C-191/94

AGF BELGIUM ν EEC AND OTHERS

OPINION OF ADVOCATE GENERAL JACOBS delivered on 15 February 1996 *

1. The issue which has led the Tribunal de The background to the dispute and the Première Instance (Court of First Instance), national court's questions Brussels, to seek a preliminary ruling from the Court in this case is whether the Euro- pean Community is liable to pay additional insurance premiums which Belgian insurers are required by law to charge on motor insurance services in order to contribute to 2. Under the Belgian provisions applicable at the funding of the following Belgian institu- the material time insurers and insured per- tions: sons were jointly liable for the payment of additional insurance premiums which were used to fund the INAMI, the FNRSH and the CRB. The relevant provisions, as set out in the order for reference, were as follows:

(i) L'Institut National de Maladie-Invalidité (‘INAMI’) (the National Sickness and Invalidity Insurance Institution); (i) Article 24 of the Belgian Law of 16 April 1963 and the Royal Decrees of 5 July 1963, 23 October 1978 and 28 June 1984 provided that the FNRSH was to be funded through additional premiums for various categories of insurance, (ii) Le Fonds National de Reclassement des including a premium of 7.5% for motor Handicapés (‘FNRSH’) (the National insurance. Rehabilitation Fund for the Handi- capped); and

(ii) Article 121 of the Law of 9 August 1963 on sickness and invalidity insur- (iii) La Croix-Rouge de Belgique (‘CRB’) ance, as amended by Article 57 of the (the Belgian Red Cross). Law of 20 December 1974 relating to the 1974/75 budgetary proposals, provided that sickness and invalidity benefits were * Original language: English. to be funded in part through the

(iii) The Law of 7 August 1974 and the Royal Decree of 16 December 1974 implementing that Law provided that the CRB was to be funded by the 5. It appears from the order for reference payment of an extra premium of 0.25% that the European Community concluded a of the cost of motor vehicle third party number of insurance contracts with the liability insurance. plaintiff insurance company, AGF Belgium, including contracts providing third party lia- bility insurance for vehicles used by the vari- ous institutions. The Community refused to pay the additional insurance premiums on the ground that they constituted indirect 3. According to the order for reference the taxes from which the Community was FNRSH was dissolved by Royal Decree of exempt under Article 3 of the Protocol on 19 July 1991 but continued to operate for the Privileges and Immunities of the European purposes of its liquidation by virtue of Arti- Communities. cle 2 of that decree. At the hearing counsel for the INAMI stated that the FNRSH had in the mean time been liquidated and its functions assumed by the INAMI.

7. Before the national court the Belgian State and the three institutions put forward a number of arguments to support their view that the Community could not rely on Arti­ cle 3 of the Protocol. Those arguments may (2) Is the third paragraph of Article 3 of the be summarized as follows. First, as a matter Protocol to be interpreted as being appli­ of national law the premiums fall to be clas­ cable to charges collected by way of addi­ sified as social contributions rather than tional insurance premiums (in the present taxes and as such are not covered by the case motor vehicle third party liability exemption in Article 3. Secondly, the premi­ insurance) for the benefit of public utility ums constitute 'charges for public utility ser­ organizations such as the INAMI, vices' excluded from exemption by the third FNRSH or CRB, in view of the fact that paragraph of Article 3. Finally, the second there is a relationship, albeit indirect and paragraph of Article 3 provides for the potential, between those charges and the refund to the Communities only of 'indirect service provided by those organizations? taxes or sales taxes included in the price of movable or immovable property'; it does not extend to premiums levied on services pro­ vided under a contract of insurance. Those arguments prompted the national court to refer the following questions to the Court for a preliminary ruling:

(3) Is the second paragraph of Article 3 of the Protocol to be interpreted as being (1) Is Article 3 of the Protocol to be inter­ applicable to indirect taxes or dues levied preted as being applicable to charges on services provided for the official use of which may be regarded under national the Communities, where substantial sums [law] as social contributions on the are involved?

The Governments of the Member States shall, wherever possible, take the appropriate measures to remit or refund the amount of indirect taxes or sales taxes included in the price of movable or immovable property, 'The Council shall, acting unanimously on a where the Communities make, for their offi- proposal from the Commission, lay down cial use, substantial purchases the price of the scheme of social security benefits for which includes taxes of this kind. These pro- officials and other servants of the Communi- visions shall not be applied, however, so as to ties.' have the effect of distorting competition within the Communities.

11. Pursuant to that article the Council established a comprehensive social security system for officials and other servants, including provision for old-age and survi- No exemption shall be granted in respect of vors' pensions and also invalidity, sickness, taxes and dues which amount merely to and accident benefits: see inter alia Articles charges for public utility services.' 72 to 84 of the Staff Regulations of Officials

I -1864

AGF BELGIUM ν EEC AND OTHERS

of the European Communities and Articles 3 of the Protocol. However, in Klomp ν Ins- 28 to 44 of the Conditions of Employment 3 pektie der Belastingen the Court was asked of Other Servants of the European Commu­ to consider whether the phrase 'all taxes on nities. salaries and emoluments paid by the Com­ munity' in Article 11(b) of the Protocol on the Privileges and Immunities of the ECSC, a forerunner of Article 13 of the single Pro­ tocol, covered contributions payable under the Netherlands General Law on Old Age, Question 1 which established a pension scheme that was applicable in principle to all residents of the Netherlands. The scheme was financed by contributions that were assessed on the income of members of the scheme and were collected in the same manner as taxes.

I-1865

OPINION OF MR JACOBS - CASE C-191/94

16. In his Opinion in that case Advocate the light of the purpose of the provision. General Gand pointed out that 'Article 11 is Such an approach is the only means of ensur­ a rule of Community law the content of ing that the provision is effectively and uni­ which must be determined by reference to formly applied. such law and not by reference to Nether­ lands law'. 4 Similarly in Humblet ν Bel­ 5 gium the Court observed in relation to the same provision:

18. It is true that in Kristoffersen 6 the Court held that the term 'income tax' in the first paragraph of Article 14 of the Protocol was to be construed by reference to national law. 'From the point of view of the law applica­ However, that provision merely determines ble, the general problem must be resolved the Member State in which a Community according to the law of the Community, in official is deemed to be resident for certain particular by interpreting Article 11 of the tax purposes. It does not affect the scope of Protocol, and not according to Belgian law. the exemption from certain national taxes applicable to Community officiais under Article 13 of the Protocol. In examining the latter question the Court had regard not to the classification of the tax under national law but to its characteristics. 7

Consequently, neither the Belgian legislation and case law nor the practice followed in analogous cases by the Belgian authorities can be relevant to this case since they resolve the problem in the light of national law.' 19. The term 'tax' is usually understood to mean a compulsory payment to government, whether central, regional or local, destined to finance public expenditure. Taxes are nor­ mally general in scope, being applicable to one or more categories of persons, goods, services, transactions or activities. A further 17. It is clear that the same applies to Article characteristic of taxes is that there is nor­ 3 of the single Protocol. It is immaterial how mally no relationship between the benefits a charge is classified under national law. The received by individual taxpayers and the term 'taxes' in Article 3 must be interpreted payments made. by reference to its normal meaning and in

21. However, expenditure on social benefits and health care is not always financed wholly by contributions paid by insured per­ sons and employers. It is common for such expenditure to be funded partly from general taxation. In the United Kingdom, for exam­ 22. Thus the fact that the revenue from the ple, a distinction is drawn between contribu­ premiums in question in the present case is tory benefits financed from contributions allocated to bodies providing social or health paid by insured persons and employers and care services such as the FNRSH or CRB, or non-contributory benefits financed out of even to a body such as the INAMI respon- general taxation; health care is provided by sible for paying sickness and invalidity ben- the National Health Service, which is efits, is not a decisive factor for the purpose financed mainly from general taxation. 8In of classifying the charges. That factor is in Denmark social assistance and a number of my view outweighed by other features of the social security benefits are financed wholly charges which suggest that they may prop- out of general taxation. 9 Some Member erly be regarded as taxes. The charges are States adopt an intermediate solution of levied on insurance services in a similar man- financing social and health care spending ner to an indirect tax on insurance; they are

8 — Pieters, op. cit.. p. 131. 10 — Pieters, op. cit., pp. 94 and 95. 9 — Pielers, op. cit., p. 53. 11 — Pieters, op. cit., p. 34.

I-1867

OPINION OF MR JACOBS — CASE C-191/94

general in scope, being applicable to all per­ charge which is special or appropriated for a sons taking out motor insurance policies; and specific purpose cannot prevent its falling the services or benefits received by individ­ within the field of application of Article ual insured persons are not in proportion, or 95 of the Treaty'. in any way related, to the amount of the levies.

'the fact that a tax or levy is collected by a body governed by public law other than the State or is collected for its benefit and is a 26. Only in the case of auxiliary and local staff, who are excluded from the Community 12 — Case 74/76 [1977] ECR 557, paragraph 19 of the judgment. schemes, do the Conditions of Employment

I-1868

AGF BELGIUM ν EEC A N D OTHERS

of Other Servants require the Community 29. The Court has not previously been asked institutions to contribute to national social to consider the distinction between a tax and security schemes: see Articles 70 and 80 of a charge for a service in the context of Arti­ the Conditions. cle 3 of the single Protocol, but in Van Leeu­ 3 wen ν Rotterdam 1 had occasion to do so in relation to Article 12 of the Protocol on the Privileges and Immunities of the EEC, a forerunner of the exemption for officials in Article 13 of the single Protocol. There the question arose whether a school levy imposed under Netherlands law on an offi­ 27. As I have explained, however, the cial whose child attended a school in Rotter­ charges in question in the present case may dam was covered by the exemption from properly be regarded as taxes from which the national taxes provided for in the second Community is exempt under Article 3 of the paragraph of Article 12. The Court held that Protocol. Although it seems to me that the a charge or due representing the consider­ charges should be regarded as indirect taxes, ation for a given service rendered by the the distinction between direct taxes covered public authorities such as the school levy in by the first paragraph of Article 3 and indi­ question, which was moreover only payable rect taxes covered by the second paragraph is in respect of non-compulsory education, was not an issue in this case. not a tax within the meaning of the Protocol.

31. Advocate General Roemer's remarks improve the quality of apples and pears highlight what in my view is the crucial dis­ grown in England and Wales, was authorized tinction between a tax and a charge for a to finance its activities by imposing an public utility service. A tax, as already noted, annual charge on growers. The Court held is a payment made to government in order to that those activities did not constitute a 'sup­ finance general public expenditure; the bene­ ply of services ... effected for consideration' fits received by individual taxpayers by rea­ within the meaning of Article 2 of the Sixth 16 son of such expenditure are not in propor­ VAT Directive because there was no direct tion to the payments which they make. A link between the amount of the charge and charge for a public utility service, on the the benefits received by individual growers. other hand, is the price paid for a specific In the words of Advocate General Slynn 1 7 service. There is a direct link between the the charge was more in the nature of an charge and the benefit received. 'across-the-board tax than a true payment for services'.

I-1870

AGF BELGIUM ν EEC AND OTHERS

charges must be for services that can be spe­ arises because Article 3 refers only to 'indi­ cifically identified, described, itemized and rect taxes or sales taxes included in the price calculated according to some predetermined of movable or immovable property'. 2 unit. 0

37. The national court's question should in 35. It is clear that the insurance premiums in my view be given an affirmative reply. A dis­ question here cannot be regarded as charges tinction between taxes on goods and those for public utility services within the meaning on services within the context of Article of Article 3 of the Protocol. There is no 3 would be arbitrary and contrary to the direct relationship between the premiums intentions of the authors of the Protocol. and the benefits received by individual The rationale for exempting the Communi­ insured persons. In the case of the Commu­ ties from taxes, namely to prevent a Member nities it is in any event unlikely that the ben­ State, in particular a host State, from gaining efits received are more than minimal given an unjustified advantage by diverting to the that most Community staff are covered by national treasury funds contributed to the the special social security schemes set up budget of the Communities, applies equally pursuant to Article 15 of the Protocol. to taxes on services.

Question 3

38. The absence of an express reference to taxes on services in Article 3 can be explained by the greater importance attached historically to the taxation of goods. The general taxation of services is of relatively recent origin. Even under the Community VAT system it was not until the Sixth VAT Directive took effect on 1 January 1978 that 36. By its third question the national court all services were brought within the scope of asks whether Article 3 of the Protocol is to the tax; under Article 6(2) of the Second be interpreted as applying to indirect taxes VAT Directive 2 1 only the services listed in on services. As already noted, the question Annex Β were compulsorily taxable.

(1) The second paragraph of Article 3 of the Protocol on the Privileges and Immunities of the European Communities applies to additional insurance pre- miums imposed by law on motor insurance services in order to fund bodies such as the INAMI, the FNRSH and the CRB, even where as a matter of national law such premiums are regarded as social contributions.

(2) Such premiums do not constitute charges for public utility services within the meaning of the third paragraph of Article 3 of the Protocol.

(3) The second paragraph of Article 3 of the Protocol applies to indirect taxes lev- ied on the provision of services.

I -1872