C-207/87

1. The case which occupies us today concerns once again the interpretation of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover 4. In its judgment of 19 January 1982 in taxes — Common system of value-added Case 8/81 3the Court held in response to a tax: uniform basis of assessment, 1 which has question for a preliminary ruling from the been the subject of many decisions of the Finanzgericht Münster that as from 1 Court. January 1979 a credit negotiator could rely on Article 13 B (d) (1) of the Sixth Directive if he had not passed the tax on to the persons following him in the chain of supply. That was confirmed once again in 2. The provision which concerns us in this the judgment in Case 255/81 4of 10 June case is Article 13 B (d) (1) of the directive 1982 in response to a question from the which provides that Member States shall Finanzgerich Hamburg. exempt from tax 'the granting and the nego­ tiation of credit and the management of credit by the person granting it'. Article 1 provides that the Member States are to ensure that the necessary harmonization provisions should enter into force by 1 January 1978 at the latest. The Ninth 2 Council Directive of 26 June 1978 5. Referring to the fact that the Ninth extended that time-limit inter alia for Directive was not retroactive the Court held Germany until 1 January 1979. in its judgment in Case 70/83 of 22 February 1984 5that, in the absence of the implementation of Directive 77/388/EEC, a credit negotiator could rely on Article 13 B (d) (1) thereof in relation to transactions 3. In fact, as is known from other cases, it was not until the adoption of the Law of 26 3 — Ursula Becker v Finanzamt Münster-Innenstadt [1982] ECR 53. * Translated from the German. 4 — R. A. Grendel GmbH v Finanzamt für Körperschaften in 1 — Official Journal 1977, L 145, p. 1. Hamburg [1982] ECR 2301. 2 — Official Journal 1978, L 194, p. 16. 5 — Gerda Kloppenburg v Finanzamt Leer[1984] ECR 1075.

8. When his request, made in April 1982, 12. The defendant Finanzverwaltung at first for an amendment of the assessment for the took the view that the plaintiff could not be year 1979 was rejected, court proceedings exempt from tax in 1978 and 1979 because ensued. These were settled at first because, there was no provision for exemption in by a notice of amendment of 11 July 1983, German turnover tax law at that time; it the Finanzverwaltung exempted from tax thus followed the case-law of the Bundesfi­ the plaintiff's turnover in respect of credit nanzhof 6and argued that no regard was to negotiation. be had to the exemption provisions contained in the Sixth Directive before they were implemented in national law. In addition, the finance administration relies on a letter from the Bundesminister der Finanzen (Federal Finance Minister) of 27 9. Further court proceedings ensued, June 1983 relating to the issue in the main however, after a review of the case which proceedings. According to that letter, covert was undertaken in order to determine whether turnover tax had been passed on 6 — See the judgment of 25 April 1985 VR 123/84, Bundesfi- nanzhof Entscheidungen 143, 383 = Betriebs-Berater 1985, covertly and which found that to be the case p. 1317.

WEISSGERBER v FINANZAMT NEUSTADT AN DER WEINSTRASSE

passing on is passing on within the meaning (77/388/EEC) on turnover tax of the case-law of this Court; as proof that concerning the exemption from turnover there has been no such passing on, it must tax of transactions consisting of the be shown that undertakings which were negotiation of credit be relied upon, in engaged in credit negotiation in 1978 have the absence of the implementation of that correspondingly reduced their commission directive, by a credit negotiator if he did in 1979 (in the case of commissions due in not pass that tax on to the persons 1979 as in 1978 it therefore had to be receiving his services? assumed that passing on had occurred because in the second half of 1978 turnover tax was due on credit negotiations in any case).

17. This question seeks clarification of the phrase 'where he had refrained from passing that tax on to persons following him in the chain of supply'appearing in the 15. In its observations on the reference for judgments 8mentioned at the beginning of a preliminary ruling the Finance Adminis­ this Opinion, and, more precisely, of the tration explained to the Court that it no point whether only overt or also covert longer relied upon the view of the Bundesfi­ passing on is to be taken into account. nanzhof. This was clearly because the said judgments of the Bundesfinanzhof were quashed by the Bundesverfassungsgericht (Federal Constitutional Court) in April and November 1987. 7 18. We have been told that to some extent the Finanzgerichte (Finance Courts) refuse to look at covert passing on because the view recommended by the Federal Finance 9 Ministry is regarded as unpractical. 16. According to those decisions of the According to the aforementioned letter Bundesverfassungsgericht and because no from the Federal Finance Minister of 27 new points of view which could lead to any June 1983 (the principles of which, different assessment have emerged, according to an order of the Oberste reference may now simply be made to the Finanzbehörden (principal revenue auth­ case-law on the VAT directive. Without orities) of the Bund and the Länder of April further argument the first question from the 1984, are also to apply to the first half of Finanzgericht Rheinland Pfalz may be 1978), covert passing on may indeed be answered to the effect that, in the absence taken into account. Covert passing on may of the implementation of the Sixth VAT be assumed to exist if it is not shown that in directive, a credit negotiator may rely, in the case of undertakings which engaged in respect of transactions carried out between 8 — See footnote 4. 7 — Decision of the Bundesverfassungsgericht of 8 April 1987 9 — See, for example, the judgment of the Finanzgericht (75/223), Europamht 1987, p. 333. Decision of the Münster of 31 August 1983, an extract of which is included Bundesverfassungsgericht of 4 November 1987 (EuGRZ in the documents submitted to the Court by the Finanz- 88/120). gericht which has made this reference.

21. (b) If regard is had only to the clause 'where he had refrained from passing that 20. As the Court will be aware, that tax on to persons following him in the chain judgment related to the question whether on of supply' contained in the operative part of the importation of goods sold in the country the judgments referred to at the beginning of export by a person not liable to tax the of this Opinion, it might seem that the full value-added tax chargeable in the Court had made unjustified enrichment part country of importation might be levied or of Community law. This point has been whether Article 95 of the EEC Treaty addressed in other judgments in which the (which prohibits imported goods from being Court had to rule on the problem of the subject to greater charges than domestic refund of national charges levied contrary goods) required that regard should be had to Community law with regard to the to the value-added tax paid abroad and not nature of certain rights of the Member subject to refund. If this means that States, which, as is well known, are very relevant here. 10 — Case 15/81 Gallon Schul Douane Expediteur BV v Inspecteur der Invoerrechten en Accijnzen Roosendaal [1982] ECR 1409. 11 — Paragraph 34.

OPINION OF MR LENZ — CASE 207/87

13 on to the purchasers. objections to such generalization and incor poration). The said reservation arose from considerations relating solely to tax law and based on the scheme of the VAT directive as a reaction to the objections which were made at the time by the defendant Finance Administration and the Federal Government to the possibility that the tax exemption provision in Article 13 of the VAT directive 23. A similar conclusion was reached in the 14 might be relied upon. judgment in Case 199/82. That case

14 — Case 199/82 Amministrazione delle Finanze dello Stato v SpA San Giorgio [1983] ECR 3595. was dealt with in paragraph 44 of the

28. The main underlying premiss of those considerations is the assumption that a right may be exercised only if the aim thereby pursued may actually be achieved, which means that the exercise of the right is corre­ spondingly limited. It would also have to be assumed that the aim of the tax exemption laid down in Article 13 of the VAT directive was not to relieve the taxable person but the end consumer 'who normally bears the 26. From that it may be inferred that, burden of value-added tax. That aim can no where it is a question of passing on of the longer be achieved where the tax exemption tax, overt passing on was meant since is claimed a posteriori, that is to say where deductions of input tax are possible by the amount of tax (liability for which was persons receiving the supplies only if the tax presumed when the tax return was lodged) is shown separately in the invoice (to which has in the mean time already been passed on express reference is made in paragraph 46). to the person receiving the supply and The Commission also takes the view that further passed on by him to his credit the reservation should be understood only customer and there is no practical possibility in that sense. In this regard it cites the of recovery. However, given that requirements of clarity and the need to consideration and the fact that normally adhere strictly to the system introduced by there is no overt passing on to the end the directive and in particular to Article 22 consumer or to persons following in the thereof (which provides that the invoice chain of supply who, like banks, cannot must state clearly the price exclusive of tax claim any deductions of input tax, one and the corresponding tax at each rate). might well accept that it would be logical to

31. The conditions mentioned under B in A. ... Article 13 of the directive could be regarded as justification. The first objective of those 'conditions' is to ensure 'the correct and B. Other exemptions straightforward application of the 16 exemptions'. That objective is certainly best achieved by exempting from tax turnover with 'covert passing on', for any Without prejudice to other Community other arrangement leads to complications as provisions, Member States shall exempt the this very case shows. following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any 32. The other objects of the 'conditions' possible evasion, avoidance or abuse: mentioned in Article 13, namely the 17 prevention of tax evasion and avoidance, can be disregarded here, for they hardly '(a) . .. apply to the present case.

15 — Eleventh recital in the preamble, Official Journal 1977, 16 — SeeBecker[1982]ECR 73, paragraph 33. L 145, p. 2. 17 — See Becker [1982] ECR 73, paragraph 34.

WEISSGERBER v FINANZAMT NEUSTADT AN DER WEINSTRASSE

37. The purpose of this question is to establish whether turnover tax is passed on covertly simply if, on agreeing his nego­ 34. It would hardly be conceivable for a tiation commission, the credit negotiator Member State to be able to levy tax on expected to have to pay turnover tax out of non-taxable turnover simply because it had it. It is thus based on the assumption that, itself prevented the desired result from under the legal situation prevailing at the taking place at the right time and an time when the commission was agreed advantage not intended at the outset thus (according to which turnover tax was due accrued to the taxpayer. If that argument also on the negotiation of credit), turnover were accepted, it would allow a Member tax was always passed on in the ensuing State to profit from its own wrongdoing period. and to frustrate the effect of Community law, namely the exemption from tax of the turnover concerned. From the standpoint of Community law, this cannot be tolerated.

38. If the view put forward above is accepted, then this question does not call for an answer, for in the case of 'covert passing on' no tax is payable during the relevant period so that it no longer depends 35. This result is perhaps not entirely satis­ on what the credit negotiator 'expected' factory because the credit negotiator when he agreed the negotiation commission. receives an advantage which was originally not intended, but it seems more acceptable than allowing the Member State to profit from its own wrongdoing.

18 — See Becker, ibid, p. 76, paragraph 47. An action for breach 39. If, however, the argument I have of obligations under the Treaty was also pending in this rejected is accepted, namely that reliance on case but was removed from the register after the directive had been implemented (Case 132/79). the directive is not possible where there has

been 'covert passing on', then, without difficult to recover charges levied in breach attempting to develop a proper and compre­ of Community law are not permissible. hensive theory of passing on, the question may be answered by referring to the Court's case-law on national law governing refunds and on the question of the exclusion of a refund if an improperly levied charge has been passed on. 42. The Court also made it clear that it was not lawful to presume that indirect taxes had been passed on, that presumption placing the burden of proof on the taxpayer to show that there had been no passing on, nor acceptable to limit the forms of proof (judgments in Joined Cases 331, 376 and 378/85 and in Case 104/86). 40. The governing principle is to be found 19 in the judgment in Case 199/82 in which the Court ruled that the court which has to rule on the refund must be free to decide whether or not the burden of the charge has been passed on to other persons, which no doubt means that all the circumstances of 43. Accordingly, it may be said that the the particular case have to be considered third question cannot simply be answered in (there was a similar ruling in the judgment the affirmative, and that therefore it is not in Joined Cases 331, 376 and 378/85). 20 permissible to proceed on the basis of the presumption contained in the question precisely because the question of actual passing on depends on the existence of a real possibility of passing on, which may have changed with the market situation since the agreement on the commission was concluded. It must also be noted that the rigid rule contained in the Federal Finance 41. It must also be recalled that in its Minister's letter of 27 June 1983 appears judgment in Case 68/79 the Court had unacceptable, for the defendant Finanzamt already stressed that the exercise of a right itself observed in its observations that the under Community law, which the national fact that the amount of commission was not courts are required to protect, should not be altered may have been due to increased made practically impossible. Accordingly, as costs or a desire for increased profits. was made clear in the judgments in Case 199/82, Joined Cases 331, 376 and 378/85 21 and Case 104/86 with regard to the question of the passing on of improperly paid charges, rules of evidence which make it practically impossible or excessively 44. However, in considering all the circum­ stances of the case, some importance must 19 — Ibid., paragraph 14. 20 — Judgment of 25 February 1988 in Joined Cases 331, 376 be attached to the fact that the plaintiff in and 378/85 Les fils de Jules Bianco v Directeur general des the main proceedings himself assumed when douanes et droits indirects [1988] ECR 1099. 21 — Judgment of 24 March 1988 in Case 104/86 Commission v making his tax returns that his credit nego­ Italian Republic [1988] ECR 1799. tiation transactions were taxable (because at