due by Member States by more than 30 %.
The new rules shall be applicable to amounts of own resources which are due after the entry in force of the proposed Regulation. However, in order to ensure a smooth transition, the capping of the interest rate shall also apply where the amount of own resources became known to the Commission or to Member States only after the entry in force of the proposed Regulation. For example, for a case where an own resource which should have been made available in 2010, but becomes known only after the entering into force of the proposed Regulation (e.g. in 2018), the interest rate according to the current rules would apply, however the increase to the annual rate of interest would be subject to the capping at 20 percentage points.
In order to avoid confusion the Commission will clearly specify the applicable interest rules when sending letters calling for interest after the entry into force of the proposed Regulation.
Possibility to release Member States from financial responsibility in cases of deferred entry in the accounts or deferred notification of the customs debt in order not to prejudice criminal investigations (Article 13(2) of Regulation No 609/2014)
Pursuant to Article 13(2) of Regulation No 609/2014 Member States shall be released from the obligation to place at the disposal of the Commission the amounts corresponding to established entitlements of traditional own resources which prove irrecoverable for (i) reasons of force majeure or (ii) for other reasons which cannot be attributed to them.
The new Union Customs Code 6 (UCC), which enters into force on 1 May 2016, allows Member States to defer the notification and the entry of the customs debt in the accounts until such time as it no longer prejudices criminal investigations 7 . Indeed, promptly notifying debtors suspected of criminal activities may hinder the fight against fraud and the dismantling of criminal networks. Moreover, Article 325 TFEU requires Member States to take the same measures to counter fraud affecting the financial interests of the Union as for their own financial interests. Covert investigations are effective and necessary measures for protecting both the financial interests of the EU and of the Member States.
However, there is no explicit rule in the own resources legislation on whether traditional own resources which cannot be recovered due to such late notifications can be waived. The UCC regulates the relationship between importers and national customs authorities, while the own resources legislation deals with the relationship between Member States and the Commission.
In order to promote effective protection of the financial interests of the Union and to take into account the newly introduced provisions of the UCC it is proposed to introduce an explicit provision allowing to release - under certain conditions to be observed strictly - Member States from their financial responsibility for amounts of traditional own resources that may prove irrecoverable due to deferred notification of customs debts in order not to prejudice criminal investigations and fight against fraud. In order to accept that in such cases amounts are irrecoverable “for other reasons which cannot be attributed” to the Member State concerned (the point below deals with the threshold for reporting) the Commission would verify in particular whether:
– the criminal investigations were justified to protect both the EU's and Member State's financials interest and were carried out diligently;
– the loss of own resources was strictly due to the delayed notification or entry in the accounts required by the criminal investigations, and
– national duties and taxes were not subject to a more favourable treatment than traditional own resources.
Raising the threshold for irrecoverable amounts to be reported (Article 13 i of Regulation No 609/2014)
The threshold for Member States to report to the Commission cases of traditional own resources declared or deemed irrecoverable under Article 13 i of Regulation 609/2014 should be increased from EUR 50 000 to EUR 100 000 in order to reduce administrative burden for the Member States and for the Commission. This amendment does not affect the definition of a “case” to be reported, namely that the report shall cover all entitlements established as a result of the findings of the same clearance or post clearance control to the same operator and relating to the same irregularity or the same type of goods where, regardless of their individual amount, the total amount of these entitlements declared or deemed irrecoverable exceeds EUR 100 000.
As the obligation of Member States to report pursuant to Article 5 of Regulation No 608/2014 fraud and irregularity cases of over EUR 10 000 to the OWNRES database remains, such cases may still be inspected by the Commission and subsequently lead to payments to the EU budget.
Clarification on exceptional management of cash resources solely in the case of default on loans (Article 14 i of Regulation No 609/2014)
Pursuant to Article 14 i of Regulation 609/2014, in the sole case of default under a loan contracted or guaranteed pursuant to Council regulations and decisions, the Commission may, if no other measures provided for by the financial arrangements applying to these loans, draw in excess of its assets in order to service the Union’s debts, irrespective of the conditions of paragraph 2 of that Article.
Following the entry into force of the Lisbon Treaty, depending on the competence under which guarantees or loans have been granted, some of the regulations and decisions previously adopted by the Council are now adopted by both the European Parliament and the Council. This is the case for example for decisions of the European Investment Bank (EIB) on EIB financing operations carried out under the external mandate with EU guarantee, or for Macro-Financial Assistance to third countries (which are however primarily covered by the External Guarantee Fund). While the scope of this provision shall not be extended, it should just be clarified that it covers the same legal acts which were covered originally.