Súdny dvor Európskej únie·27.2.1997

C-330/95

ECLI:EU:C:1997:94

Súd: Súdny dvor Európskej únie
IČS: 61995CC0330
Zdroj: eur-lex.europa.eu ↗

GOLDSMITHS v COMMISSIONERS OF CUSTOMS & EXCISE

OPINION OF ADVOCATE GENERAL LA PERGOLA delivered on 27 February 1997

1. By this question referred for a prelimi jewellery, and RRI Limited ('RRI'), a spe nary ruling, the VAT and Duties Tribunal, cialist barter exchange company. The two Manchester Tribunal Centre, asks the Court companies negotiated the conclusion of a to give an interpretation clarifying the right contract under which Goldsmiths undertook to derogate provided for in Article 11C(1) of to supply RRI with jewellery which it had 1 the Sixth VAT Directive ('the Sixth Direc been unable to sell and in exchange RRI tive') governing the reduction of the taxable undertook to supply advertising services. amount in cases of total or partial non payment for the supply after the transaction which is subject to VAT has been completed. More particularly, the Court is asked to rule on the compatibility of rules implementing the legislation, such as the United Kingdom legislature has adopted, which allow the bene fit of a tax refund in respect of sales transac tions in which the consideration is paid in money and, by contrast, exclude it in respect of those transactions in which the consider ation consists of something other than 3. In pursuance of the agreement, Gold money. smiths delivered to RRI jewels to the value of £202 809.47 (including VAT of £30 205.67 declared by Goldsmiths in its VAT return for the period concerned and actually paid). For its part, RRI undertook to supply Gold smiths with advertising services to the same I — Facts value as the jewels.

2. The facts of this case involve two compa nies: Goldsmiths (Jewellers) Ltd ('Gold smiths'), a manufacturer and supplier of

4. After providing the first part of the adver tising services which it was contracted to * Original language: Italian. 1 — Sixth Council Directive (77/388/EEC) of 17 May 1977 on supply — to the value of £68 678.03 (includ the harmonization of the laws of the Member States relating ing VAT of £9 335) — RRI became insolvent to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1). and was wound up. The value of the services

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not performed therefore amounted to as that which RRI was required to make £135 162.12, including VAT of £20 130.53. could not be covered by the provision. 3

5. As a result of that insolvency, Goldsmiths 8. Goldsmiths considered that on the con took the view that the outstanding advertis trary they were entitled to tax relief on the ing debts could not be recovered and consideration which they had not received adjusted its VAT return for the period end and appealed to the national court, claiming ing on 28 February 1993. It accordingly that the national legislation was contrary to reduced the net amount of VAT by an the Sixth Directive, and in particular Article amount equivalent to the sum owed by way 11(C)1 which provides: of VAT on the services owed by RRI, and thenceforth irrecoverable.

'In the case of cancellation, refusal or total or 6. The Commissioners of Customs and partial non-payment, or where the price is Excise ('the Commissioners') refused to reduced after the supply takes place, the tax allow Goldsmiths the tax relief thus calcu able amount shall be reduced accordingly lated. On 1 June 1993 they issued an assess under conditions which shall be determined ment of VAT to Goldsmiths in the sum of by the Member States. £20 130 plus interest.

However, in the case of total or partial non 7. The administration reached that decision payment, Member States may derogate from on the basis of section 11(1) of the Finance this rule' (emphasis added). Act 1990. As the national court acknowl 2 edges, in cases of total or partial non payment that provision of national law restricts the right to a refund of VAT owed 3 — Section 11(2) of the Finance Act 1990 (the provision then applicable, subsequently re-enacted as section 36 of the VAT exclusively for a supply of goods or services Act 1994) provides for a right to refund of VAT owed. Under section 11(2), the relief applies where: 'for a consideration in money': having regard '(a) On or after 1 April 1989 a person has supplied goods or to the letter of the law, a supply in kind such services for a consideration in money and has accounted for and paid tax on the supply, (b) The whole or any part of the consideration for the supply has been written off in his accounts as a bad debt, and (c) A period of one year (beginning with the date of the 2 — Order for reference, point 11. supply) has elapsed.'

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In the light of that provision, in Goldsmiths' in the case of bad debts to exclude relief view the national rules should not have been where the consideration lost consists of limited to providing for tax relief only in the something other than money?' case of non-payment of the consideration in money in contracts for sale but should have included the case of consideration in kind. What the Community legislature has con ferred on the Member States is what Gold smiths describes as an 'all or nothing' power to derogate. This prevents the conditions on Legal assessment which tax relief is granted from being chosen on a selective, not impartial basis. In its view, the fact that the United Kingdom has applied the basic measure to sales transactions implies that there is no power to derogate in 4 relation to different sorts of supply.

10. The question raised by the Manchester Tribunal Centre turns, in essence, on the Member States' scope to exercise the right conferred on them by the directive to dero gate from the principle that the taxable amount is to be 'reduced accordingly', laid 9. Faced with that question of interpreta down in Article 11C(1) of the Community tion, the Manchester Tribunal Centre legislation. referred the following question to the Court for a preliminary ruling:

11. We are dealing with the rules laid down in the Finance Act of the United Kingdom 'Is the derogation contained in Article which allow for the tax relief provided for 11C(1) of the EC Sixth Council Directive of by the Sixth Directive in respect of certain 17 May 1977 on the harmonization of the categories of transactions, supplies for a con laws of the Member States relating to turn sideration in money, and not in respect of over taxes — Common system of value others where the consideration is in kind. added tax: uniform basis of assessment For the purposes of Community law, two (77/388/EEC) ("the Sixth Directive") to be different kinds of problem arise which I interpreted as permitting a Member State would draw to the Court's attention in an which enacts provisions for the refund of tax order progressing logically from one to the other: whether or not the second question needs to be answered depends on the reply 4 — Order for reference, point 16. given to the first, as I shall explain below.

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The Sixth Directive provides for reduction of Community provision to be interpreted, the taxable amount in the series of situations conceived of as 'strict', and therefore as nec listed therein: (1) cancellation, (2) refusal, (3) essarily bound to exclude application of the total or partial non-payment, (4) where the uniform Community provisions without price is reduced after the supply takes place. exception in the sphere in which it may be In each case, relief is granted under condi exercised. Following the second solution, the tions determined by the Member States in its power to derogate is, on the contrary, dou own legal order. National legislatures are bly discretionary: the national legislature given the right to derogate (as is laid down in may not only decide to avail itself of the the Directive) only in the case of situation derogation, which is not disputed, but is in 5 (3), that of 'total or partial non-payment'. addition free to differentiate the provisions In this case, the Member State may decide of the derogating measures in accordance not to allow the right to tax relief which it is, with needs of which it is to be the judge. by contrast, required to allow and apply, according to the rules it sees fit to lay down, with regard to the other situations envisaged by the directive.

13. The first view is supported by Gold smiths' pleadings, the second, with differing arguments, by the United Kingdom and Ger 12. The first question for the Court is to man Governments. The point which must be consider how the power to derogate has here made clear now is that if the first of these been conferred and conceived by the Com two opposing points of view is accepted, the munity legislature. More particularly, this case before the Court is immediately settled means ascertaining whether, in exercising the in radice. The solution adopted in the United power to derogate, the Member State must Kingdom legal order would be contrary to exclude reduction of the taxable amount both the design and the sphere of operation regardless in all cases of non-payment, or of the derogation provided for by the Com whether it may provide otherwise, as the munity provision. On the other hand, what United Kingdom legislature has in fact done. would be the consequences if the second of In the first hypothesis, the power or right to the two arguments in the case were to be derogate is, according to the wording of the accepted? Derogation could also be subject to discretionary restrictions, in the way that I have explained. This does not imply, how 5 — It should be noted that, unlike the English version, the Ital- ever, that the derogating provisions of ian provides for five situations: (1) 'annullamento' (cancella- tion); (2) 'recesso' (refusal); (3) 'risoluzione' (termination of a national law are free to depart from the prin contract for non-performance, because it has become impos- ciples and rules of Community law, includ sible to perform or because the terms are excessively oner- ous); (4) 'non pagamento totale o parziale' (total or partial ing those which the Court may infer from non-payment) and (5) 'riduzione del prezzo dopo che l'operazione è effettuata' (where the price is reduced after the the context of the Sixth Directive and thus supply takes place). Consequently, the power to derogate, from the rules which it lays down and the which in the English version relates to No (3), in the Italian version relates to No (4). aims which inspire it. This is the other ques-

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tion, to which I referred earlier in setting out non-application of the rule or principle the logical order of the questions raised by whose scope it is empowered to circumscribe. this reference to the Court. The power to derogate therefore implies the discretionary right to differentiate the provi sions and effects of the legislation resulting 6 from the exercise of that power. The judi cial interpretation of that power would be no different if it were stated — as it is in the sec ond sentence of Article 110(1) of the Sixth 14. As regards the first question, to my Directive in the Spanish version — that the mind the exercise of the power to derogate is Member State may decide not to apply, rather not subject to the condition which Gold than may derogate from, the provision on tax smiths' pleadings claim is laid down or at the 7 relief. Non-application of such a rule can least implied by the Sixth Directive, namely not be other than the result of a derogation, that the national legislature is required to and the power to derogate remains derogate from all the rules from which dero unchanged. Let me add to those consider gation is possible or else to apply without ations that it is provided, as I have pointed any derogations the reduction of the taxable out, that the taxable amount is to be reduced amount. I do not see that that kind of under conditions to be determined by the automatism, which operates by drawing en Member State. Which, to my mind, means bloc within the derogation any area for that the Sixth Directive recognizes (it which derogation is allowed under the Sixth Directive, has any basis in logic or any tex remains to be seen within what bounds) the tual justification. national legislature's discretion, both in lay ing down rules for application of the tax relief and also in refusing the grant of such 8 relief to the persons concerned.

6 — To return to the provision under consideration in this case, 15. The Community provision of relevance some of the legal literature gives expression to this view. P. here is clear and complete: it states that the Farmer and R. Lyal, EC Tax Law, Oxford, 1994, p. 128, commenting on the second sentence of Article 11C(1), stated Member States may derogate with regard to that 'the structure of the provision suggests that on this point (total or partial non-payment) the power to derogate reduction of the taxable amount, and goes on extends to the principle of reduction itself' (emphasis added). to specify the cases in which derogation is To the same (in my view) effect, see also B. J. M. Terra and J. Kajius, A Guide to the European VAT Directives, Amster- allowed. The power — or the right, if that is dam, 1993, comment on Article 11, p. 95: 'Notwithstanding the imperative "shall", Member States are free to derogate the preferred term — thus given to the from this rule (i. e. not to grant or to partially grant a reduc- Member State must be understood as mean tion) in the case of total or partial non-payment' (emphasis added). ing that the power to derogate falls within 7 — The second sentence of Article 11C(1) in the Spanish version the legislature's sphere of competence. It is reads as follows: 'non obstante, en los casos de impago total o parcial, los Estados miembros podrán no aplicar esta regla' the power, in regulating a given field of rela (emphasis added). tionships, to adopt rules replacing others 8 — On the other hand, as the United Kingdom points out in its observations, the Court has already been called upon to which however retain a residual field of assess an unqualified alternative — 'all or nothing' — in the exercise of a derogation. This was in the Bramhm judgment application. The derogating provision does in which the Court did not accept the claimant's interpreta- not operate to abolish the provision from tion of the right to derogate under Article 7(1)(d) of Direc- tive 79/7/EEC in terms fundamentally similar to those used which it derogates. If it were otherwise, we by Goldsmiths in this case. In Bramhill, the Court's reason- ing was based on the need for an interpretation of the scope should be speaking of repeal and not deroga or the derogation which was not incompatible with the aim tion. The legislature with the power to of progressively implementing the principle of equal treat- ment. See Case C-420/92 Bramhdl v Chief Adjudication derogate establishes, however, the field of Officer [1994] ECR I-3191, paragraphs 20 to 22.

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16. The important thing now is to ascertain should be recalled that the Court has consis the relationship between the rule in the tently held that, in interpreting a provision Community provision, expressed by the of Community law, it is necessary to con Sixth Directive to permit derogation, and the sider not only its wording but also its con provision of national law which derogates text and the aims pursued by the legislation 9 from it. of which it forms part.

The Sixth Directive pursues the aim of har monizing tax laws. Appropriate reduction of the taxable amount in the situations provided for is a rule of harmonization and is linked 18. What is involved is a general principle of to the others which, still in the field of tax, the Community order which has found spe were laid down in the Directive in order to cific expression in the matter before us. The pursue the same objective. The derogating derogation — more generally, all discretion measure adopted by the United Kingdom afforded to the Member States within the constitutes an exception with respect to the scheme of the Directive — must in any event rules in Article 11 which are intended to har be exercised within the limits and under the monize the criteria used to determine the conditions deriving from the principles 10 taxable amount. In this sense, derogation which guided the Community measure. from the Community rule constitutes an This rule is derived from the case-law of the exception to a general principle: that laid Court, and primarily from the judgment 1 down in Article 11A, which provides that given in Profant. 1 There it was held that as the taxable amount is to be 'in respect of regards the power of the Member States to goods and services other than those referred set the limits of, and detailed rules concern to in (b), (c) and (d) below, everything which ing, the exemptions on importation provided constitutes the consideration which has been for in Article 14, 'the authorities of the or is to be obtained by the supplier from the Member States do not enjoy a completed purchaser, the customer or a third party for discretion (...) for they have to observe the such supplies' (Article 11A(1)(a), emphasis fundamental objectives of the harmonization added). of value added tax' (paragraph 25). In Kühne, the Court held that the use made by the Member State concerned of the derogation

9 — Case C-30/93 AC-ATEL Electronic Vertriebs [1994] ECR I-2305, paragraph 21. 10 — To this effect, see the Opinion of Advocate General Mayras in Case 51/76 Verbond van Nederlandse Ondernemingen 17. That is why the derogation has to be [1977] ECR 113: 'Although the autonomy enjoyed by the Member States in matters of value added tax remains com justified. And it will be justified, to my mind, plete (...), nevertheless in areas where they may make excep only if it is made in accordance with the tions or may apply certain transitional provisions (...), they may only act with due regard to and in accordance with the principles and rules of Community law rel provisions of the directive' (page 134).

evant to the legislation in the case in point. 11 — Case 249/84 Profant [1985] ECR 3237, paragraphs 23 to 25; see also Case 127/86 Ledoux [1988] ECR 3741, In establishing the scope of the derogation, it paragraph 11.

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permitted under the second sentence of tax exemption, discriminates between money Article 6(2) was contrary to the principle of transactions and barter transactions. fiscal neutrality. Similarly, in Case 324/82 Commission v Belgium, the Court called upon to give a decision as to the proper exer cise of the power to derogate under Article 27 of the Sixth Directive, held that the defen dant had failed to fulfil its obligations: 'the [national] measures at issue', it declared, 'are 21. First of all, how must a supply in kind disproportionate to the aim in view in so far be defined for the purposes of the Sixth as they depart in a general and systematic Directive? As the Court stated in its judg way from the rules laid down in Article ment in Aardappelenbewaarplaats: 'a provi 11'. 13 sion of services is taxable (...) when the ser vice is provided against payment and the basis of assessment for such a service is everything "which makes up the consideration for the provision of services; there must there- fore be a direct link between the service pro- 14 vided and the consideration received'. The 19. However different the cases then under meaning of the expression 'everything consideration are from the present case, they which', also found, as I have said, in Article have at least this in common, that, in those 11A(1)(a), is clarified in the Naturally Yours cases as in this, the Member States were judgment. The Court was then considering a given a discretionary power to be exercised situation in which the value of the marketing within the bounds of, and thus in keeping service offered by the purchaser must be with, the Sixth Directive. It is clear from the added to the price agreed by the vendor and case-law that Member States must use the the purchaser, with the result that a supply discretion so provided in such as way as to which was not originally expressed in mon comply with the aims of harmonization and etary terms is converted into consideration 15 the underlying principles of the legislation. for money.

20. I shall directly consider this other aspect, 22. Returning to the Court's findings in that which is crucial to resolution of the dispute. case and in others, it is possible to say that Attention must be given, from the specific the transaction in question, in which there is angle of proportionality, to the question of a direct and express link between the service whether there is any justification for the provided and the consideration, necessarily derogation introduced into the United entails the exchange of two taxable services Kingdom system which, for the purposes of

14 — Case 154/80 Aardappelenbewaarplaats [1981] ECR 445, 12 — Case 50/88 Kühne [1989] ECR 1925, paragraph 17. paragraph 12 (emphasis added). 13 — Case 324/82 Commission v Belgium [1984] ECR 1861, 15 — See Case 230/87 Naturally Yours Cosmetics [1988] ECR paragraph 32. 6365, especially paragraphs 16 and 17.

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within the meaning of the Sixth Directive. 24. The United Kingdom Government justi To argue otherwise would foster the conse fies the solution adopted in the derogation quences mentioned by Advocate General by arguing that there was a greater risk of Vilaça: 'If any form of payment — such as, fraud in contracts under which payment was 18 for example, services provided in exchange made in kind rather than in money. for the goods supplied — were to be excluded from the consideration, the door would be left open to lawful tax avoidance, frustrating the objectives of the Sixth direc tive and enabling part of the basis of assess ment to escape taxation, and possibly creat ing distortions in the tax treatment of situations which are, from the economic or commercial standpoints, substantially identi 25. The solution adopted in the derogating 17 cal'. provision is therefore claimed to be in accordance with the 17th recital in the pre amble to the directive, which provides that 'the Member States should be able, within certain limits and subject to certain condi- tions, to take or retain special measures dero gating from this directive in order to sim plify the levying of tax or to avoid fraud or tax avoidance' (emphasis added).

23. That is why taxable persons who enter into the reciprocally binding undertakings to supply services which go to make up a trans action in kind are required to comply with the obligations laid down in Article 22 of the Directive. In particular, by virtue of Article 22(3)(a), every taxable person is to 'issue an invoice or other document serving as invoice 26. I for one consider that this case should in respect of all goods and services supplied be considered with regard to the limits and by him to another taxable person, and shall conditions which the Member States are keep a copy thereof'. Moreover, 'Every tax bound to observe in adopting derogating able person shall submit a return within an measures. Nor can I overlook the fact that interval' to be determined by each Member the Court has applied the principle of pro State. According to the facts in the case, that portionality, which is one of the general is what was done by both Goldsmiths and, principles of law underlying the Community in respect of the part payment made, by order, when defining the scope of derogating RRI. provisions. Accordingly, in Johnston, it held that 'That principle requires that derogations

16 — Sec also the Opinion of Advocate General Van Gerven in Case 126/88 Boots Company [1990] ECR I-1235, paragraph 18 — According to the observations of the Government, 'the 6: 'It is (...) quite clear that forms of consideration other United Kingdom chose to limit relief for bad debt to cases than payments in money arc envisaged by Article where the supply has been made "for a consideration in 11A(1)(a) '. money". Its purpose, in enacting that limitation, was to 17 — Opinion of Mr Vilaça in Case 230/87 Naturally Yours, sec- remove the risk of fraud: an approach which reflects the tion 19. 16th recital to the Sixth Directive' (point 24).

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remain within the limits of what is appropri the more general Community VAT system ate and necessary for achieving the aim in caused by the drawing of unimportant and 19 21 view'. unjustified distinctions.

27. Let me now apply the rule laid down in the case-law to the circumstances of this case. Even if transactions for a consideration in kind may involve greater risk of avoidance 29. Let me consider the approach adopted or evasion than transactions for money, that by the United Kingdom from the angle just does not suffice to justify the root-and- described. The case under examination branch decision taken by the United King reveals the outward effects, that is to say 20 dom legislature. The provision which it those which have occurred as a result of adopted pursues an aim which may, theoreti derogation from the directive as provided for cally, be supported; in practice, however, the in that State. As the United Kingdom difference in treatment between contracts for authorities themselves acknowledge, there is a consideration in kind and contracts for sale no danger of evasion in this case. 22 And yet, established as a derogation from the directive precisely because the United Kingdom legis is incompatible with a principle which ought lature drew a distinction between the two to have been complied with, namely fiscal types of transaction, Goldsmiths has suffered neutrality. significant financial loss: it is not entitled to recover value added tax relating to a transac tion which was performed, duly recorded and entered in accounts, but for which it did not receive the agreed consideration. It is in a worse position than it would have been in if 28. In my view, that principle is intimately it had entered into a contract for sale for bound up with the principle of non consideration in money. And all taxable per discrimination and, in the circumstances of sons who realize transactions of this sort will this case, demands that barter transactions be be in the same position: they will have less treated in the same manner as money trans protection in the event of total or partial actions. Fiscal neutrality specifically requires non-payment. Let no one say that a prudent equal treatment for those different economic trader will prefer to conclude a contract for activities in order to avoid distortions of sale in order to avoid such consequences.

19 — Case 222/84 Johnston [1986] ECR 1651, paragraph 38. 21 — On the other hand, this exposition of the principle seems to 20 — It is in this respect, it seems to me, that the case in point me to come very close to that put forward by the same most resembles the judgment in Case 324/82 Commission v United Kingdom Government in Case C-283/95 Fischer Belgium, cited above at footnote 13, for two kinds of rea- (action pending; see Observations of the United Kingdom son. First, because in both cases the Member State adduced Government submitted on 20 December 1995): 'The essen- the prevention of tax avoidance as a reason in support of tial nature of the principle (of fiscal neutrality), as its very the exercise of its right to derogate. Second, because now as name indicates, is neutrality. Its force is derived from the then, to borrow the words used by the Court on that occa- need to ensure that economic activities are treated equally sion, the exercise of the right to derogate results in legisla- and to ensure that the common system of value added taxa- tion which 'entails such a complete and general amendment tion is not distorted by irrelevant or illegitimate distinc- of the basis of assessment that it is impossible to accept that tions'. it contains only the derogations needed to avoid the risk of 22 — Observations of the United Kingdom, section 25: 'There is tax evasion or avoidance' (paragraph 31). no suggestion of fraud in the present case'.

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From the economic standpoint, as Advocate which is to be found in Article 11A(1)(a). General Vilaça observed in his Opinion in That provision states that the taxable amount Naturally Yours, barter transactions, like is to be in respect of the supply of goods and sales for money, are a means by which com services, everything which constitutes the 23 mercial life is carried on. There is no justi consideration which has been or is to be fication for discriminating against one cat obtained by the supplier. As I have said, a egory as opposed to the other. Such unequal broad interpretation of the formula so treatment results, for the purposes of the adopted was given in the Naturally Yours Sixth Directive and Community law, in judgment: it includes supplies which, lato unwarranted interference, far from neutral in sensu, may be expressed in economic terms. tax terms, with the trader's freedom of For tax purposes, therefore, supplies in kind, choice and, consequently, in unjustified fail if they can be assessed in monetary terms, 24 ure to reduce the taxable amount. Espe are treated in essence in the same way as cially as the general character of value added supplies for cash, and it is clear that such tax demands that the equal is treated equally must lead, as a matter of principle, to the 25 and the unequal in proportion unequally. equal treatment necessary for the two types of transaction. Exceptions and derogations may be provided for, but they must have an objective basis. Derogations must observe the principles of the Sixth Directive and, moreover, must not infringe the principle of proportionality.

30. In this respect, there is textual support in the directive for the conclusion just set out,

23 — In this regard it seems to me to be interesting to point out n what an Italian author wrote — i a not far-distant period of high inflation — on the subject of barter contracts: 'Notice should be taken of renewed interest in this tradi tional institution, which is capable of maintaining the value in exchange of goods in real terms, which by contrast are adversely affected by the current major inflationary pro cesses and the correlated extremely high money rates'; L. Ricca, 'Permuta', in EdD, Vol. XXXIII, p. 125, Milan, first paragraph. 24 — In this sense I shall take the liberty of disagreeing with the United Kingdom's statement at the hearing to the effect 31. Nor, furthermore, does the reference to that, from an economic point of view, excluding barter the 17th recital seem to me to be of the least transactions from qualifying for tax relief does not produce distortions in so far as the greater risk presented by distor relevance in the circumstances. The Member tions is internalized in the price. I take the view that this greater 'induced' risk is in itself liable to divert some trans States may adopt measures to simplify the actions into cash sales rather than barter transactions which levying of tax or to avoid fraud or tax avoid arc more onerous in the light of the United Kingdom leg islation. In essence, I mean that the reasoning of the United ance. The measures provided for are deroga Kingdom Government —based, as I understand it, on an idea that the rules specifically adopted for this type of tions, and the recital in question refers to the transaction arc 'neutral' as regards economic decisions — would be valid if those transactions were not in 'compe limits and conditions to which derogation is tition' with those carried out for money. subject. What those limits and conditions are 25 — Thus B. J. M. Terra and J. Kajus, op. cit., p. 14: 'The general is not expressly stated. They are constraints character of a sales tax demands that the equal is treated equally and the unequal in proportion unequally'. which must be inferred from the directive

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itself, by interpreting its provisions and the this point. From the first angle, the United areas in which it gives Member States free Kingdom had available to it the specific dom to derogate. means of dealing with any problems caused by barter transactions as regards avoidance 28 or evasion, and it did not use it. That is not all: even the measure adopted ad hoc by the legislature is nevertheless framed, pre cisely with reference to Article 11 in general, 32. Let us now look at the scheme of the as being limited by the criterion of necessity. directive. It provides for two instruments From the first point of view, the derogating which are related to the terms of the 17th provisions at issue were adopted without recital. going through the procedure laid down by the directive and without giving the other Member States the assurances concerning 29 compliance with that procedure. Nor, moreover, has the United Kingdom supplied First, the Member States may derogate from any actual assessment of absolute necessity the provisions of the directive in order to — and thus of there being no possible alter prevent tax evasion or avoidance and to that native measures — to support its decision to end Article 27 provides that the Member exclude barter transactions from entitlement States may maintain or adopt special mea to tax relief. sures, subject to the authorization of the Council. There is, therefore, a ready-made means by which the Member States may tackle and resolve the problems of tax eva 26 sion and avoidance.

Second, as the Court has recognized, recourse to such instruments demands the 33. Second, the directive provides for spe necessary safeguards. The measures 'in prin cific exemptions to be granted subject to the ciple may not derogate from the basis for conditions to be laid down 'for the purpose charging VAT laid down in Article 11, except of (...) preventing any possible evasion, within the limits strictly necessary for avoidance or abuse', or for 'other obliga 27 achieving that aim'. Two observations on tions' to be imposed by the Member States

26 — For an analysis of the objectives of the provision, I would 28 — It seems apposite to note in this connection that the United refer to the Opinion of Advocate General Jacobs in Case Kingdom is the Member State which has most often availed C-97/90 Lennartz [1991] ECR I-3812: 'The general rules of itself of the right under Article 27. It has notified to the the Sixth Directive (...) arc intended to reconcile the inter Commission 12 measures to simplify procedure or combat ests of administrative simplicity with the objectives of the avoidance (France and Germany have each presented five common VAT system, in particular that of neutrality. It measures for the Commission's information). The infor would clearly have been difficult, if not impossible, to mation is taken from B. Terra and J. Kajus, op. cit., see envisage all the technical difficulties or forms of avoidance commentary on Article 27, page 19. or evasion which the tax authorities throughout the Com 29 — See Article 27(2), (3) and (4). The provisions require the munity might encounter. (...) It was therefore appropriate Member state to inform the Commission of the measures to to allow Member States to seek individual authorization for be adopted so that it may assess them; furthermore, the measures dealing with particular problems' (paragraph 71). Commission is required to inform the other Member States 27 — Case 324/82 Commission v Belgium, cited at footnote 14, and they have the right to ask the Council to examine the paragraph 29. case.

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OPINION OF MR LA PERGOLA — CASE C-330/95

for the prevention of fraud. The provision Member States had interpreted the provision at issue is silent on this point, which is one in absolute good faith and should therefore reason for considering that it does not lay not have to suffer loss as a result of the 'very down the derogating provisions authorized serious' problems that would be created by by the directive where intended for the spe such a ruling. cific purpose of preventing tax evasion and avoidance. In other words, it may be inferred from the legislature's silence on this point that considerations of this nature should be unimportant.

36. I do not consider that argument to be meritorious. Limiting the effects of a judg ment under Article 177 constitutes an excep tional case: interpretation of a provision of Community law in the context of a reference 34. In conclusion, the United Kingdom leg for a preliminary ruling explains and defines islature considered it necessary to depart 'in the meaning and scope of the provision as it a general and systematic way' from the gen ought to be, or ought to have been, under eral rule in Article 11C(1) only with regard stood since it entered into force. The provi to barter transactions. However, not to allow sion, thus explained, may be applied by the reduction of the taxable amount in such courts even to legal relationships arising and cases means that the exercise of the discre established before the judgment ruling on tionary right to derogate fails to comply the request for interpretation, provided that with the precepts of Community law: it is the conditions enabling an action relating to contrary to the principle of fiscal neutrality the application of that provision to be which is in its turn linked to the fundamental 31 brought before the courts having jurisdiction principle of non-discrimination. 32 are satisfied.

35. One last brief observation. At the hear ing, the United Kingdom's representative These are the principles. The Court has asked the Court, if it were to hold that recourse to limiting the effects of a judgment excluding barter transactions from tax relief only in truly exceptional circumstances. That was unlawful, to limit the temporal effects is to say, where serious economic repercus of the judgment, on the ground that the sions result in particular from the large num ber of legal relationships established in good

30 — See, to this effect, Articles 13B, 14 and 22(8) of the Sixth Directive. 32 — Joined Cases 66/79, 127/79 and 128/79 Salumi [1980] ECR 31 — Commission v Belgium, cited above, paragraph 32. 1237, paragraph 9.

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GOLDSMITHS v COMMISSIONERS OF CUSTOMS & EXCISE

faith on the basis of a provision considered nity institutions acted in such a manner as to to be validly in force, and individuals and lead the United Kingdom to assume that the national authorities have been induced to rules it adopted in this case were lawful 36 behave in a manner inconsistent with Com under Community law. munity legislation by reason of an objective and significant uncertainty relating to the 33 scope of the community legislation.

Thus, most recently in the Bosman judg 38. Moreover, finally, for the reasons I have ment, the Court recognized the need to limit been explaining, I do not think that require the effects of a judgment — with a sole ments of legal certainty can lead to limitation exception in favour of persons who had of the effects of the judgment. In my view, already brought court proceedings or raised the discretion given to the Member States by an equivalent claim under national law — in the provision conferring the right to dero the light of the uncertainty existing as the gate could be properly exercised by reference compatibility of the various rules in force to the principles on which the scheme of the and applicable in respect of football transfers directive is based — proportionality, fiscal

34 and the provisions of Community law. neutrality, equal treatment — and which may be deduced from the judgments of the Court dealing with the question of the limits of derogations from the directive. I cannot, therefore, perceive that element of legal uncertainty which might, with reason, lead to an interpretation of the scope of the power to derogate granted to the Member States under the provision which accords 37. No such grounds appear in the circum with the rules in force in the United King stances of this case. The United Kingdom 37

dom system. has said nothing about the serious financial disruption which would be caused by appli cation of the provision interpreted in this 35 way . Nor, to my mind, have the Commu 36 — I would note that in earlier decisions the Court took into consideration in support of the alleged reliance the fact that the Commission did not pursue the procedure for failure to fulfil obligations with regard to a practice later held to be contrary to Community law law,, or where it had agreed tem porarily to the practice being maintained ( sec Case 33 — Opinion of Mr Tesauro in Case C-200 /90 Poulsen [1992 C-200/ ] 1992] C-163 C-163/ /90 Legros [1992 1992]] ECR I-4625 I-4625,, paragraph 32 ); simi 32);

I-2231,, section 12 ECR I-2231 12;; see also the decisions referred to larly,, in Cabanis-Issarte larly Cabanis-Issarte,, in deciding to limit the effects of therein. . therein judgment,, the Court took into consideration the fact the judgment 34 — Case C-415 C-415//93 Bosman [1995 1995]] ECR I-4921 I-4921,, paragraphs 143 that in that judgment the scope of previous judgments was 144.

. and 144 also limited (Case C-308 C-308/ /93 Cabanis-Issarte [1996 1996] ] ECR 35 — Moreover Moreover,, as is well known merely referring to the financial I-2097,, paragraphs 46 to 48 I-2097 ). 48). consequences of a given interpretation of Community law 37 — As regards the condition of reasonableness reasonableness,, it may be ruling,, docs not justify restricting the effects of the Court's ruling argueď from the judgment in Poulsen in which it found that in order to avoid the paradox pointed out by Mr Tesauro in 'the Danish Government has not shown that at the time cited,, of according 'more favourable treat the Opinion last cited introduced,, Community law when the contested levy was introduced ment precisely for the more serious infringements' (section could reasonably be construed as permitting such a tax' 12 ). 12). (Case C-200 C-200//90 Poulsen Poulsen,, paragraph 21 21,, emphasis added ). added).

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OPINION OF MR LA PERGOLA — CASE C-330/95

For the reasons set out above, I propose the following answer to the question referred by the national court:

The second sentence of Article 11C(1) of the Sixth VAT Directive must be inter preted as meaning that it does not authorize a Member State to exclude the pos sibility of tax relief in respect of bad debts arising from barter transactions when, by contrast, it does allow the possibility of tax relief for debts arising from sales transactions for a consideration in money.

I-3816