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The EU uses taxpayers' money to finance policies that all Member States and their national parliaments define in the European Treaties by mutual agreement.

Where does the EU gets its income from?

The EU budget is set based on income, which derives from the three following ways:

• Traditional Own Resources (TOR). It consists on duties that tax on imports of products coming from third countries.
• Value Added Tax (VAT). It is the application of a uniform rate of VAT harmonized incomes from each Member State.
• Gross National Income (GNI). Application of a uniform rate (0.73%) to the Gross National Income of each Member State. It is only used to complete the necessary resources, and it represents the bulk of revenues.

Source: The EU budget at a glance. Publications

Payments charged against Community budget are limited to a total amount equivalent to 1.24% of GDP of the entire European Union. This percentage is established by Member States in the Inter-institutional Agreement on budgetary discipline and sound financial management. The current Inter institutional Agreement and financial framework (2007-2013) was concluded between the European Parliament, the Council and the Commission on 17 May 2006 for the period 2007-2013.

Which are the expenditures of the European Union?

The costs and investments of the European Union are set out in the treaties and can not show deficit, which means that income must cover the total cost of all activities.

Community projects are based in very specific objectives and priorities, and are part of the different community policies, which are strictly based on the Treaties. The Treaties establish the competencies or areas in which EU institutions can act alone or in collaboration with Member States. The actions and projects funded by the EU budget reflect the priorities fixed by EU countries at a given time. They are grouped into general categories of expenses (called “headings”) and into different policies subdivided into more than 200 activities.

How do they make community budget?

Each year, the Council and Parliament adopt the EU budget in a democratic manner. Annual budgets determine the lines of work, which are developed in a concrete way through the Calls for proposals published in the C series of OJEU and the contract notices published in Euroalert.net and in the supplement to the Official Journal of the European Union (S series)

Source: The EU Budget explained by the European Commission

The EU budget as a whole is published annually in the Official Journal of the European Union, like the corrections that are made throughout the year.

76% of the budget is spent under the so-called shared management between the European Commission and Member States and 22% is managed exclusively by the European Commission. In any case, the ultimate responsibility for implementing the budget lies with the European Commission.