C-318/96

SPAR v FINANZLANDESDIREKTION FÜR SALZBURG

OPINION OF ADVOCATE GENERAL ALBER delivered on 20 November 1997 *

A — Introduction that it is unlawful under Article 33 of the Sixth Directive (second question), and

I — Nature of the problem

— does the Kammerumlage I restrict, in a manner contrary to Community law, the right to deduction under Article 17 of the 1. In this reference for a preliminary ruling, Sixth Directive (first question), because the Verwaltungsgerichtshof (Higher Admin- the basis of assessment applied is the istrative Court), Vienna, raises questions amount of input tax paid, which it has concerning the compatibility of the Austrian the effect of reducing? levy towards the functioning of chambers of commerce (Kammerumlage) with the com- mon system of value added tax (hereinafter 'VAT'), as governed by the Sixth Council Directive (77/388/EEC) on the harmonisa- tion of the laws of the Member States relat- ing to turnover taxes — Common system of II — Nature and calculation of the Kam- value added tax: uniform basis of assess- merumlage ment 1 (hereinafter 'the Sixth Directive').

2. The national proceedings turn in particu- lar on the following two questions: 3. The Kammerumlage is a levy towards the financing of the tasks entrusted to chambers of commerce which involve, in particular, representing the interests of all the members. — is the Kammerumlage I a duty in the Paragraph 3(2) of the Handelskammergesetz nature of a turnover tax, with the result (Austrian Law on Chambers of Commerce, hereinafter 'the HKG') defines members of chambers of commerce as 'all natural or legal * Original language: German. persons and all limited partnerships and reg- 1 — OJ 1977 L 145, p. 1. istered profit-making associations entitled

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2. in the case of insurers operating in Paragraph 21 of the Umsatzsteuergesetz the finance, credit and insurance sector, (Turnover Tax Act) 1994, be applied by the premium volume is to be taken. analogy.

2. The amount of the levy payable shall (3) The assembly of the Federal Chamber be calculated on a quarterly basis by the may decide to leave certain parts of the chamber member and shall be paid not bases of assessment out of account, later than fourteen days after the end of where to take them into account in cer- the second calendar month following tain sectors would impose a dispropor- the relevant quarter... tionate burden on chamber members. ...

3. Where the official form for the turn- over tax return provides for the annual amount of the levy to be shown, that amount shall be entered in the said return.

(5) The levy described in subparagraphs (1) and (2) shall be collected by the Federal 4. The levy shall not be charged on tax authorities in accordance with the chamber members whose annual turn- following provisions: over ... does not exceed two million Austrian schillings.

7. In order to cover its expenditure, the Fed- eral Economic Chamber (regional chambers) 'The Austrian Law on Turnover Tax ... in may set an additional levy calculated on a principle grants a right to full deduction of payroll basis, known as the 'Kammerumlage input tax. However, in practice Paragraph IF (hereinafter 'the KU II'). 2 It is clear from 57(1) of the H K G has the result that the the information provided by the Austrian traders concerned are not granted a 100% Government that that levy is in fact collected deduction of input tax, but only a lesser by the Federal Economic Chamber and by amount. The amount which may be claimed all the regional chambers. as input tax is referred to in Paragraph 57(1) of the H K G as the basis of assessment for a levy similar to a tax. Therefore, on the one 2 — Paragraph 57(7) and (8) of the HKG. hand, ... the right to deduct input tax is

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granted but, on the other, part of that taxes — Common system of value amount of input tax is clawed back from a added tax: uniform basis of assessment, large group of traders by the Finanzamt. The prohibit a Member State from charging way in which this happens is that the total a levy assessed at a fixed rate on the sum of turnover tax for supplies ... to the basis of: trader ... forms the basis of assessment for the KU I. Consequently, that basis of assess- ment is made up of the amount which the trader is entided to deduct as input tax.' 3

The national court goes on to state: (a) the turnover tax payable on supplies or other services provided by other traders to the person subject to the levy for the purposes of his ' busi- 'The Verwaltungsgerichtshof also considers ness, with the exception of that pay- that there is reasonable doubt as to whether able on sales of businesses, and the KU I regime is contrary to the prohibi- tion of taxes which can be characterised as turnover taxes, laid down by Article 33 of the Sixth Directive.' 4

11. Article 17(2) of the Sixth Directive pro- vides: ' 1 . Without prejudice to other Community provisions, in particular those laid down in the Community provisions in force relating to the general arrangements for the holding, movement and monitoring of products sub- ject to excise duty, this directive shall not prevent a Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, 'In so far as the goods and services are used stamp duties and, more generally, any taxes, for the purposes of his taxable transactions, duties or charges which cannot be character- the taxable person shall be entitled to deduct ised as turnover taxes, provided however that from the tax which he is hable to pay: those taxes, duties or charges do not, in trade between Member States, give rise to formali- ties connected with the crossing of frontiers.'

(a) VAT due or paid in respect of goods or services supplied or to be supplied to him by another taxable person; B — Opinion

I — Compatibility of the KU I with Article (b) VAT due or paid in respect of imported 33 of the Sixth Directive (second question) goods.'

13. Contrary to the sequence of the ques- tions but in line with the manner of proceed- 12. Article 33 of the Sixth Directive, as amended by Council Directive 91/680/EEC of 16 December 1991 supplementing the 5 — OJ 1991 L 376, p. 1.

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14. At the outset, it should be observed that the Austrian Government's contention that, 16. Conversely, the fact that Paragraph as a membership levy, the Kammerumlage in 57(5)(1) of the H K G refers to the application no way comes within the purview of Article by analogy of the provisions applicable to 33 but is still lawful, cannot be accepted. turnover tax does not have the effect of auto- Certainly, given the intention behind it, the matically equating, as the Commission Kammerumlage may constitute a form of asserts, the KU I with a duty comparable to membership levy. However, a membership turnover tax, because those provisions do levy does not vary to the same extent as the not determine the nature of the duty but Kammerumlage but is limited to a few differ- serve principally to determine the technical ences in scale. N o r is a membership levy method of calculation and the administrative dependent on the use made of the relevant process. body. However, the Kammerumlage is levied as consideration for services, if only notional, rendered by the chamber. There- 6 — Judgment in Joined Cases 93/88 and 94/88 Wisselink and fore, it is more comparable to a charge under Others [1989] ECR 2671, paragraphs 10 and 12.

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2. Possibility of examining the KU I in iso- 3. Examination of the essential features of lation VAT

20. The demarcation criteria, just like the formulation of Article 33 as a whole, must be considered in the context of the harmonised system of turnover tax in the form of the common system of VAT. 10 Under Article 2 of the first Council Directive (67/227/EEC), 1 1 the principle underlying 18. That reasoning cannot in my view be the common system is that a general tax on upheld because this case concerns not the consumption should be applied to goods and financing of the chambers in general but the calculation of the KU I on the basis of input transactions. If that method of calculation should turn out to be incompatible with the 7 — Judgments in Case 73/85 Kerrutt [1986] ECR 2219, para- graph 22, Wisselink and Others (cited above at footnote 6, common system of VAT, the existence of a paragraph 14), and Case C-109/90 Giant [1991] ECR further levy, the KU II, though calculated 1-1385, paragraph 9. 8 — Judgments in Kerrutt (cited above at footnote 7, paragraph differently, would be of no consequence, par- 22) and Wisselink and Others (cited above at footnote 6, ticularly as those two levies are independent paragraph 14). 9 — Opinion in Case C-200/90 Dansk Denkavit and Poulson of each other in the sense that they are not Trading [1992] ECR I-2217, especially at 1-2235. necessarily levied together on all the mem- 10 — Judgment in Case 295/84 Rousseau Wilmot [1985] ECR 3759, paragraph 14. bers, as was stated at the hearing. It follows 11 — Council Directive of 11 April 1967 on the harmonisation of that the KU I may be assessed in isolation legislation of Member States concerning turnover taxes (OJ, English Special Edition 1967, p. 14, hereinafter 'the First under Article 33. VAT Directive').

— it is in proportion to the price of such 21. Article 33 of the Sixth Directive is goods and services; intended to prevent the operation of the common system of VAT from being jeopar- dised by fiscal measures imposed by Member States on the movement of goods and ser- vices and affecting commercial transactions in a manner comparable to VAT. 12 Thus, the Court has not focused primarily on the question whether or not charges are in the — it is levied at each stage of the production nature of turnover taxes, but has always and distribution process; examined as a matter of priority whether the duties exhibit the essential characteristics of VAT, since, according to settled case-law (see, for example, the judgments in Bozzi and Dansk Denkavit), taxes, duties and charges which exhibit the essential character- istics of VAT must in any event be deemed to affect the movement of goods and services in a manner comparable to VAT. Accord- — it applies to the value added to goods and ingly, taxes, duties and charges which do not services, the tax payable on a transaction have these essential characteristics are not being calculated after deduction of the precluded by Article 33. 13 As to the essential tax paid on the previous transaction; 14

14 — Judgments in Bozzi (cited above at footnote 13, paragraph 12 — Judgment in Rousseau Wilmot (cited above at footnote 10, 12), Case 252/86 Bergandi [1988] ECR 1343, paragraph 15, paragraph 16). Wisselink and Others (cited above at footnote 6, paragraph 13 — Judgments in Cases C-347/90 Bozzi [1992] ECR I-2947, 18), Giant (cited above at footnote 7, paragraphs 11 and 12), paragraphs 9 and 10, and Dansk Denkavit and Poulsen and Dansk Denkavit and Poulsen Trading (cited above at Trading (cited above at footnote 9, paragraph 11). footnote 9, paragraph 11).

23. O n the other hand, the Italian and Ger- man Governments contend that the KU I is not of general application. The Italian Gov- ernment points out in that connection that liberal professions and undertakings whose turnover does not exceed OS 2 million are 22. I now turn to the question whether the not subject to it. None the less, the Commis- KU I at issue in these proceedings exhibits sion considers that this exemption does not the essential characteristics of VAT. For the alter the general nature of the KU I since the purposes of the first (twofold) criterion, it Sixth Directive itself lays down specific must therefore be examined whether the KU schemes for small enterprises, agricultural I is applied generally to transactions involv- producers and liberal professions, which in ing goods or services. In the Commission's no way detracts from the general nature of view, the criterion of general application is VAT. satisfied. In that connection, it refers to the order for reference and the statements of the national court explaining that every trader engaged in industrial, craft or commercial activities is subject to the levy. Reference is also made to Paragraph 3(2) of the H K G . 24. However, the Austrian Government Under that provision, all natural and legal submits that the KU I is not always calcu- persons, limited partnerships and registered lated on the basis of input transactions, that profit-making associations which are entitled is to say on the basis of supplies to the independently to pursue craft, industrial or chamber member. Thus Paragraph 57(2) of commercial activities, together with under- the H K G lays down other bases of assess- takings in the finance, credit, insurance, ment for credit institutions and insurance transport and tourism sectors, are members companies. It observes that, under Paragraph of chambers of commerce. The fact that the 57(3), the assembly of the Federal Chamber KU I applies to transactions follows, in the may decide to exclude certain parts of the Commission's view, from Paragraph 57(1) of bases of assessment from the calculation of the Kammerumlage where some trade and professional sectors are required to make a 15 — Judgments in Bergandi (cited above at footnote 14, para- disproportionate contribution, and that this graph 8) and Joined Cases C-370/95, C-371/95 and provision has been applied in certain sectors. C-372/95 Careda and Others [1997] ECR I-3721, para- graph 15. Accordingly, there are exemptions from the

calculation of the KU I under Paragraph 26. The Italian Government emphasises, 57(2) of the H K G for credit institutions, finally, that the KU I does not apply to all financial establishments, insurance compa- members’ transactions but only to those in nies, retirement pensions, building compa- respect of which they have received supplies nies, the petroleum industry, traders in fuel and have therefore had to pay turnover tax. and oil, buying organisations in the food The representative of the Finanzlandesdirek- trade, freight forwarders and undertakings tion für Salzburg gave an example of this at engaged in the transportation of goods, as the hearing. He considered the situation well as petrol stations. Thus, it is submitted, where the undertaking liable to pay the Kammerumlage itself manufactured the consideration of input transactions is only entire article supplied by it, without any one method of calculation amongst others. input from third parties. In that case, the KU I would not be payable. According to the Austrian Government, the Kammerumlage is generally calculated according to the under- taking's inputs, that is to say on supplies received by the undertaking. Since the over- riding principle in the levying of the KU I is the relative use made of the chambers, it is necessary to determine in each case how that principle may best be observed. For that rea- son, inputs are calculated partly on the basis of salaries but also partly on the basis of sup- plies and, in the case of insurance companies, for example, by other methods. 25. At the hearing, the Finanzlandesdirek- tion für Salzburg explained the significance of the Kammerumlage as regards the persons subject to it. Apparently, only about one-half of chamber members are subject to the KU I, that is to say around 11 000 members. Fur- thermore, there are only very few chamber members who have to pay only the KU I. This means that the KU I applies in the vast majority of cases in conjunction with the KU II. Persons liable to pay only the KU I amount to a few thousand only. Finally, it 27. However, as has already been stated, that was stated at the hearing that the KU II is is of no importance since it is a matter of levied in around 6 000 cases in isolation from examining whether calculation of the Kam- the KU I which is calculated on the basis of merumlage on the basis of input transactions input transactions. Accordingly, it is submit- is compatible with the system of VAT. In ted, the KU I which applies to input transac- that connection, it is appropriate to examine tions is only one method of calculation whether the levying of the KU I on the basis amongst others and may not be regarded as of input transactions must be deemed to be a being of general application. It has already general tax or duty for the purposes of VAT. been indicated that the link between the KU That question depends primarily on the defi- I and the KU II is not relevant to the ques- nition of the term ‘general', which is why it tion to be resolved in these proceedings. cannot be ruled out ab initio that one

29. To the same effect was the Court's ruling with regard to a tax introduced by a munici- pality under which any person regularly or occasionally organising within the munici- pality shows or public entertainments for 32. However, that reasoning is not free from which it charged an admission fee was hable doubt. It is true, as the parties have submit- to tax on the gross amount of receipts. The ted, that certain undertakings are not subject Court deemed it not to be a general tax to the KU I (for example, if their annual because it applied only to a limited category turnover does not exceed ÖS 2 million). But of goods and services. 17 this does not mean that only certain catego- ries of persons, and thus certain activities and

16 — Judgment in Joined Cases 93/88 and 94/88, loc. cit., cited at footnote 6, paragraph 20. 17 — Judgment in Giant (cited above at footnote 7, paragraph 18 — Judgment in Bozzi (cited above at footnote 13, paragraph 14). 14).

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35. From that, it could be inferred that a 2 of the First VAT Directive, the common 'membership levy' for the financing of an system of VAT is based on the principle that autonomous organisation cannot be deemed a general consumption tax is to be applied to to be a tax or duty within the meaning of goods and services. Under Article 2 of the Article 33 either. However, it should be Sixth Directive, the following are to be sub- observed in that connection that Article 33 ject to VAT: was inapplicable not only because the levy was created in order to finance social funds but also because the essential characteristics of VAT were not present. Once again, there- fore, the reasoning was based on the essential characteristics of VAT. 1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;

36. Thus the KU I must also be examined on the basis of those essential characteristics. As 2. the importation of goods. has already been established, the first of those characteristics is indeed present because the KU I refers to transactions gen- erally.

40. Conversely, even if it were possible to establish that, whenever liability to the KU I arises, there is a corresponding transaction by the chamber member, the necessary con- 38. In the case of the KU I, however, it is nection between the imposition of the tax not in fact the transactions of the person and the relevant transaction which is liable to the membership levy which form required under the system of VAT would the basis for calculating the levy and are thus still not be present. This becomes clear on directly affected by it. The relevant basis is examining the next criterion to be consid- the VAT paid by the chamber member in the ered. According to that criterion, the tax or price charged by his suppliers. It is therefore duty must be exactly proportionate to the the transactions of the supplier which form price of the goods and services. the basis for calculating the Kammerumlage. In the Austrian Government's view, it fol- lows that the KU I is not a turnover tax within the meaning of Article 33.

3.4 Proportionality of the KU I

and the difference between purchase and sell- is questionable whether there is also exact ing prices — in other words, the profit. proportionality in relation to the price Moreover, as was stated at the hearing, pro- charged in respect of those transactions. portionality is regarded merely as an over- riding principle and programme, adhered to by individual undertakings using different methods of calculation, one of which is to have regard to input transactions. That does not, however, prove that the latter method of calculation actually results in a charge which is exactly proportionate to the price of goods and services. 43. Even if it may be assumed that the undertaking liable to pay the levy passes on the KU I paid by it in the price of goods and services supplied by it, the amount of the Kammerumlage cannot be assumed to be exactly proportionate to the price of the goods and services. The amount of the KU I depends on the supplies required by the undertaking subject to the levy for the pur- poses of its transactions. The price of the goods and services supplied by it subse- quently is not, however, determined accord- ing to the volume of those supplies alone but also according to that of its own services. 42. As evidence of proportionality, the These may be variable and may therefore be Commission adds that the KU I is 'to be cal- reflected to a varying extent in the price of culated on the basis of the turnover tax' 22 the final product. Thus, at the hearing, the and 'thereby reflects the proportionality of representative of the Finanzlandesdirektion the latter'. In that connection, the tax paid für Salzburg pointed out that the value by the chamber member in the price and added varies from one economic sector to forming the basis of the calculation of the another, and even within a particular sector, KU I relates to the transactions of the sup- depending on whether or not the undertak- plier, that is to say, the input transactions. ing succeeds in making the best possible use That tax is exactly proportionate to the price of its resources. One economic sector with a of the goods made available by the supplier. strong performance is, for example, that of Since the KU I is calculated in units per credit institutions and insurance companies. thousand of that turnover tax, it may be In that sector, only small amounts of VAT assumed that it is also exactly proportionate are payable on supplies made by other to the price of the goods or services supplied. undertakings or in respect of other services. However, the relevant transactions for In other words, in spite of relatively strong present purposes are not the input transac- performance, there is only a relatively small tions but, as demonstrated above, those car- charge to KU I. That is, moreover, the rea- ried out by the chamber member himself. It son why the legislature made special provi- sion for that sector in Paragraph 57(2) of the H K G , according to which the KU I is not to be calculated on the basis of input transac- 22 — That is to say, the turnover tax paid by the chamber mem- tions. ber in the price.

45. The KU I should therefore be held not to affect the turnover of chamber members in a manner comparable to VAT, nor is it exactly proportionate to the price of goods or services supplied by them. 48. This does not necessarily mean that the imposition of the KU I cannot be regarded as comparable to VAT since, even under the system of VAT, it is essentially the recipient of the service who pays the VAT together with the price to the supplier who then accounts for it to the competent tax auth- 46. In what follows, it is appropriate to ority (less the VAT paid by him on his input examine whether the result arrived at is any transactions). Under the VAT system, the tax different if the transactions of the chamber is passed on to the next stage of production. member's supplier are taken into account. In the case of the KU I, it is also the recipi- Thus, at the hearing, the Commission also ent of goods and services who pays the pointed out that receipt of a service is always Kammerumlage. In contrast to VAT, he does balanced under the system of VAT by the not pay the Kammerumlage to the supplier supply of a service. but accounts for it himself.

47. In that connection, it could be argued that the only decisive factor for the purposes of Article 33 is that transactions, irrespective of which kind, are taxed in a manner compa- 49. Strictly as a matter of principle, the KU I rable to VAT. If the transactions of the could be deemed to affect transactions in a chamber member's supplier were taken as a manner comparable to VAT. None the less,

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51. However, in the case of the KU I, it is the supply to the chamber member which constitutes the chargeable transaction. The

23 — Judgment in Careda and Others, cited above at footnote 15, 53. That conclusion might be different if paragraph 15. regard were none the less had to the transac- 24 — Judgment in Case 391/85 Commission v Belgium [1988] ECR 579, paragraph 23. tions effected by the chamber member. Since

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undertakings operating at all stages of the to be characterised as a turnover tax. 26 None production and distribution process are the less, the Court went on to add that 'it is chamber members, it could be said that the sufficient for it to exhibit the essential char- KU I is as a matter of principle levied at acteristics of VAT'. 27 However, applicability every production and distribution stage. It to the value added to goods and services has should, however, be borne in mind that — been held by the Court to be one of those on this view of the matter — the KU I is not essential characteristics. Hence it would be proportionate. essential for a tax or duty which, according to Article 33, is not compatible with the sys- tem of VAT to apply to the value added to goods and services.

3.7 The KU I by reference to the value added

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Sixth Directive as such. If it were otherwise, 61. Even if an examination is conducted into national competences would be curtailed and the question whether there has been an that would run counter to the principle of infringement of Article 17, the result is that a subsidiarity. Taxes and duties which are law- reduction in the amount of input tax can ful under Article 33 may thus be viewed in only be of an accounting nature. There is no isolation, that is to say independently of the direct link between the possibility of claim- Sixth Directive. Even an 'infringement' of ing a deduction in respect of input tax and specific provisions of the Sixth Directive is the levying of the KU I. Thus, the KU I is therefore irrelevant because those provisions also levied where the chamber member is only apply to duties falling within the sys- unable to set off input transactions against tem of VAT. Accordingly, an examination on deductions. the basis of Article 17 of the Sixth Directive is possible only in the context of the system of VAT itself.

III — Infringement of Article 5 of the EC Treaty?

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63. Moreover, Article 5 chiefly concerns system of VAT by affecting the movement of principles of a general nature; it is highly goods and services. The KU I is therefore dubious whether provisions governing VAT lawful under Article 33. form part of those principles. General prin- ciples for these purposes, as is apparent from the preamble to the Sixth Directive, 34 are rather those concerning free trade, the pre- vention of distortions of competition and the elimination of formalities on the crossing of 65. The KU I is not intended either to cir- frontiers. It is also a matter of creating a uni- cumvent VAT or to correct it, nor can it be form basis for the Community's own essentially equated with it. Its sole purpose is resources. That basis would be curtailed if to provide financing by chamber members taxes and duties were separated from the sys- for the lawful representation of their inter- tem of VAT and levied separately from VAT ests. The amount of input tax paid, which or in addition to it. As none of those consid- was adopted as an indicator of the ability of erations applies to the KU I, it does not chamber members to make a financial contri- affect the free movement of goods and ser- bution, was perhaps unfortunate but was no vices from that point of view either. doubt chosen as the basis of assessment on purely practical grounds because that amount can readily be ascertained and checked from data available elsewhere.

Even if a different view were taken, it should be borne in mind that, because the amount levied is so small, the KU I cannot give rise to distortions, particularly since the legisla- ture allows for much wider bands in the V — Ancillary examination of the temporal VAT rates themselves. effect of the judgment to be given

That is a matter for the national courts. 68. Furthermore, even if the Court were to TheCourt's task is merely to examine find there to have been an infringement, it whether the method of calculating the KU I, would not have been readily discernible namely by reference to input transactions, is owing to the complexity of the problem. The compatible with the common system of situation was different in Dansk Denkavit VAT. If that question is answered in the and Pouhen Trading, where the Commission negative, it does not mean that the KU I may alerted the Danish Government, only a mat- no longer be levied. It would simply be ter of weeks after the introduction of the necessary to find another method of calcula- duty in question, to the problems to which tion which would be compatible with the that duty could give rise under Article 33. In system of VAT. For that reason it would be those circumstances, the Court did not con- useful to limit the temporal effects of the sider it expedient to limit the effects of its judgment since, as regards the past, there can judgment in time. 35 But since in the present be no question of reimbursements but case it would not have been so easy to dis- merely of recalculating a Kammerumlage cern the existence of a possible infringement w h o s e a m o u n t w o u l d n o t be significantly of Article 33, the Court could limit the different. effects of its judgment in time.

C — Conclusion

69. Accordingly, I p r o p o s e that the C o u r t should reply as follows t o the questions referred for a preliminary ruling: