C-4/89

O P I N I O N OF MR MISCHO — CASE C-4/89

OPINION OF M R ADVOCATE GENERAL MISCHO delivered on 28 March 1990 *

Mr President, authorities', within the meaning of the first Members of the Court, subparagraph of Article 4(5) of the Sixth VAT Directive 1 by defining them in relation to the said concept of 'administrative functions' (question (a)) and, consequently, not to regard local authorities as taxable 1. None of the parties who submitted persons in respect of activities in which they written observations in this case failed to engage in the context of their 'adminis- point out the similarity of the questions trative functions' as defined in national law referred to the court to those in Joined (question (b)). Cases 231/87 and 129/88 ([1989] ECR 3233). The answers to be given to them are largely if not entirely conditioned by those which the Court gave in its judgment of 17 4. In short, compared to the earlier cases, October 1989 in those cases. the question is whether the concept of 'administrative functions' as defined in the Italian legislation can constitute a valid criterion for determining which activities are engaged in by local authorities 'as public 2. On closer examination, it would even authorities'. appear that the questions in this case and the grounds for referring them to the Court are in part identical to question 2(a) to (d) in Case 129/88. In fact they have been 5. In the abovementioned judgment of submitted by the same court. The principal, 17 October 1989, the Court held, in answer if not the only, difference is the reference to to the first question, that: the concept of 'administrative functions' as defined in regard to the various branches of local authority activity by Presidential Decree No 616 of 24 July 1977, adopted for 'It is for each Member State to choose the the purpose of implementing Article 118 of appropriate legislative technique for trans- the Italian Constitution. posing into national law the rule of treatment as a non-taxable person laid down in that provision' (first subparagraph of Article 4(5) of the Sixth Directive).

'may, for example, merely incorporate into 9. The Court has certainly decided that the national law the form of words used in the only criterion making it possible to Sixth Directive or an equivalent expression distinguish with certainty activities engaged or they may draw up a list of activities in in by bodies subject to public law 'as public respect of which bodies governed by public authorities' from those governed by private law are not to be regarded as taxable law is the legal regime applicable under persons'. national law.

However, if it adopts such a method, it must take care not to include in the list of activities so defined, activities which do not come within 10. At the hearing, brief reference was the definition which the Court has laid made to the problem of mixed regimes, that down of activities engaged in 'as public is to say, situations governed in part by authorities'. public law (for example, a deed of concession) and in part by private law (for example, the contract governing the concession).

It follows that its scope does not depend only on classifications or concepts of national law, in particular, as is the case here, when 11. However, having regard to the they are borrowed from branches of law complexity of that problem, I do not think it other than that at issue. is possible to take a position on it in these proceedings. That may be seen in particular from the fact that it has been resolved in different ways by different Member States. 8. It is thus not merely because a local To remain with the example of concessions, authority activity is regarded as an 'adminis- referred to by the Commission, it would trative function' as defined by Presidential appear that the legislation which deals in the Decree No 616 that the authority may auto- most detailed way is that of the Grand matically be regarded as not being a taxable Duchy of Luxembourg. It provides that the person in respect of it (question (b)). hire and concession of the right to occupy

'Charges giving access to cross-country ski trails and public facilities which may be levied by local authorities in mountain areas 16. However, what is a court before which are free of VAT. However, if such charges such a case is brought to do in the are collected by a departmental, interdepart- meantime? Here again, I share the mental or regional association, the amounts Commission's view that the court should paid to that association in return for regard the activity engaged in by the local collecting the charge are subject to VAT. authority as subject to VAT if it comes to That is so even if the payment takes the the conclusion that exemption would lead to form of a municipal subsidy or is deducted significant distortions of competition by the association from the amount between traders established in the various collected (inst. 10 September 1985, regions of the same Member State. BO 31-17-83)' (Lamy fiscal, Vol. 2, No 5018).

17. However, since that problem was also not raised in the questions referred to the Court, I do not think it is necessary for the 13. It thus appears that the question of Court to deal with it in its answers. mixed regimes deserves a more detailed discussion. Moreover, since it was not raised in the questions referred to the Court, I do not think that the Court should give an 18. Consequently, I propose that the Court answer on that subject. should answer the first two questions by repeating the answer given to the first 2 — Règlement grand-ducal of 22 October 1979 on the liability question in Joined Cases 231/87 and of bodies subject to public law to value-added tax, Mémorial A, p. 15542. 129/88 and adding that

19. With regard to question (c), the Court could simply repeat the answer given at point 2 in the operative part of the 'a body governed by public law may rely on judgment in Joined Cases 231/87 and [that provision] for the purpose of opposing 129/88, or modify it slightly to make it the application of a national provision correspond more closely to the express making it subject to VAT in respect of an scope of the question, which seeks to activity in which it was engaged as a public determine not so much the conditions under authority, which is not listed in Annex D which the Member States are required, by and whose treatment as non-taxable is not way of derogation from the first liable to give rise to significant distortions of subparagraph of Article 4(5), to charge tax competition' (paragraph 33). to local authorities, but under what conditions the latter are entitled, notwith- standing the second subparagraph of that provision, to be treated as non-taxable persons in respect of activities in which they 22. It follows from the foregoing that, engage 'as public authorities'. under the second subparagraph of Article 4(5), the Member States are not merely required to tax bodies subject to public law if their treatment as a non-taxable person under the first subparagraph would lead to 20. It should be recalled that under the significant distortions of competition but second subparagraph, as the Court inter- must also exclude them from VAT if the preted it in the abovementioned judgment, distortions of competition to which their exclusion is likely to lead are not 'significant', that is to say, they must comply with the rule of non-taxation notwith- standing the fact that distortions of compe- tition are possible if those distortions are 'the Member States are required to ensure not 'significant'. that bodies governed by public law are treated as taxable persons in respect of acti- vities in which they engage as public auth- orities where those activities may also be engaged in, in competition with them, by 23. In order to avoid any misunderstanding private individuals, in cases in which their which might arise from the fact that the treatment as non-taxable persons could lead question refers to activities engaged in to significant distortions of competition, but Optionally' and from the answers proposed they are not obliged to transpose that by the plaintiff in the main proceedings, criterion literally into their national law or which contrasts activities in which local to lay down precise quantitative limits for authorities are required to engage with such treatment' (paragraph 24). those in which they engage optionally, I

'(1) The first subparagraph of Artide 4(5) of the Sixth Directive must be inter- preted as meaning that activities pursued "as public authorities" within the meaning of that provision are those engaged in by bodies governed by public law under the special legal regime applicable to them and do not include acti- vities pursued by them under the same legal conditions as those that apply to private traders. It is for each Member State to choose the appropriate legis- lative technique for transposing into national law the rule of treatment as a non-taxable person laid down in that provision. The Member States are not required to exclude certain activities from VAT solely on the ground that they are classified in national law as "administrative Junctions" or something similar.

(2) The second subparagraph of Article 4(5) of the Sixth Directive must be inter- preted as meaning that the Member States are required to ensure that bodies subject to public law are not treated as taxable persons in respect of activities in which they engage as public authorities even where those activities may also be engaged in, in competition with them, by private individuals, in cases in which their treatment as non-taxable persons is not capable of leading to

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COMUNE DI CARPANETO PIACENTINO AND OTHERS

significant distortions of competition, but they are not obliged to transpose that criterion literally into their national law or to lay down precise quanti- tative limits for such treatment.

(3) The third subparagraph of Article 4(5) of the Sixth Directive must be inter- preted as meaning that it does not require the Member States to transpose into their tax legislation the criterion of the non-negligible scale of activities as a condition for treating the activities listed in Annex D as taxable. Nor are they required to fix a ceiling for treatment as non-taxable persons in respect of the activities at issue.3'