How does Brussels stay afloat? Is there an EU tax or is Europe dependent on the generosity of its Member States?

How It Works: EU Budget – Who pays?

Where does the money come from  to fund the EU budget?

The short, but not so simple, answer  is mostly from you, the taxpayer.

But as there is no EU tax as such, the  question remains open to explanation.

The EU's founders wanted the  Community to be funded by its own tax.

One of the EU's predecessors,  the European Coal and Steel Community

was financed by a real community tax  levied on the steel and coal industry.

But despite regular calls for  a community tax system,

the EU is now almost entirely funded  by Member States' contributions.

Part of the EU's revenue is called  traditional own resources or TOR.

They are mainly trade tariffs  and customs duties from third countries.

That is the foreign taxpayers' contribution  to the EU to this day.

Next, a percentage of VAT collected in the  Member States is allocated to the budget,

but gross national income-based  own resources or GNI for short

Originally it was composed of  Common Customs contributions.

Then we had the VAT contribution.  This was the original one.

This was not enough  so a resource was created,

which was the one based on the gross  national income of the Member States.

In practice, this has increasingly become  a direct contribution by Member States.

Let's take two states of similar population  size but different financial muscle.

The Netherlands is one of the richest EU  countries, Romania one of the poorest.

GNI contributions represent  about 1% of gross national income.

For the Netherlands that amounts to  just over 4 billion euros in 2010.

So the Dutch are shouldering  about 4% of the entire EU budget,

whereas the Romanian contribution  amounts to just over 1%.

Even though the system  is hardly transparent for citizens,

states can address perceived unfair  imbalances in budget negotiations.

If the budget was financed  mainly through a direct tax,

and, let's say, if the Parliament  had the power to set this tax,

it would be much more difficult  to discuss the excess contributions or not.

That brings us to the debate about  the states that pay more than they get

and those that receive more than they  pay, but that's for another How It Works.