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Draft Report on the Fact-Finding Mission of the Budgetary Control Committee to Germany Berlin, Mecklenburg-Western Pomerania, Hamburg 3

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Draft Report on the Fact-Finding Mission of the Budgetary Control Committee to Germany Berlin, Mecklenburg-Western Pomerania, Hamburg 3 Directorate-General for Internal Policies of the Union Directorate for Budgetary Affairs Secretariat of the Committee on Budgetary Control Brussels, 22 April 2016 Draft Report on the fact-finding mission of the Budgetary Control Committee to Germany Berlin, Mecklenburg-Western Pomerania, Hamburg 3 - 5 November 2015 (As endorsed by CONTon XXXXXXXX, the report was not voted) B-1047 Brussels - Tel +32 2 28 43379 - Fax 0032 2 28 44907 F-67070 Strasbourg - Tel +33 3 88 1 72257 - Fax 0033 3 88 1 79976 Conclusions The effectiveness of the European Parliament's Committee on Budgetary Control political efforts can be further increased if it stays in regular contact with its national counterparts. The current own-resource system is complex and would benefit from simplification. The CONT delegation fully supported the findings in the Special Report 11/2013 on Gross National Income (GNI) data issued by the European Court of Auditors (ECA). The German "VAT gap" (the difference between the theoretical tax liability according to the tax law and the actual revenue collected) is estimated at 11,2 % in 2013; the percentage amounts to EUR 24,873 million. Financial engineering instruments are an attractive source of finance in a competitive business environment European legislation in the area of structural funds is often considered to be too complex and unclear. Cooperation between different national and European bodies working on security risk analysis in trade has proven very important. Recommendations National parliaments should be encouraged to support national declarations for the implementation of European funds with the view to establishing a single audit chain. National parliaments should support the European Parliament's endeavour to hold the Council to account. A more accountable, transparent, simple financing system of the EU budget needs to be established. The CONT delegation reiterated its demands on GNI data as voted in the 2013 Commission discharge resolution. Member States should increase their administrative cooperation in EUROFISC The use of Intermediate Bodies (IB) and multitude of different instruments should be avoided as they increase the risk of error. Management (MA) and Audit Authorities (AA) should be asked for concrete proposals which legal provisions should be simplified (Done by letter from the Chair to the respective MAs and AAs). OLAF should strengthen its coordinating role in the cooperation between different national and European bodies working on security risk analysis in trade 2 1) Introduction In its 2013 Commission discharge report1 the European Parliament (EP), based on reports from the European Court of Auditors (ECA)2, observed that "6. Issues a reservation concerning the way Member States' GNI contributions have been calculated due to deficiencies as regards the Commission’s verification of data; recalls that the Court of Auditors concludes that the Commission's verification of GNI data was not sufficiently structured and focused; (...) 58. Demands that the Commission to ensure that Eurostat's and Member States' data are identical, as the indicator of GNI represents the key benchmark not only for Union revenue but also for expenditure; 59. Recalls the criticism formulated by the Court of Auditors in its Annual Report for 2012 as regards the lack of effectiveness of the Commission's verification of GNI data (see Annual Report for 2012, point 2.41); stresses that the prolonged use of general reservations and the excessive duration of the verification cycle of GNI data used for own resources can lead to budgetary uncertainty, as has been highlighted by the discussions between the Member States about the draft amending budget No 6 to the general budget 20141; 60. Regrets the fact that certain Member States did not anticipate that it will result in an increase of their budgetary contribution, despite the fact that they were aware of the changes in the statistical methodology to calculate the GNI contribution since spring 2014; Against the backdrop of these observations the Committee on Budgetary Control (CONT) decided to have a closer look at the calculation, collection and management of own resources in Germany. CONT also decided that, while in Germany, the delegation should verify which measures German authorities had taken to improve the implementation of structural funds previously under reservation in the Annual Activity Reports (AAR) of the Commission's directorates general. In this context it is noteworthy to recall Parliament's view as expressed in the 2013 Commission discharge report: "184. Regrets that faulty first-level-checks by national management and control systems remained a prime source of errors; is deeply concerned by the fact that Member States seem to be less scrupulous when spending Union funds compared to the way they spend their national budget while they have an important responsibility on implementing correctly and lawfully the Union budget when they are responsible for the management of Union funds; (...)" The fact-finding mission took place from 3 to 5 November 2015 and followed the programme as outlined in the annexe. The delegation met with Members of the German Bundestag discussed the calculation, collection and management of own resources with the Federal Ministry of Finance and the regional authorities in Hamburg and verified the implementation of selected operational programmes of structural funds in Berlin, Mecklenburg-Western Pomerania and Hamburg. 1 P8_TA(2015)0118, adopted on 29 April 2015 2 See the ECA Annual Report 2012 point 2.41 and also the ECA Special Report (SR) 11/2013 3 2) Background 2,1) Own resources3 Article 311 of the Treaty on the functioning of the European Union states that “the Union shall provide itself with the means necessary to attain its objectives and carry through its policies. Without prejudice of other revenue, the budget shall be financed wholly from own resources”. In addition, article 323 makes clear “the European Parliament, the Council and the Commission shall ensure that the financial means are made available to allow the Union to fulfil its legal obligations in respect of third parties”. Traditional own resources consist of custom duties, agricultural duties and sugar and isoglucose levies which result directly from the existence of a unified customs area and are collected by Member States. Moreover, the Member States are authorized to retain a share of the collected amount as collection costs, for the 2014-2020 period this share will amount to 20% as opposed to 25% during the 2007-2013 period. VAT-based own resource is a complex calculation based on a theoretical harmonised VAT base statistically computed for each Member State. Currently, the VAT base is not fully harmonised across Member States as derogations continue to exist and different types of VAT rates are present. Therefore, this VAT resource is not levied directly on the final consumers (who actually bear the VAT burden) but on the net VAT revenue collected, corrected and adjusted in order to obtain a harmonised VAT base. In other words, this resource comes from national budgets. Moreover, the capping mechanism in place on this resource (currently 50% of GNI) directly transforms it into a GNI-based resource for the Member State concerned (e.g. in 2014: five Member States were concerned). GNI-based own resource is a fixed percentage of Member States' GNI. Initially created to play the role of balancing the EU budget, this resource has grown to represent more than two thirds of the total revenue, around 74% in 2013. Gross national income (GNI) data are macroeconomic aggregates resulting from Member States statistical computation. Computation includes a large number of different components to be measured using the best available statistical sources and methods. Computation of the GNI for the own resource purpose have to comply with the requirements of the European System of National Accounts (ESA95). The European Commission is in charge of the verification of the GNI data provided by Member States in order to ensure that their contributions to the EU budget are correct. Even though the GNI own resource is a balancing resource, any overstatement or understatement of the GNI of a particular Member States will directly affect the respective contributions of the other Member States. Finally, other revenue, which is not called own resources, comes from fines to companies breaching EU competition law or other EU laws, contributions of non-EU countries to specific EU programmes and taxes on EU staff. 3 Policy Department Budgetary Affairs, Control challenges in the EU’s own resources system, April 2015, p 1-2 4 EU resources in % of total EU resources 2014 Finally, other revenue, which is not called own resources, comes from fines to companies breaching EU competition law or other EU laws, contributions of non-EU countries to specific EU programmes and taxes on EU staff. Source: European Commission - EU Budget 2014 - Financial Report 2,2) Structural funds programmes for the regions of Berlin and Mecklenburg-Western Pomerania Further down you will find the global figures on structural fund allocations in Berlin and Mecklenburg-Western Pomerania: European Regional Development Fund (ERDF) Operational Programme for Berlin 2007-20134: The main objective of the programme is to improve the international competitiveness of the city and its enterprises. In particular, the programme intends to create 11,200 jobs and provide support for 1,080 business start-ups and 550 R&D projects. The Programme has been divided into the following priorities: 1. Promotion of business competitiveness and start-ups 2. Innovation and knowledge-based economy 3. Integrated urban development 4. The environment 5. Technical assistance Total OP budget: EUR 1 700 744 230 Total EU contribution (from ERDF): EUR 875 589 810 4 http://ec.europa.eu/regional_policy/en/atlas/programmes/2007-2013/germany/operational-programme- berlin 5 The European Social Fund (ESF) Operational Programme for Berlin, Germany, 2007- 20135: The ESF programme for Berlin aims to boost the competitiveness of Berlin’s economy and help increase the employment rate.
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