C-200/90

DANSK DENKAVIT AND POULSEN v SKATTEMINISTERIET

OPINION OF MR ADVOCATE GENERAL TESAURO delivered on 30 January 1992 *

Mr President, It applies to the supply of goods and the Members of the Court, provision of services subject to value added tax and to various transactions that are exempt from value added tax (including, in particular, banking and insurance services).

1. The national court has submitted four questions for a preliminary ruling on the interpretation of Article 33 of the Sixth Council Directive on value added tax, 1 and In the case of undertakings subject to value on Article 9 et seq. and Article 95 of the added tax, the basis of assessment for the EEC Treaty. levy is calculated in accordance with the same rules as those laid down for the calcu­ lation of value added tax. Accordingly, the principle of the deduction of input tax is applied. Those questions were raised in proceedings brought by two Danish companies for the reimbursement of the tax introduced by the Kingdom of Denmark by Law No 840 of In the case of undertakings exempt from 18 December 1987. value added tax, the basis of assessment is, where possible, the value of sales less the value of purchases; otherwise, it is fixed on a flat-rate basis, namely the undertaking's 2. The tax in question, known as the total wages bill with a supplement of 90%. 'employment market contribution' (here­ inafter referred to as 'the employment levy'), was introduced in order to offset the decrease in State revenue as a result of the The rate of the employment levy is fixed at adoption of measures to pay for social 2.5% of the basis of assessment. expenditure out of tax with a view to strengthening the competi­ tiveness — especially abroad — of Danish undertakings. In contrast to value added tax, the levy is not paid on importation, but on subsequent marketing by the importing undertakings. Since imports are not subject to the levy, no As is apparent from the order for reference deduction is made when the imported goods the employment levy exhibits the following are marketed for the first time. characteristics :

3. The first question submitted by the of Article 33 in the harmonized system of national court turns on the compatibility of turnover tax, which takes the form of a the tax in question with Article 33 of the common system of value added tax. Sixth Directive. I would point out, in passing, that an action for failure to fulfil its obligations, dealing with the same matter, has been brought by the Commission As is already apparent from the First against Denmark and is currently pending Directive on value added tax, 2 harmon­ before the Court (Case C-234/91). ization in that sector must result in the abolition of cumulative multi-stage taxes and in the adoption by all Member States of a common system of value added tax (see 4. Article 33 of the Sixth Directive, which the fourth recital in the preamble). A forms part of Title XVIII ('Miscellaneous'), harmonized system of that kind is designed, provides as follows: in particular, to ensure that a single commercial transaction is subject to uniform tax provisions, so far as turnover tax is 'Without prejudice to other Community concerned, regardless of the Member State provisions, the provisions of this directive in which the transaction takes place (see the shall not prevent a Member State from Court's judgment of 3 March 1988 in Case maintaining or introducing taxes on 252/86 Bergandi v Directeur Général des insurance contracts, taxes on betting and Impôts [1988] ECR 1343). gambling, excise duties, stamp duties and, more generally, any taxes, duties or charges which cannot be characterized as turnover taxes.' In order to achieve that objective the First 3 and Second Directives on value added tax provide that the Member States are to replace their system of turnover tax by the 5. It follows from the wording of that common system of value added tax. provision that although Article 33 permits the Member States, in the exercise of their sovereignty in tax matters, to charge value added tax concurrently with other taxes, Viewed in that context, Article 33 is in fact duties or charges (see the Court's judgment designed to ensure the proper functioning of of July 1986 in Case 73/85 Kerrut v the common system by expressly prohibiting Finanzamt Mönchengladbach-Mitte [1986] the Member States, whose power to ECR 2219), it expressly prohibits the intro­ introduce charges other than value added tax duction of duties which can be 'charac­ is simultaneously recognized, from unilat­ terized as turnover taxes'. erally introducing or maintaining in force taxes which exhibit the basic characteristics of value added tax and therefore overlap with the latter jeopardizing the unity of the The scope of that prohibition, as the Court system. has consistently held (see the judgments of 27 November 1985 in Case 295/84 2 — First Council Directive of 11 April 1967 (67/227/EEC) on the harmonization of legislation of Member States Rousseau Wilmot v Organic [1985] concerning turnover taxes (OJ, English Special Edition ECR 3759, and of 13 July 1989 in Joined 1967, p. 14).

That is the rationale behind Article 33, as is The principle underlying that system clear from the case-law of the Court. In its consists, by virtue of Article 2 of the First aforesaid judgment in Rousseau Wilmot, the Directive, in the application to goods and Court points out that the provision in services up to the retail stage of a general question, in leaving the Member States free tax on consumption which is exactly to maintain or introduce certain indirect proportional to the price of the goods and taxes such as excise duties on the condition services, irrespective of the number of trans­ that they are not taxes which can be actions which take place in the production 'characterized as turnover taxes', seeks to and distribution process before the stage at prevent the functioning of the common which tax is charged. However, value added system of value added tax from being tax is chargeable on each transaction only compromised by fiscal measures of a after deduction of the amount of value Member State levied on the movement of added tax borne directly by the costs of the goods and services and charged on various price components; the procedure for commercial transactions in a way deduction is so arranged by Article 17(2) of comparable to value added tax. the Sixth Directive that taxable persons are authorized to deduct from the value added tax for which they are liable the value added tax which the goods have already borne (see the judgments in Rousseau Wilmot, Bergandi and Wisselink and, most recently, the The Court has expressed itself in similar Court's judgment of 19 March 1991 in terms in Bergandi, stating that Article 33 Case C-109/90, Giant v Gemeente Overijse must be interpreted as meaning that, as [1991] ECR I-1394). from the introduction of the common system of value added tax, the Member States are no longer entitled to impose on the supply of goods, the provision of services or imports liable to value added tax, taxes, duties or charges which can be char­ In the light of that legislation, the Court has acterized as turnover taxes. so far taken the view that the concept of charges which can be 'characterized as turnover taxes' must be defined essentially by reference to three factors (see the judgment in Giant): 6. Turning to the scope of Article 33, let me point out first of all that this provision does not define the concept of charges which can be 'characterized as turnover taxes'.

In the light of those considerations, it seems 7. The contested levy exhibits all the to me that the contested levy must be distinctive features outlined in the case-law. classified as a turnover tax for the purposes In the first place, it is a tax of general of Article 33 of the Sixth Directive. application levied on the supply of goods and the provision of services. Its field of application in fact is even wider than that of value added tax itself, inasmuch as it extends to sectors which are exempt from 8. That conclusion — in my view — is not value added tax. The fact that imports are invalidated by the Danish Government's not subject to tax is immaterial in that objections. regard, since imported goods are in any event subject to tax at each subsequent marketing stage. The first of those objections concerns the interpretation of Article 33. According to the Danish Government, that provision prohibits only taxes which distort compe­ tition or which compromise the common system of value added tax, either because they replace value added tax wholly or in Secondly, the levy constitutes, as the Danish part or because they affect the manner in Government itself acknowledges, a 'cascade' which the system operates. On the other tax on turnover which is collected at each hand, Article 33 does not prohibit the mere stage of the marketing chain and whose introduction of 'cascade' turnover taxes basis of assessment, as in the case of value which exhibit characteristics similar to those added tax, is determined by reference to the of the system of value added tax. revenue earned by the undertakings concerned. As for the fact that in some cases the tax is determined on a flat-rate basis (that is to say, on the basis of the total wages bill increased by a given percentage), That objection must be rejected inasmuch as it should be pointed out that the purpose of it is based on a misinterpretation of Article that criterion is to reconstruct the amount 33. of revenue purportedly earned by the undertakings in question and that, as the Court has confirmed in its case-law, in particular in Bergandi, a flat-rate tax may be The scope of the prohibition laid down by regarded as a turnover tax for the purposes that provision is not limited solely to taxes of Article 33 where — as is precisely the that distort or replace value added tax, case here — the amount thereof is fixed on which, moreover, would in any event be the basis of an objective evaluation of the incompatible with the common system even undertaking's foreseeable receipts. in the absence of Article 33. On the

— only economic considerations (primarily the supposedly lesser impact on prices of It must also be emphasized, moreover, that a tax which is not invoiced separately) the employment levy, though charged on were at the time behind the Danish transactions in a manner comparable to Government's preference for introducing value added tax, is governed exclusively by the levy, instead of increasing value national rules which do not coincide with added tax; however, it is clear, and those of the common system as regards, for confirmation is to be found in the instance, the range of activities that are Court's case-law, that 'the reasons for exempted. Those possible difference the introduction of a national tax into between the systems governing the two internal law and the circumstances taxes, one being a Community tax and the surrounding its introduction cannot other a national tax, which, however, affect its nature with regard to exhibit the same characteristics and are Community law' (see the judgment in intended to be charged in the same manner Wisselink); on the same transactions, demonstrate that the overlap between value added tax and similar national taxes has a far from negligible effect on the uniform functioning — the fact that the levy is not invoiced of the common system. separately from the price reflects a

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choice of accounting method which in its entirety, stating in its judgment that cannot affect the nature of the tax since, 'Article 33 of the Sixth Directive must be as stated earlier, the levy constitutes a interpreted as meaning that as from the cascade tax which is charged only on the introduction of the common system of value added value and which is ultimately added tax the Member States are no longer borne by the final consumer (in practical entitled to impose on the supply of goods, terms the introduction of the levy did the provision of services or imports liable to not lead to a corresponding increase in value added tax, taxes, duties or charges prices only because, at the same time as which can be characterized as turnover it was introduced, the Danish taxes'. Government reduced the social expen­ diture borne by undertakings and, consequently, the costs of production).

The employment levy is borne — as has Moreover, the same view has been repeatedly been emphasized — by domestic expressed by Air Advocate-General Mancini products and imported products. It must in his Opinion in Bergandi, and it seems to therefore be assessed exclusively in the light me that the Court adopted that suggestion of the provisions of Article 95 of the Treaty.

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DANSK DENKAVIT AND POULSEN v SKATTEMINISTERIET

In that regard, that plaintiffs in the main whether the rules governing the contested proceedings maintain that the contested levy levy are such as to preclude discrimination has discriminatory effects in relation to against imported products in all cases. Such imported products inasmuch as, in the case an appraisal must be carried out by of the latter, the basis of assessment of the reference to the fiscal impact both of the levy is calculated in accordance with rules levy as such and of other charges, in which differ to some extent from those laid particular value added tax, whose impact down for domestic products. may vary owing to the existence of the levy.

The Court has already held that Article 95 12. There is a final point which has not is infringed 'where the taxation on the been raised in the order for reference. imported products and that on the similar domestic product are calculated in a different manner on the basis of different criteria which lead, if only in certain cases, to higher taxation being imposed on the The Danish Government asks the Court to imported product' (see the judgment of limit the temporal effects of its judgment in 17 February 1976 in Case 45/75 REWE v the event of a declaration that the contested Hauptzollamt Landau [1976] ECR 181). levy is incompatible with Community law.

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OPINION OF MR TESAURO — CASE C-200/90

Finanze dello Stato v Denkavit Italiana there cannot have been any objective uncer­ [1980] ECR 1205, and of 27 March 1980 tainty with regard to the fact that the in Joined Cases 66, 127 and 128/79 Ammin- employment levy was prohibited in the light istrazione delle Finanze dello Stato v Salumi of that provision. [1980] ECR 1237).

Having said that, I consider that in this case the imposition of a restriction on the effects of the judgment should be categorically Furthermore, cases concerned with the excluded. legality of national charges under Community law may frequently have serious financial implications for the recovery of charges unduly levied. Accordingly, to The interpretation of Article 33 is quite restrict the effects of the judgment solely on clear and is supported by a wide and unam­ account of the magnitude of those impli­ biguous body of case-law. Accordingly, cations would not only run counter to the

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DANSK DENKAVIT AND POULSEN v SKATTEMINISTERIET

previous case-law of the Court (see, for from negligible) but would also constitute a example, the judgment of 25 May 1989 in dangerous precedent inasmuch as it could Case 15/88 Maxi-Di v Ufficio del Registro di lead to a substantial reduction in the judicial Bolzano [1989] ECR 1391 concerning a protection accorded to the rights of charge whose financial importance was far taxpayers under Community tax law.

13. To conclude, therefore, I propose that the questions submitted by the national court be answered as follows:

'1 . Article 33 of the Sixth Directive precludes the introduction and maintenance in force of a national tax such as the "employment market contribution" introduced by Danish Law No 840 of 18 December 1987.