C-276/97

OPINION OF MR ALBER — CASE C-276/97

O P I N I O N OF ADVOCATE GENERAL ALBER delivered on 27 January 2000 *

I — Introduction these fees are not subjected to VAT because in France they are considered to be pay- ments made to the State. The fee is not regarded as consideration for an economic activity and therefore no VAT is levied. The operation and maintenance of stretches of toll road can — unlike planning and con- struction — be entrusted to others by granting concessions to State-owned, semi-State-owned and, in certain cases, private bodies. 2 1. In these proceedings for failure to fulfil Treaty obligations the Commission claims that France has failed to fulfil its obliga- tions under the EC Treaty in so far as value added tax was not levied on motorway fees (tolls) and corresponding payments of own resources with interest were not made. 1

I I— Pre-litigation procedure

3. By letter of 26 April 1984 the Commis- sion asked the French authorities to express their view on the VAT rules in respect of French motorway concessionaires. 2. In France fees are levied for the use of certain stretches of motorway. However,

* Original language: German. 1 — The Commission has also brought actions against Ireland, the United Kingdom, the Netherlands and Greece on the 4. In their reply of 5 July 1984 the French same grounds: see Cases C-358/97, C-359/97, C-408/97 and C-260/98. Unlike the other defendant Member States, the authorities stated that the concessionaires Netherlands has made the corresponding amount of own resources available to the Commission pending clarification of the points at issue. In the Member States against which no action has been brought either no tolls are charged or VAT is levied on tolls. As a lower rate of tax is levied in Spain, the 2 — A proportion of the toll collected — the exact amount of Commission has also brought an action against Spain (Case which is unknown — must be paid by the concessionaires to C-83/99). the State.

8. By letter of 17 February 1989 the French authorities again stated that the toll was 13. By letter of formal notice of 28 January essentially a parafiscal tax. 1988 the Commission asked the French

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Government to submit its observations 17. The Commission was unable to concur pursuant to Article 169 of the EC Treaty with France's view and therefore brought (now Article 226 EC). the present action under Article 169 of the EC Treaty, which was lodged at the Court Registry on 30 July 1997.

'The following shall be subject to value added tax: (1) dismiss the application,

1. the supply of goods or services effected (2) order the Commission to bear the costs for consideration within the territory of of the proceedings. the country by a taxable person acting as such;...'

21. Under Article 4(1), (2) and (5) of the Directive: III— Legal background

' 1 . "Taxable person" shall mean any per- son who independently carries out in any 1. The levying of VAT place any economic activity specified in paragraph 2, whatever the purpose or results of that activity.

Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — common system of value 2. The economic activities referred to in added tax: uniform basis of assessment 3 paragraph 1 shall comprise all activities of (hereinafter 'the Directive') producers, traders and persons supplying services, including mining and agricultural activities and activities of the professions. 3 — OJ 1977 L 145, p. 1. The exploitation of tangible or intangible

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'VAT resources shall be calculated by However, when they engage in such activ- applying the uniform rate, set in accor- ities or transactions, they shall be consid- ered taxable persons in respect of these 4 — Annex D lists a total of 13 types of activity, including activities or transactions where treatment telecommunications, the supply of water, gas, electricity, as non-taxable persons would lead to port and airport services, and the running of trade fairs and exhibitions. significant distortions of competition. 5 — Article 13(A) lists 17 exemptions for certain activities in the public interest. Thus inter alia the following are exempt from tax: the supply of services by the public postal services, hospital and medical care, the supply of services and of goods closely linked to welfare and social security work and to the protection of children and young persons, supply of services for their members by non-profit-making organisa- tions with aims of a political, trade-union, religious, patriotic, philosophical, philanthropic or civil nature, and activities of public radio and television bodies other than those of a commercial nature. Article 13(B) provides for further exemptions for insurance and reinsurance transac- tions, certain credit activities and — with four excep- In any case, these bodies shall be consid- tions — the leasing or letting of immovable property. ered taxable persons in relation to the 6 — OJ 1989 L 155, p. 9.

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dance with Decision 88/376/EEC, Eura- rate applicable on the Member State's tom, to the base determined in accordance money market on the due date for short- with this Regulation.' term public financing operations, increased by two percentage points. This rate shall be increased by 0.25 of a percentage point for each month of delay. The increased rate shall be applied to the entire period of delay.' 23. Article 2(1) provides:

ment of a toll by users, as is the case in users are not compelled to use this toll road France, constitutes an economic activity network, there is a direct link between the within the meaning of Articles 2 and 4 of service and the price paid. the Sixth VAT Directive.

30. A distinction must be drawn between engagement in such an economic activity 27. Even if, as in France, this activity is by State bodies, or for the account thereof, carried out under a special system of and the concept of the exercise of public concessions which the State grants to authority. Under Article 4(5) of the Sixth State-owned, semi-State-owned or, in cer- VAT Directive, the only activities in respect tain cases, private bodies, that does not of which a State and its local authorities are mean that it falls outside the scope of VAT. not to be regarded as taxable persons are First, it constitutes an economic activity those which they engage in as public within the meaning of Article 2 of the Sixth authorities. VAT Directive and, second, it is carried out by taxable persons within the meaning of Article 4 which can also include bodies governed by public law.

31. The general nature of VAT means that all economic transactions are liable to tax. The State and the other bodies governed by public law are not exempt from VAT in 28. The term 'economic activity' must be general, but only in respect of the activities appraised objectively in the light of the which they engage in as public authorities actual economic situation. It is not neces- in the strict sense. Moreover, under the sary for services to be primarily or exclu- second paragraph of Article 4(5) they are sively orientated towards market life. It is liable to VAT even then where treatment as sufficient that they are actually connected non-taxable persons would lead to signifi- with economic life in some way or other. cant distortion of competition.

33. Failure to levy VAT on the toll has serious consequences, not only at local level but in respect of all Community traders 35. However, France has not allowed the who use French toll roads infrastructure in Commission to examine the figures and the course of their taxable activities since calculation method which the French they are unable to deduct such expenditure, authorities used to argue that, if the which places a burden on their economic Commission's view is correct, France even activity, in conformity with the Sixth VAT has a claim to reimbursement of the Directive. Failure to levy VAT has, there- amounts it has overpaid as own resources fore, considerable effects on the functioning since 1981. At any rate, the claim for of the harmonised VAT system which plays reimbursement asserted by France is non- an important role in the single market. It existent since either the French system is in must, therefore, be concluded that there is conformity with Community law and no significant distortion of competition. There correction to the assessment base for VAT is also unequal treatment of the Member own resources arises, or it infringes the States in respect of the Community budget Directive with the result that the assess- as they have to bear a higher financial ment base increases. burden because missing income has to be made up from gross domestic product.

36. As regards interest for late payment, the Commission refers to Article 11 of Regulation No 1552/89. It was pointed out to France that interest on late payment was due from 31 March 1986 in respect of 34. As regards the allegation that the contributions to own resources which had Community provisions on the payment of not been paid as a result of the failure to own resources from VAT have been levy VAT.

41. As regards the problem of distortion of competition, the French Government takes 39. In the present case the French Govern- ment considers that the State is exercising State authority in collecting the toll. It 9 — See the Proposal for a Council Directive on the charging of heavy goods vehicles for the use of certain infrastructures owns the public road network and has sole [COM(96) 331 final] and the Commission Green Paper State authority which it exercises in the "Towards fair and efficient pricing in transport — policy options for internalising the external costs of transport in form of administrative acts, namely in the European Union" COM(95) 691 final.

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the view that French and foreign traders are V — Appraisal in the same position and therefore foreign traders are not at a disadvantage. As far as the alleged unequal treatment of the Mem- ber States as regards the Community bud- get is concerned, there is no distortion of competition within the meaning of Arti- cle 4(5) of the Sixth VAT Directive. 1. Levying of VAT on tolls

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the service provided and the consideration (b) Taxable persons received. 10

49. Under Article 4(1) and (2) of the Directive, a taxable person is any person 46. There is such a direct link in that a toll who independently carries out any eco- is paid for the provision of infrastructure, nomic activity — and that includes all the amount of which, in turn, depends on activities of producers, traders or persons the type of vehicle concerned and the length supplying services. of the road.

50. Under Article 4(5)(1) of the Directive, States, regional and local government 47. The toll itself is not a tax, as a tax is authorities and other bodies governed by payment of money, which is not made in public law are not to be considered taxable return for a particular service, and which is persons in respect of the activities or imposed by a body governed by public law, transactions in which they engage as public in order to generate revenue, on all those authorities. This is so even where they who meet the statutory conditions for collect dues, fees, contributions or other liability. Since, however, in the present case payments in connection with these activ- there is a specific service provided in return, ities or transactions. in the shape of the supply of certain parts of the roads infrastructure, the money paid is a fee which must be seen as a consideration for a service provided.

(aa) State activity

52. This means, first, that not all activities of bodies governed by public law are automatically exempt from tax, but only those which also serve to discharge a specific responsibility in the exercise of public authority. Second, an activity carried 55. Since, under Article 6(1) of the Sixth on by a private individual is not exempted VAT Directive, even activities carried out in from VAT merely because it consists in pursuance of the law are taxable, it is clear carrying out acts falling within the prero- that the mere fact that an activity falls gatives of the public authority. 12 within the remit of public law is not sufficient to fulfil the requirements for VAT exemption in Article 4(5)(1). As that provision constitutes an exception to the definition of taxable person, it must be interpreted strictly. Thus, only those activ- 53. The subject-matter or purpose of the ities of public authorities which constitute activity of the public body does not deter- the essential core of State activity can' be mine whether activities are carried out as considered exempt from VAT. This is also public authorities. According to the case- confirmed by Article 4(5)(3), which refers law of the Court, it is the way in which the to the activities listed in Annex D (see activities are carried out that determines to above at point 21), in respect of which even what extent public bodies are to be treated bodies governed by public law are liable to as non-taxable persons. 13 VAT.

essential facilities. If the State carries out of achieving the same goal, i.e. the relevant such activities, it must be considered to do qualification. However, in the present case so in the exercise of public authority. the user has a genuine choice between two possibilities — although one may be less convenient and slower — in order to achieve the same goal. The toll road net- work is made available to everyone who is prepared to pay, but only to them. This must be viewed as selection, which is alien to State activity. Tolls are levied principally for economic and financial reasons. Thus, the provision of a limited stretch of road on payment of a toll cannot be regarded as a State activity. 57. It is true that the provision of roads is not expressly classified as an activity sub- ject to VAT, as the supply of water, gas and electricity is in Annex D. In reality, the provision of roads infrastructure without charge must be seen as an activity of the State. The question remains whether, con- 58. Article 4(5)(1) is, therefore, not applic- versely, the whole network of roads built able to the present case, since the provision with taxpayers' money in discharge of a of infrastructure on payment of a toll State responsibility can be operated by cannot be regarded as an activity carried private economic operators on payment of out in the exercise of public authority. The a toll which is collected from everyone. In bodies empowered to collect the tolls must, any event, making available a stretch of therefore, be considered to be taxable road in a manner which is selective, inas- persons. much as payment is required, cannot be seen as an activity performed in the exercise of public authority. The levying of the toll is, indeed, also possible in connection with a State activity and, in itself, does not give rise to tax liability, as Article 4(5)(1) expressly confirms. It should be borne in mind that, in the present case, the road user (bb) Economic activity has a choice between using the toll-free road infrastructure and using toll roads. In providing the toll-free road network, the State responsibility has, in any event, been discharged and the provision of additional stretches of road on payment of a toll must be viewed as a purely private economic activity. Anyone who needs planning per- 59. As I have already pointed out, under mission which is subject to a fee has no Article 4(1) of the Directive any person option but to pay the fee. Anyone who is who independently carries out any eco- following a course of study for which nomic activity is deemed to be a taxable everyone must pay fees has no other means person.

64. Consideration of the actual economic situation is a fundamental criterion for the application of the common VAT system. 17 62. Under this wide definition of economic In the present case this means that given activity it is not necessary for services to be parts of the roads infrastructure are made primarily or exclusively orientated towards available to road users on payment of a the market or economic life. It is sufficient toll. As this activity is thus also carried out that they are actually connected with by the relevant bodies to generate revenue, economic life in some way or other. 1 6In in order to cover expenditure on materials the present case, the road infrastructure is and at the same time earn an income, it is provided, on payment of a toll, under a clear that there is an economic activity in special system of concessions which the the case under consideration. State can grant to State-owned, semi-State- owned, or even private bodies.

(c) (In the alternative) Distortion of com- petition 63. Even if the grant of concessions in France is subject to public law and the toll motorways form part of the public roads network, this is of no relevance in deter- mining whether there is an economic

65. Under Article 4(5)(2) States, regional 15 — Case 235/85, cited above at footnote 11, Case 348/87 and local government authorities and other Stichting Uitvoering Financiële Acties v Staatsecretaris van Financiën [19891 ECR 1737, paragraph 10, and Case C-186/89 Van Tiem [1990] ECR I-4363, paragraph 17. 16 — Opinion of Advocate General Lenz of 12 February 1987 in Case 235/85, point 22, and judgment in that case, cited 17 — Case C-260/95 Commissioners of Customs and Excise v above at footnote 11. DFDS [1997] ECR I-1005, paragraph 23.

(d) Interim conclusion 67. The examples of distortion of competi- tion given by the Commission do not stand up to scrutiny here. First, the scope of the Directive — as is clear from a number of provisions — is limited to transactions at national level. There is no breach of the duty to treat other nationals equally in the present case. Second, the cases of distortion mentioned — no right to deduct input tax 69. It must thus be concluded that France on the one hand and reduced costs on the has failed to fulfil its obligations under the

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Treaty in not subjecting the motorway tolls (by the Member State) to be established. It to VAT. is thus the duty of the Member States to make the necessary calculations, commu- nicate the result to the Commission and pay the resources due.

2. Own resources 73. The claim for interest is based on Article 11 of Regulation No 1552/89, according to which any delay in making 70. Under Article 2(1) of Regulation the entry in the account is to give rise to the No 1553/89, the VAT resources base is to payment of interest. According to the case- be determined from the taxable transac- law of the Court, the reason for the delay is tions referred to in Article 2 of the Sixth immaterial. 18 VAT Directive. Contributions to own resources are then calculated by applying a fixed uniform rate to this base.

failure to fulfil obligations, where the should always strive to enable Member action is well founded. However, since States to restore conformity with the Treaty the application is for a declaration, the in the usual manner. The earliest possible Court cannot order the defendant State to time at which an action can be brought is remedy the breach or cancel or alter the on expiry of the period prescribed in the contested measures. reasoned opinion. There is no general upper time-limit for bringing an action before the Court of Justice. 19 It is, there- fore, for the Commission to judge, on expiry of the time-limit set, when to bring an action following the reasoned opi- nion. 20 However, in extreme cases, where 76. Consequently, the Court is not empow- the Commission waits a long time before ered to make a formal order that France bringing an action and takes no other steps remedy the unlawful situation as regards against the Member State, the possible the levying of VAT. However, in the course objection that the right of action has been of the proceedings for failure to fulfil forfeited and the admissibility of the action Treaty obligations, the Court can clarify thereby affected cannot be ruled out the obligation of France to remedy the entirely. 21 Nevertheless, the case-law of breach of the Treaty. the Court tends to reject the idea that the Commission's right of action can be forfei- ted. 22

properly raised, but it was not in the is generally intended to remedy (for the present case. As no submissions were made future) a situation which is contrary to the in that connection there is no need to Treaty. This type of proceedings does not discuss this point further. Moreover, no concern the validity of a particular decision direct claim can be made for payment of as does an action for annulment, the effects resources in the course of an action for in time of which can be limited under the failure to fulfil Treaty obligations. second paragraph of Article 174 of the EC Treaty (now Article 231 EC). An action for failure to fulfil Treaty obligations does not as a rule seek compensation for damage in individual cases, as cases subject to the rule regarding limitation periods in Article 43 80. However, the Community's claims for of the EC Statute of the Court of Justice do. the payment of contributions to own Rather, proceedings for failure to fulfil resources could have lapsed by failing to Treaty obligations seek a declaration of meet other time-limits. principle on the content of the rules of Community law. It is in the interests of legal certainty for the Court of Justice to make a declaration regarding the content of the rules in a dispute between the Commis- sion and a Member State. The mere passage 81. For reasons of legal certainty, it might of time since the conclusion of the pre- be necessary, in the present case, to limit in litigation procedure does not alter this time the effects of a declaration of failure to principle. Should events during that time fulfil Treaty obligations as regards the diminish the interest of a party in a correction of annual statements. 23 The declaration, this might result in the inad- possibility of invoking the principle of legal missibility of the action, but would not certainty in the absence of a limitation prejudice the claim for a declaration as period has been acknowledged by the such, which could be made afresh to the Court of Justice in its case-law. 24 Court at any time.

84. On the face of it, the fact that the Court 86. On the other hand, retrospective col- has consistently held that 'certainty and lection of VAT on fees paid for the use of foreseeability are requirements which must roads must be ruled out for both practical be observed all the more strictly in the case and legal reasons. In a case such as the of rules liable to entail financial conse- present one retrospective collection of VAT quences' constitutes an argument against would also be ruled out under national law temporal limitation. 25 Weighing up con- for reasons relating to the protection of siderations of legal certainty diminishes legitimate expectations. Quite apart from such certainty and foreseeability. However, that, the practical consequences of retro- it must also be said that the considerable spective collection of VAT would be unrea- delay by the Commission in instituting sonable in the case of business traffic as the proceedings for failure to fulfil Treaty tax debtors who might have to be tracked obligations cannot be reconciled with the down are generally not those who pay the requirements of certainty and foreseeability tax included in the prices. either.

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before expiry of the time-limit. It is the 91. In the context of the Commission's responsibility of the Member State con- relationship to the Member State, it must cerned if it does not act on an objection by be considered that the previous financial the Commission and, for example, fails to years are closed and no correction is to be levy VAT generally. Having notice of the made. objection it is able to assess in principle the obligations which arise from the VAT Directive and proceed accordingly.

93. It is clear from the Commission's letter of formal notice of 28 January 1988 amongst the documents on the Court file that the Commission's claims relate to the period from 1981 until cessation of the 90. Moreover, the Member States cannot alleged infringement. It must therefore be settle the matter themselves, if the proceed- assumed that this is the period at issue in ings for failure to fulfil Treaty obligations the Court action too. Although the Com- stagnate, as here, in the pre-litigation mission took no further action in respect of phase. The Commission is not bound to subsequent years between the end of the bring an action and the Member State pre-litigation procedure and the bringing of cannot challenge the reasoned opinion. the action, it must be assumed that its Taken together, these factors could be an intention was to put an end to the infringe- incentive to circumvent proceedings for ment with all that this implied for the failure to fulfil Treaty obligations. How- subsequent years. The extent to which the ever, such conduct on the part of the financial years since 1981 are now closed Commission would be contrary to the spirit so that the annual statements cannot now of the correction procedure. be corrected must therefore be examined.

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95. However, it is not clear how the exception in the second part of Article 9(2) is to be understood. It states, on the subject of the annual statements to which no corrections must be made: '... unless they 97. Whilst the objective of this provision is concern points previously notified either by to grant an extension of the time allowed in the Commission or by the Member State complex cases raising many problems, the concerned.' For the 1981 to 1990 financial parties must be seen to be making an effort years, the underlying issues and various to reach a solution; otherwise the Commis- legal points which also underlie this appli- sion could circumvent the 43-month time- cation were discussed with France. limit under the first part of Article 9(2) by routinely raising objections to the Member States' annual statements. It would then be able to investigate the circumstances for an unlimited time and postpone the closure of the financial year indefinitely. However, that would be neither desirable on eco- 96. There is a strong case for interpreting nomic grounds, nor compatible with the the second part of Article 9(2) to mean that principle of legal certainty. The Commis- exceptions to the 43-month time-limit are sion would be able, without having to only to be allowed if those concerned have justify it, to circumvent the requirements of continued in the intervening period to make the first part of Article 9(2) according to an effort to solve the problems raised. which the time-limit for the closure of the However, if the proceedings come to a annual statements is 31 July of the fourth lengthy and unwarranted standstill, it year following the relevant financial year. would be contrary to the spirit and purpose of the provision to continue to apply it. In the present case there was not sufficient 27 — At the oral procedure, the United Kingdom and Greece denied that there had been any dialogue with the further dialogue in the years between 1990 Commission.

103. Under Article 69(2) of the Rules of 101. The principle of the protection of Procedure, the unsuccessful party is to be legitimate expectations and the general ordered to pay the costs if they have been timetable resulting from the 43-month time-limit for the correction of annual statements mean that the collection of 28 — See point 93 for the calculations.

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applied for in the successful party's plead- the declared failure to fulfil obligations and ings. The Commission has asked for France cannot be pursued by means of this action. to be ordered to pay the costs. Although the The subject at issue in the present case is claim for payment of contributions to own only the declaration of conduct contrary to resources has partially extended the time- the Treaty. As the French Republic has limits, this has no implications for a costs essentially been unsuccessful, it should be order as this claim is only a consequence of ordered to pay the costs.

V I I— Conclusion

104. For the foregoing reasons I therefore propose that the Court should rule as follows: