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Where does the money come from?

The European Union has its 'own resources' to finance its expenditure.

Legally, these resources belong to the Union. 

Member States collect them on behalf of the EU and transfer them to the EU budget.

Own resources are of three kinds (the figures below refer to the
forecasts for 2010).

•Traditional own resources (TOR) — these mainly consist of duties that
are charged on imports of products coming from a non-EU state. They
bring in approximately EUR 14.1 billion or 12 % of the total revenue


•The resource based on value added tax (VAT) is a uniform percentage
rate that is applied to each Member State’s harmonised VAT revenue.
The VAT-based resource accounts for 11 % of total revenue, or some EUR
14.0 billion..


•The resource based on gross national income (GNI) is a uniform
percentage rate applied to the GNI of each Member State. Although it
is a balancing item, it has become the largest source of revenue and
today accounts for 76 % of total revenue or EUR 92.7 billion
The budget also receives other revenue, such as taxes paid by EU staff
on their salaries, contributions from non-EU countries to certain EU
programmes and fines on companies that breach competition or other
laws. These miscellaneous resources add up to around EUR 1.4 billion,
i.e. about 1 % of the budget.

The total EU revenue for 2010 amounts to some EUR 141.5 billion.

Revenue flows into the budget in a way which is roughly proportionate
to the wealth of the Member States. The United Kingdom, Germany, the
Netherlands, Austria and Sweden, however, benefit from some
adjustments when calculating their contributions.

On the other hand, EU funds flow out to the recipients within the
Member States and in third countries in accordance with the priorities
that the Union has identified. Less prosperous Member States receive
proportionately more than the richer ones and most countries receive
more than they pay in to the budget.

All on  http://ec.europa.eu/budget/budget_glance/where_from_en.htm

AND?OR

Revenue in detail

Traditional own resources (TOR)

TOR are pure Community revenue, resulting directly from Community
legislation. It is, however, the Member States that must collect these
resources and that are responsible for making the corresponding
amounts available to the Commission. They retain a certain percentage
as a compensation for the costs of collecting them (25 %).

Member States are responsible for implementing Community customs
legislation and operating a framework of customs checks and controls
to ensure that they collect the correct amount of customs duties at
the right time. Failure to comply with the rules may lead to a
financial liability to the EU budget.

Via its on-the-spot inspections and other documentary controls, the
Commission seeks assurance that the Member States, responsible for
managing their collection and recovery procedures, comply with their
responsibilities. For this, the Commission uses a variety of measures
and actions (responsibility of Member States for errors by their
national administrations, follow-up of recovery by means of the
write-off procedure, monitoring of recovery by following up movements
in the so-called B-account that covers amounts that are challenged or
not secured, annual programme of compliance audits etc.).
The VAT-based own resource

The VAT-based resource relies in the first place on calculations made
by Member States' authorities in conformity, in particular, with
Council Regulation (EEC, EURATOM) N° 1553/89 on the definitive uniform
arrangements for the collection of own resources accruing from value
added tax. The Commission verifies the annual statements of the VAT
bases submitted by Member States in order to fix the amounts that each
Member State must pay to the budget. In this work the Commission is
guided by three principles:

•Transparency: it must be clear how the VAT base has been determined;
•Uniformity: so far as possible Member States must use identical
methods and draw on the same sources of information;
•Equity: each Member State must be treated the same.
VAT resources result from the application of a uniform rate of call
(0.30 % for all Member States; for the period 2007-2013 the call rate
of 4 Member States is reduced: for Austria to 0.225%, for Germany to
0.15%, for Sweden and the Netherlands to 0.10%) to a common tax base.
This base is a theoretical construct that compensates for the fact
that neither the VAT rates nor the list of goods and services covered
by VAT are harmonised at EU level. Each Member State sends an annual
statement showing the total VAT tax-base, including adjustments to
take account of variations in national VAT practices, to the
Commission by 31 July of the year following the year concerned. The
statement contains not only the figures but also information about
data, sources, methods and formulae used to establish and adjust the
base. After preliminary checks to verify the credibility and
plausibility of the figures, the Commission's control unit sends the
data to the unit that manages budget receipts.

Subsequently, each statement is the subject of an on-the-spot control
visit in the Member State concerned. It is now usual to control 2 or
(increasingly) 3 years at one time. The control is carried out by
officials of the Budget Directorate-General, usually supported by
officials from the Taxation Directorate-General and the Statistical
Office of the European Communities (Eurostat).

Following a control, the controllers draw up a report presenting their
findings and indicating in particular any reservations concerning the
figures or problems of sources or methodology, as well as cases where
it appears that Community law has been disregarded. The Member State
then sends its observations on the report, in which it either accepts
the Commission's findings and makes appropriate changes or contests
the findings. After analysis of these observations, the Commission's
controllers draw up a summary document that presents the resulting
state of affairs and lists any reservations that remain. These may be
the subject of continuing bilateral discussions and/or will be
re-examined during the following control mission. If no other solution
appears possible, the Commission may initiate infringement proceedings
against the Member State and if no agreement is reached the case may
go before the European Court of Justice.
The report, the Member State's observations and the summary document
are jointly discussed at the next available meeting of the Advisory
Committee on Own Resources, where representatives of every Member
State have an opportunity to examine and discuss the treatment of
other Member States. This is how respect for Community law and also
the principles of transparency, uniformity and equity are ensured.

In 2006 the Commission carried out 9 on-the-spot controls, 5 of them
in Member States that joined the EU in 2004, which were controlled for
the first time. In 2007 there will be 11 controls.

(See also the Commission’s Fifth report under article 12 of Regulation
(EEC, Euratom) No 1553/89 on VAT collection and control procedures).

The GNI-based own resource

The GNI-based resource is governed by Council Regulation (EC, EURATOM)
N° 1287/2003 of 15 July 2003 on the harmonisation of gross national
income at market prices (GNI Regulation). GNI is determined in
conformity with the provisions of Council Regulation (EC) N° 2223/96
on the European system of national and regional accounts in the
Community, which established the system known as ESA95. In the field
of the GNI-based resource, just as in that of the resource based on
VAT, the same principles of transparency, uniformity and equity apply.
In practice, much of the control work regarding gross national income
is carried out by national accounts specialists from Eurostat, in
close partnership with their colleagues from the Budget DG. Member
States have drawn up inventories of the sources and methods used to
calculate their national accounts under the current European System of
Accounts (ESA 95). All but one of these national inventories are
currently subject to reservations pending the resolution of questions
raised by Eurostat concerning certain items, or, in the case of one
Member State which was late in sending in its inventory, pending
detailed analysis. The analysis is supplemented by periodic
on-the-spot controls carried out by officials from Eurostat,
accompanied by colleagues from the Budget DG.

Each Member State returns an annual questionnaire presenting its gross
national income to the Commission by 22 September of the year
following the year concerned. These questionnaires are subject to a
rapid examination by Commission officials and are then formally
presented to the GNI Committee at a meeting held in late October or
early November, during which Member States confirm the accuracy of
their respective data in the presence of representatives of both
Eurostat and the Budget DG. The GNI Committee adopts a formal opinion
declaring that it considers the data to form a correct basis for the
determination of GNI-based budget contributions. The questionnaires
may subsequently be the subject of on-the-spot controls by the
Commission's staff. In addition to the controls that may be necessary
to clear up the remaining reservations concerning the ESA 95
inventories, it is clear that attention will increasingly focus over
coming years on the new Member States, who have been preparing, with
assistance from the Commission, for their budgetary responsibilities
in the field of national accounts.

Making available of own resources

Member States make available own resources to the Commission on a
monthly basis in line with the procedures and time limits laid down in
the Community legislation (Council Regulation (EC, Euratom) No
1150/2000 of 22 May 2000, as amended by Regulations (EC, Euratom) No
2028/2004 of 16 November 2004 and No 105/2009 of 26 January 2009).

Traditional own resources payments are based on the Member States'
actual collection of the duties and levies concerned. Member States
inform the Commission about the amounts collected by means of monthly
statements.

Member States' monthly payments relating to VAT and GNI resources as
well as the UK correction are based on the amounts entered in the
budget for the total year concerned. The Commission sends monthly a
letter of call to each Member State requesting the corresponding
funds.

Member States pay by crediting own resources to an account kept in the
name of the Commission with its Treasury or the body it has appointed.
These accounts are kept in Member States' national currency.

Any delay in crediting own resources to this account will give rise to
the payment of interest by the Member State concerned.

Other revenue

The part of the general budget not financed by own resources include
tax and other deductions from staff remunerations, bank interest,
contributions from non-member countries to certain Community
programmes (e.g. in the research area), repayments of unused Community
financial assistance, interest on late payments. There is also a
balance from the previous exercise that is mainly derived from the
difference between the outturn of own resources payments and
expenditure in the previous year.
In the 2010 budget, other revenue (not including the balance from the
previous exercise) amounts to around 1 % of total EU revenue.
http://ec.europa.eu/budget/budget_detail/revenue_detail_en.htm