Background
4.Under the current Own Resources Decision (Council Decision of 31 October 1994 (94/728/EC, Euratom)) the Community budget is financed primarily from own resources, consisting of:
	customs duties, including those on agricultural products;
	sugar levies;
	the yield from applying a notional rate of VAT, of 1%, to an assessment basis in each Member State which is “capped” at 50% of gross national product (“GNP”); and
	a fourth resource based on shares in GNP, the rate of which is determined by what is required (given all other revenue) to balance the budget.
5.The new decision agreed by the Council of Ministers on 29 September 2000 amends the current arrangements for VAT based contributions by reducing the maximum call-up rate to 0.75% in 2002 and 2003 and 0.50% thereafter (thereby increasing Member States’ GNP based contributions).
6.Provision is also made for an increase, from 10% to 25%, in the proportion of Traditional Own Resources, ie customs duties and sugar levies, retained by Member States against collection costs (also increasing Member States’ GNP based contributions).
7.The new decision provides for the continuation of the abatement mechanism whereby the United Kingdom benefits from a correction in respect of budgetary imbalances. But the financing arrangements of the correction are changed to reduce the amount borne by Germany, Austria, Sweden and the Netherlands. In addition, provision is made for the United Kingdom to forgo the “windfall” gains it would have received from the changes referred to in paragraphs 5 and 6 above and those which would accrue at the time of enlargement from the switch in payments to acceding states from “pre-accession aid” to “structural funds” and other expenditure which is subject to the UK correction. Similar treatment of a “windfall” was provided for by Article 4(2) of the current Decision.
8.The new Decision has to be approved by all Member States in accordance with their national procedures before it can enter into force. It will take effect from 1 January 2002 except for the increase in the collection costs and the provisions regarding the abatement mechanism which will take effect from 1 January 2001.