C-81/79

JUDGMENT OF 27. 11. 1980 — JOINED CASES 81, 82 AND 146/79

of him within the meaning of the systems. Consequently the principle of second subparagraph of Article 3 (4) equality does not require account to of the aforesaid regulation. be taken of possible inequalities which 2. The tax system of the Communities is may become apparent because the an independent system which is Community and national systems applied irrespective of the national overlap.

In Joined Cases 81, 82 and 146/79

1. DENISE SORASIO-ALLO, an official of the Commission of the European Communities, of 68 Avenue Emile Duray, Brussels 1050,

2. CECILIA AIMO-CAMPOGRANDE, an official of the Commission of the European Communities, of 21 Spaltlaan, Overijse 1900 (Belgium),

3. ALAIN-PIERRE ALLO, an official of the Commission of the European Communities, of 68 Avenue Emile Duray, Brussels 1050,

SORASIO v COMMISSION

amount of the applicant's remuneration and, on the other hand, for an order that the Commission do pay the sums corresponding to the overpayments of tax from the date when she took up her appointment until date of execution of the judgment to be delivered;

In Case 82/79:

On the one hand, for annulment of the implied decision rejecting the complaint lodged on 30 October 1978 and, to the extent necessary, the decision calculating the taxable amount of the applicant's remuneration when she advanced to Step 5 of Grade A 7 (on 1 October 1978) and, on the other hand, for an order that the Commission do pay the sums corresponding to the overpayments of tax from the date when she took up her appointment until the date of execution of the judgment to be delivered;

In Case 146/79:

On the one hand, for annulment of the decision discontinuing the additional abatements in respect of dependent children and of the implied decision rejecting the complaint made in this connexion on 16 May 1979 and supplemented by letter dated 21 June 1979 and, on the other hand, for an order that the Commission do pay the sums corresponding to the over- payments of tax from 1 April 1979 until the date of execution of the judgment to be delivered,

Facts and Issues

The facts of the case, the course of the (2) 'Dependent child' means the procedure, the conclusions and the legitimate, natural or adopted child submissions and arguments of the parties of an official, or of his spouse, who may be summarized as follows: is actually being maintained by the official.

I — Facts and written procedure (6) Not more than one dependent-child allowance shall be paid in respect of A — The rules applicable any one dependent child within the meaning of this article, even where the parents are in the service of two different institutions of the three 1. The second paragraph of Article 3 European Communities". (4) of Regulation (EEC, Euratom, ECSC) N o 260/68 of the Council of 29 February 1968 laying down the conditions and procedure for applying B — The facts the tax for the benefit of the European Communities (Official Journal, English Special Edition 1968 (I), p. 37 provides 1. Denise Sorasio-Allo, the applicant in that: Case 81/79, is an official of the defendant in Grade A 5. Her husband, Jean-Pierre Alio, the applicant in Case "An additional abatement equivalent to 146/79, is also an official of the twice the amount of the allowance for a Commission and is in Grade A 6. Cecilia dependent child shall be made for each Aimo-Campogrande, the applicant in dependent child of the person liable as Case 82/79, is also an official of the well as for each person treated as a defendant and is in Grade A 6. Her dependent child within the meaning of husband, Gianluigi Campogrande, is also Article 2 (4) of Annex VII to the Staff an official of the Commission. Regulations." Mr and Mrs Alio have two children born in 1967 and 1974. Mr and Mrs Campo- 2. Article 2 of Annex VII to the Staff grande have three children born in 1966, Regulations provides that: 1967 and 1968.

felt that the tax deducted was higher to the taxable amount of his remune- than it should have been on the basis of ration. In May 1979 Mr Alio discovered Regulation No 260/68 and asked the that the additional tax abatements had administration for an explanation. She been disallowed. An explanation was informed that when the basic taxable obtained from the relevant division amount was being calculated the indicated that the disallowance of the additional abatement for a dependent said tax abatements was due not to a child had not been applied. change in Mr Allo's personal situation but to the fact that his wife had been promoted to Grade A 5 and that from then on she and not he would receive the household, dependent-child and 3. As far as Mrs Sorasio-Allo was education allowances. In June 1979 an concerned she sent a note on 15 amount equivalent to the said September 1978 to Mr Pratley, head of allowances, paid in April, and to an the Individual Rights and Privileges increase in tax for the same month was Division, asking him to tell her whether, deducted from Mr Allo's remuneration, when the taxable amount of her re- since his wife's promotion had taken muneration was calculated, account was effect from 1 April 1979. taken of the tax abatement for depen- dent children provided for by Regulation No 260/68 and requesting that, if necessary, the requisite corrections be made for the past as well as for the 5. On 30 October 1978 Mrs Aimo- future. Campogrande submitted a complaint relating to the calculation of the taxable amount of her remuneration in her new step without the additional tax By a note of 29 September 1978 Mr abatement's being made and asking for Bosmans, head of the Salaries, Pensions, the taxable amount of her remuneration Missions and Miscellaneous Allowances in the past to be corrected if necessary. Division, replied that the provision for the additional tax abatement for a dependent child applied only to an official to whom one or more Mrs Sorasio-Allo submitted a complaint dependent-child allowances were granted on 24 October 1978 against the failure to under Article 2 (1) of Annex VII to the take into consideration her circumstances Staff Regulations, and that the as to dependants when the taxable allowances were in fact not awarded to amount for the assessment of the tax Mrs Sorasio-Allo but to her husband, payable by her was calculated and, to the so that the abatement in question applied extent necessary, against the rejection by only when Mr Allo's and not the note of 29 September 1978 of her Mrs Sorasio-Allo's remuneration was request of 15 September 1978 that, if calculated. necessary, the requisite corrections be made.

In Case 146/79 Mr Alio asked for his application and those of his wife and of Mrs Aimo-Campogrande to be dealt (b) Annul the implied decision with jointly. The First Chamber of the rejecting the complaint lodged on Court by an order dated 24 October 24 October 1978 and, to the 1979 ordered that for the purpose of the extent necessary, Mr Bosmans's procedure and judgment Cases 81, 82 note of 29 September 1978 on the and 146/79 should be dealt with jointly. calculation of the taxable amount The applicants therefore lodged only a of the applicant's remuneration single reply and the Commission only a (Case 81/79); single rejoinder. Annul the implied decision rejecting the complaint lodged on Upon hearing the report of the Judge- 30 October 1978 and, to the Rapporteur and the views of the extent necessary, the decision Advocate General the Court (First calculating the taxable amount of Chamber) decided to open the oral the applicant's remuneration when procedure without any preparatory she advanced to Step 5 of Grade inquiry. A 7 on 1 October 1978 (Case 82/79);

Annul the decision discontinuing the additional abatement in II — C o n c l u s i o n s of t h e p a r t i e s respect of his two dependent children at the time when the applicant's taxable remuneration The applicants claim that the Court as from 1 April 1979 was should: calculated and the implied

SORASIO v COMMISSION

— Order the applicants to bear the The Commission points out that, costs; although it cannot be denied that Article 2 (6) of Annex VII does not refer expressly to the tax abatement in — Subject to all necessary reservations. question, the provision against over-

JUDGMENT OF 27. II. 1980 — JOINED CASES 81, 82 AND 146/79

SORASIO v COMMISSION

against the overlapping of family Consequently the abatement is allowed allowances is the obligation to declare because of the existence of a dependent allowances of the same type paid child without its being necessary to take elsewhere. But there is no obligation to into account the fact that the child declare a tax abatement allowed depends on one or more Community elsewhere, in particular a tax abatement taxpayers. for which a spouse who is not an official qualifies. So that the defendant's system leads to the illogical situation that, in the case where husband and wife are both The defendant does not consider that it officials, there is only one tax abatement is bound by the principle of tax law in respect of each dependent child, relied on by the applicants either. The whereas in the case of a family where fact that two officials who are husband one spouse is an official and the other is and wife are taxed separately in no way not there may be two tax deductions in precludes the view that the abatement respect of each dependent child. must be made only once in respect of each child. A dependent child can only be dependent once, whether he is entirely dependent on one of his parents On the basis of the rationale of the or partially dependent on both of them, scheme, the applicants consider it to be but in any case can never be entirely logical that, from the moment when, for dependent on both his parents at the example, parents jointly maintain a child, same time. account is to be taken of this in the case not only of one parent but of both of them when taxable income is calculated. The defendant's argument is wholly in keeping with the practice adopted in the Member States, whose methods of The defendant replies that the fact that allowing taxpayers who have dependent the conditions for allowing the fiscal children a reduction of tax are certainly abatement are wider than those for different but in each State the benefit is granting the dependent-child allowance granted — whether the husband and is certainly not of such a kind as to wife are taxed separately or not — only render its interpretation illegal. once in respect of each" dependent child.

Appropriate compensation in casu is The Commission considers that, even if repayment of the taxes wrongly collected the way in which it has interpreted the for this reason, together with interest. provisions in question is assumed to be wrong, it does not constitute a wrongful act or omission which could lead to the award of damages. The judgment in Case 23/69, Anneliese Fiehn v The defendant thinks that it is not a Commission of the European Communities question of comparing the applicants' [1970] ECR 547 shows that "The situation with that of an imaginary adoption of an incorrect interpretation official in a comparable situation to . . . does not constitute in itself a theirs but whose spouse works outside wrongful act". The applicants have not the Communities. In fact such a established the existence of exceptional comparison would mean that account circumstances. The judgment in Case would have to be taken of a factor over 106/76, Francine Gelders (née Deboeck)v which the administration has no control, Commission of the European Communities namely the possible existence in the [1977] ECR 1623 shows that "It is . . . national law of rules comparable to those unnecessary to order the Commission to brought into force by Regulation No pay . . . the sums claimed since the 260/68. The requirement of equal annulment of the contested decision will treatment is met as soon as compliance in itself cause the Commission to take a therewith is ensured in the rules adopted new decision in accordance with the by the Community legislature, without judgment given". its being necessary or moreover possible to take into consideration factors outside such rules such as the place where the official spends his remuneration or the national tax rules governing the salary of The applicants reply that the Staff Regu- the offical's spouse. lations make it clear that it is the corollary of every rule against over- lapping that benefits obtained from elsewhere must be declared. The defendant's system is condemned by the In fact for there to be discrimination very proposition which it puts forward as there must also be unequal treatment its main argument, since, for the

The Commission replies that allowing The applicants confirm that there is two tax abatements in respect of each indeed unequal treatment by adopting dependent child where the child's parents the line of reasoning taken up by the are both in the service of the Commission in connexion with the first Communities would itself be discrim- submission, which the Commission inatory. Thus a husband and wife who forgot when dealing with the second : the are both officials of the Communities child of a man and wife who are both would receive two abatements whereas officials qualifies for only one tax an official whose spouse is not gainfully allowance, whilst the child of an official employed could only receive one. Such and a person working outside may different treatment is clearly unjustifiable qualify for two tax reductions. in view of the close link between the tax abatement and the existence of a dependent child and is therefore dis- criminatory. The illegal practice is not applied uniformly to everyone but only to the official whose spouse is also an official. Even if an illegal practice does not in se The Leonardini judgment cannot provide constitute a wrong it does so where, as the answer, since the Commission was in this case, it is arbitrary (no objective ordered to pay default interest "having criterion), inconsistent (rule against regard to . . . the lengthy delay preceding overlapping without its indispensable settlement of the claims arising from the counterpart) and discriminatory. accident", which was judged to be wrongful. The circumstances were entirely different both from those which gave rise to the Fiehn judgment and also The applicants leave it to the Court to from those in this case. deal as it thinks best with their claims that the Commission should be ordered to pay the sums corresponding to the overpayments of tax to the extent to At the sitting held on 19 June 1980 the which the object of the claims may applicants, represented by Edmond appear to be a consequence of the Lebrun of the Brussels Bar and the annulment of the contested decisions, Commission of the European but insist that they are entitled to an Communities, represented by Daniel Jacob of the Brussels Bar, presented oral order for payment of default interest, argument. since the fact that such interest is owed does not necessarily arise out of the annulment. Once there has been a wrongful act, default interest becomes The Advocate General delivered his payable as from the date when each opinion at the sitting on 19 June 1980.

"(1) An official who has one or more dependent children shall . . . receive an allowance . . . for each dependent child.

(2) 'Dependent child' means the legitimate, natural or adopted child of an official, or of his spouse, who is actually being maintained by the official.

(6) Not more than one dependent-child allowance shall be paid in respect of any one dependent child within the meaning of this article, even where the parents are in the service of two different institutions of the three European Communities."

4 Mr and Mrs Alio have two children, born in 1967 and 1974. Mr and Mrs Campogrande have three children, born in 1966, 1967 and 1968.

SORASIO v COMMISSION

5 On 24 October 1978 Mrs Sorasio-Allo submitted a complaint against the failure to take into consideration her circumstances as to dependants in the calculation of the taxable amount for the assessment of the tax payable by her. Mrs Aimo-Campogrande submitted a similar complaint on 30 October 1978. It is unfortunate that there were no replies to these complaints.

JUDGMENT OF 27. 11. 1980 — JOINED CASES 81, 82 AND 146/79

9 The applicants in a second submission assert that the Commission is in breach of certain legal principles and rules, in particular of the principles of equality, distributive justice and equity. The Commission systematically allows the additional abatement in the case of an official who has at least one dependent child and whose spouse works outside the Community institutions, that is to say even if that spouse also receives dependent-child allowances which are deducted from those granted to the official and which may even reduce them to zero, and without taking into account the tax abatements which the spouse is allowed also in respect of the dependent child under his or her national tax rules.

io Therefore not to allow this abatement in the case of an official who has at least one dependent child but whose spouse is also an official and where it is the latter spouse who, because of the rule against overlapping of Article 2 (6) of Annex VII to the Staff Regulations, receives the dependent-child allowance, would be to disregard the principles of equal treatment, equity and distributive justice.

n In fact the consequences of the contested practice are that, all other things being moreover equal, two salaries are taxed differently simply because one includes the payment in respect of the dependent child and the other does not, and that one official, merely because his or her spouse is also an official, pays much more tax than a colleague in receipt of the same remuneration and being in the same circumstances as to dependants as that official but whose spouse works outside the Community institutions.

is Consideration of the submissions put forward by the applicants leads to their rejection. Although it is true that the applicable provisions do not expressly preclude a husband and wife who are both officials of the Communities from being allowed the tax abatement, such an exclusion is, however, in accordance with the aim and scheme of the system. The tax abatement for a dependent child is justified only if it is allowed for social reasons connected with the existence of the child and the cost of maintaining him. Article 3 (3) of Regulation No 260/68 provides that the dependent-child allowance shall be deducted from the basic taxable amount for the purpose of calculating the tax. The second subparagraph of Article 4 (2), which provides that an "additional" abatement equivalent to twice the amount of the allowance for

JUDGMENT OF 27. 11. 1980 — JOINED CASES 81, 82 AND 146/79

a dependent child shall be made for each dependent child, must be read in this context.

is As far as concerns the alleged breach of the principle of equality the tax system of the Communities is an independent system which is applied irrespective of the national systems, and the Commission is right to maintain that the hypothetical situations put forward by the applicants are not comparable. The principle of equality does not require account to be taken of possible inequalities which may become apparent because the Community and national systems overlap.

SORASIO v COMMISSION

i9 It follows that the applications are unfounded and must be dismissed.

Costs

20 Under Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs. As the applicants have failed in their submissions they must be ordered to pay the costs. However, under Article 70 of the Rules of Procedure, in proceedings by officials arid other servants of the Communities, institutions are to bear their own costs.

On those grounds,

A. Van Houtte T. Koopmans Registrar President of the First Chamber