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Business for Britain publishes inaccurate figures on the VAT contribution to the EU budget

BfB, one of the Eurosceptic campaign groups, is running with a story that “UK pays nearly a fifth of all VAT that goes into the EU budget”. Actually the UK pays 13.9% of the EU’s VAT contribution but accounts for 14.4% of the EU’s gross national income (GNI). In other words, the VAT contribution paid by the UK is marginally lower than what we might expect for its economic size.

Looking at the EU’s most recent published annual financial figures, which are from 2013 [the figures for 2014 still need to be audited], we see that on the tab for 2013, the total VAT resource for the EU (box G72) was €14,019 million and that from the UK (box AI72) was €2,527 million – or 18%. This does not take into account the UK rebate, which is calculated on the basis of the UK’s VAT and GNI percentage contributions.

The UK rebate in 2013 (AI74) was €4,329 million, of which 13.47% or €583 million was discounted from the VAT contribution. The real VAT contribution was therefore €1,944 million out of €14,019 million or 13.9%, some way below “nearly a fifth” and very reasonable when we consider that the UK accounts for 14.4% of the EU’s economy.

In its paper, BfB omits to note that the VAT precept is tiny and worth just 0.3% of VAT and that the EU budget itself is likewise tiny and worth just 1% of GDP or 2% of total public spending. It is time for a more open debate about the future of the EU budget.


Posted on Wednesday, May 27, 2015 at 10:31AM by Registered CommenterDr Giacomo Benedetto | Comments2 Comments

Reader Comments (2)

Response to the Centre for European Politics blog from BfB

It is claimed by Dr Benedetto that the UK’s net VAT contribution is lower per year as a percentage of EU VAT revenue and that therefore our research is inaccurate because it does not take into account the UK rebate.

Using the same statistics as Dr Benedetto, our research calculates only the amount the UK pays in per year which is in every case accurate. The rebate for each year is not a “discount” on each year’s payment, it is paid back based on the previous year’s VAT and GNI (“backloaded” in EU jargon), so to include it in a calculation of a VAT payment in would be misleading.

The gross VAT contribution of the UK remains nearly a fifth of the EU’s VAT revenue.

The rest of the paper still highlights some important aspects of EU VAT policy which require discussion. The inferences of CEP make no difference, for example, to the potential impact on consumers of VAT rises.

May 29, 2015 | Unregistered CommenterTim Philpott

In response to the comment by Mr Philpott:

I am glad that we are all reading from the same statistics.

"The rebate for each year is not a “discount” on each year’s payment, it is paid back based on the previous year’s VAT and GNI (“backloaded” in EU jargon), so to include it in a calculation of a VAT payment in would be misleading."

The official name, or jargon if you will, for the British rebate is actually the "British correction". It corrects what was understood as a relative over-payment by Britain in 1984. It counts not as spending but as revenue (or negative revenue since it is a refund) and is indeed paid in arrears. Since we are discussing revenue and since the British are keen to defend their correction, it is appropriate to expect that the value of the VAT-based correction be included in calculations of the VAT contribution. The correction does its job because, according to the figures of 2013, it reduced the British contribution to slightly less that what we should expect of Britain's economic size.

June 1, 2015 | Registered CommenterDr Giacomo Benedetto

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