C-260/98

3. By letter of 12 August 1987 the Com- mission asked the Greek authorities to bring the existing national rules concerning the collection of the toll into line with the provisions of Article 2 of the Sixth VAT 2. In Greece a toll may be levied on roads Directive. and motorways in order to improve, pro- mote or ease traffic conditions, the con- struction of new roads and the maintenance of existing roads. The monies thus collected are paid directly into the national Road Construction Fund, a body governed by 4. By letter of 20 April 1988 the Commis- * Original language: German. sion sent a letter of formal notice informing 1 — The Commission has also brought actions against France, the Greek authorities that the collection of Ireland, the United Kingdom and the Netherlands on the same grounds: see Cases C-276/97, C-358/97, C-359/97 and the toll for the use of motorways consti- C-408/97. Unlike the other defendant Member States, the tuted an economic activity which fell Netherlands has made the corresponding amount of own resources available to the Commission pending clarification within the scope of the Sixth VAT Direc- of the points at issue. In the Member States against which no action has been brought either no tolls are charged or VAT is tive. It stated that the Greek authorities levied on tolls. As a lower rate of tax is levied in Spain, the would be infringing that directive if the toll Commission has also brought an action against Spain (Case C-83/99). were not subjected to VAT.

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5. In its reply of 4 July 1988 the Greek 9. By letter of 31 January 1990 the Greek Government claimed that the toll was an authorities refused to make back payments, indirect tax levied by a public body in the referring to the arguments which had exercise of public authority and therefore it already been advanced in the reply to the did not fall within the scope of the Sixth reasoned opinion in respect of the alleged VAT Directive. infringement of the Sixth VAT Directive.

(1) declare that in not subjecting road fees, which constitute a consideration paid by users for the supply of a service to III — Legal background them, consisting in the provision of motorways and other transport infra- structure facilities, to value added tax, contrary to the provisions of Articles 2 and 4 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on VAT, and, moreover, by thus evading pay- 1. The levying of VAT ment of own resources and interest due (Regulations No 1552/89 and No 1553/89) the Hellenic Republic had failed to fulfil its obligations under Sixth Council Directive 77/388/EEC of the Treaty establishing the European 17 May 1977 on the harmonisation of the Community; laws of the Member States relating to turnover taxes — common system of value added tax: uniform basis of assessment 2 (hereinafter 'the Directive')

(2) order the Hellenic Republic to make available to the Commission the own resources which it has failed to pay since 1987 together with interest for 15. Article 2 of the Directive provides: late payment;

(3) order the Hellenic Republic to bear the 'The following shall be subject to value costs of the proceedings. added tax:

14. The Greek Government contends that 1. the supply of goods or services effected the Court should: for consideration within the territory of the country by a taxable person acting as such;...'

(1) dismiss the application; 2 — OJ 1977 L 145, p. 1.

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Article 13 4... as activities which they 18. Article 2(1) provides: engage in as public authorities.'

'The VAT resources base shall be deter- mined from the taxable transactions re- ferred to in Article 2 of Council Directive 2. Own resources 77/388/EEC... with the exception of trans- actions exempted under Articles 13 to 16 of that Directive.'

(a) Council Regulation (EEC, Euratom) No 1553/89 of 29 May 1989 on the defi- nitive uniform arrangements for the collec- tion of own resources accruing from value added tax 5 (b) Council Regulation (EEC, Euratom) No 1552/89 of 29 May 1989 implement- ing Decision 88/376/EEC, Euratom on the system of the C o m m u n i t i e s ' own resources 6

17. Article 1 provides:

(c) Council Decision 88/376/EEC, Eura- tom, of 24 June 1988 on the system of the Communities' own resources 7 22. It constitutes an economic activity since — from an objective point of view and in the light of the actual economic situation — road users are supplied a service for consideration in respect of the movement of goods and persons. Since a 20. Under this decision the missing income connection with economic life exists in this from VAT own resources is to be made up respect, the activity falls within the scope of by own resources deriving from gross the Sixth VAT Directive. The legal classifi- domestic product in order to provide the cation of the activity under the law of a rest of the financing, which results in a Member State, in particular, cannot guar- redistribution of the burden to the detri- antee the uniform application of the VAT ment of the other Member States. system.

29. The Greek Government responds to the Commission's allegations by stating, first, 25. In the view of the Commission the that the action is not founded on the proper provision of road infrastructure is compar- legal basis. It claims that the provisions of able to supply to the public of gas, water the Sixth VAT Directive, in particular and electricity. However, it is common Articles 2 and 4 thereof, are not so precise, ground that such activities are liable to unconditional and strict that proceedings VAT and the requirements for exemption for failure to fulfil Treaty obligations can are not fulfilled. be based thereon.

26. In the present case the toll constitutes a 30. Since the collection of a toll for the direct consideration from the road users for provision of infrastructure is not listed in the provision of the infrastructure. The Annex D pursuant to Article 4(5)(3), amount of the toll to be paid varies which would make it liable to tax, it was according to distance and the type of the legislature's intention to exempt that vehicle. activity from VAT.

31. Under Greek law it is possible to levy a 27. If the toll is not subjected to VAT, as is toll in order to improve, promote or ease the case in Greece, traders from other traffic conditions, the construction of new Member States are placed at a disadvan- roads and the maintenance of existing tage, since they are unable claim a deduc- roads. tion of input tax in respect of the toll paid.

32. The toll collected is paid directly into 28. As regards the question of own the national Road Construction Fund, a resources, the Commission considers that body governed by public law. This means the failure to levy VAT upsets the equili- that it forms part of the overall State brium of the common VAT system and the budget. On account of these characteristics

34. Furthermore, the infrastructure is pro- 1. Levying of VAT on toils vided in the exercise of public authority, a matter to be determined solely in accor- dance with the relevant national law. In the present case it must be concluded that the toll is an indirect tax, 9as is evident from the nature of the toll, its aim, its function and the direct link with the State budget and with the applicable national 36. In accordance with the structure of the public law. Directive, it must first be ascertained whe- ther there is a taxable transaction within the meaning of Article 2 of the Sixth VAT 8 — At the oral procedure the Greek Government stated otherwise, claiming that the toll was not an indirect tax. Directive. That requires a supply of services Although it was a fee which exhibited certain characteristics in return for consideration. Next, it must of a tax, as, amongst other things, it was paid directly into the State budget, it constituted a public fee levied in the be ascertained whether that transaction exercise of State authority in the same way as a heavy goods vehicle fee or a court fee. was carried out by a taxable person and, 9 — See footnote 8 as regards what constitutes an indirect tax. if so, whether it was an economic activity.

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(a) Supply of services for consideration there is a specific service provided in return, 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.

37. The supply of services consists here in the provision of infrastructure.

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(aa) State activity what extent public bodies are to be treated as non-taxable persons. 13

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(bb) Economic activity that they are actually connected with economic life in some way or other.

52. As I have already pointed out, under Article 4(1) of the Directive any person who independently carries out any eco­ nomic activity is deemed to be a taxable 56. Even if the provision of road infra­ person. structure on payment of a toll is subject to public law and the toll motorways form part of the public roads network, this is of no relevance in determining whether there is an economic activity. Under Article 6(1) of the Sixth VAT Directive taxable transac­ tions may include the performance of 53. Article 4(2) of the Sixth VAT Directive services in pursuance of an order made by defines economic activity as 'all activities of or in the name of a public authority or in producers, traders and persons supplying pursuance of the law. The objective nature services'. of the definition of economic activity also calls for the classification of the activity in this case as an economic one as the activity itself must be considered, regardless of its purpose or result.

54. The Court has consistently held that the scope of the term 'economic activities' is very wide, and that the term is objective in character, in the sense that the activity is considered per se and without regard to its 15 purpose or results. 57. Consideration of the actual economic situation is a fundamental criterion for the application of the common VAT system. 1 7 In the present case this means that given parts of the roads infrastructure are made available to road users on payment of a toll. As this activity is thus also carried out 55. Under this wide definition of economic by the relevant bodies to generate revenue, activity it is not necessary for services to be in order to cover expenditure on materials primarily or exclusively orientated towards and at the same time earn an income, it is the market or economic life. It is sufficient

clear that there is an economic activity in 60. The examples of distortion of competi- the case under consideration. 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 (c) (In the alternative) Distortion of com- on the one hand and reduced costs on the petition other — are not the result of waiving tax or charging tax as the case may be, but of the misapplication of the law. Following clari- fication by the Court, the Member States will certainly levy VAT in a uniform manner. (The same will then be true of payments to own resources.) If the Com- 58. Under Article 4(5)(2) States, regional mission's argument is taken to its logical and local government authorities and other conclusion, distortion of competition bodies governed by public law are consid- would most of all prejudice those countries ered taxable persons even in respect of the where no road tolls are levied at all. activities or transactions in which they engage as public authorities, where treat- ment as non-taxable persons would lead to significant distortion of competition. In the light of the observations made above, this sub-class should not require analysis as such activity must be considered not to form part of State activities. The following analysis is thus given only in the alterna- tive.

65. Since in the present case services were 63. In respect of this point the Commission supplied by taxable persons, VAT should claims that the Court should order the have been levied on the tolls. However, as Hellenic Republic to make available to the this did not happen, the relevant amounts Commission the own resources which it has for fixing the VAT resources base could not failed to pay since 1987 together with be taken into account. interest for late payment. However, since in proceedings for failure to fulfil obliga- tions the application is for a declaration, the Court cannot order that certain mea- sures be taken, cancelled or altered, but can merely declare that the defendant Member State has committed one or more infringe- 66. That constitutes a breach of Commu- ments of Community law. In the present nity provisions on the payment of own case the purpose of the Commission's resources from VAT. It is of no relevance action, which must be determined in the that the recalculation of contributions to light of the pleas raised and the grounds own resources would lead to a result stated, is in the first place to obtain a detrimental to the Community. Under the declaration that the motorway toll was not relevant legislation it is only important for subjected to VAT — contrary to the those own resources to be calculated Treaty — with the result that the corre- according to the correct base and the sponding contributions to own resources payments required of the taxable persons were not paid. Therefore, this plea by the (by the Member State) to be established. It Commission must be seen as relating to is thus the duty of the Member States to that subsequent effect of the declaration of make the necessary calculations, commu- failure to fulfil obligations, so that the nicate the result to the Commission and Court of Justice may — provided that a pay the resources due.

68. Once it is established that Greece has failed to fulfil its obligations under the EC Treaty, the question arises whether the Commission is also entitled to enforce the claims it has against Greece as a result in respect of the whole period concerned. 72. Since, under Article 155 (now Arti- cle 221 EC) and Article 169 of the EC Treaty, the Commission is bound to bring proceedings in respect of every failure to fulfil Treaty obligations of which it becomes aware, it has a fundamental duty 69. In proceedings for failure to fulfil to bring proceedings. However, it has a obligations, Member States are required certain discretion, particularly as regards to take all necessary steps to remedy the the time and manner of implementing the failure to fulfil obligations, where the various stages of the procedure under action is well founded. However, since Article 169. Despite its fundamental duty the application is for a declaration, the to bring proceedings, the Commission Court cannot order the defendant State to should always strive to enable Member remedy the breach or cancel or alter the States to restore conformity with the Treaty contested measures. in the usual manner. The earliest possible time at which an action can be brought is on expiry of the period prescribed in the 18 — Case 54/87 Commission v Italy [1989] ECR 385, para- reasoned opinion. There is no general graph 12. upper time-limit for bringing an action

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76. The Treaty makes no express provision for a temporal limitation on the effects of 73. Nor can the claims of the Communities judgments in proceedings for failure to be considered to be time-barred in the fulfil Treaty obligations. However, that is present case. First, there are no provisions not in fact necessary since a judgment in of Community law regarding limitation of proceedings for failure to fulfil Treaty actions which would be applicable and, obligations is of a declaratory nature and second, it is not possible to apply the is generally intended to remedy (for the national rules regarding the limitation of future) a situation which is contrary to the actions for tax debts. To fulfil its purpose, a Treaty. This type of proceedings does not limitation period must be established in concern the validity of a particular decision advance. As it constitutes a plea it must be as does an action for annulment, the effects properly raised, but it was not in the in time of which can be limited under the present case. As no submissions were made second paragraph of Article 174 of the EC in that connection there is no need to Treaty (now Article 231 EC). An action for discuss this point further. Moreover, no failure to fulfil Treaty obligations does not direct claim can be made for payment of as a rule seek compensation for damage in resources in the course of an action for individual cases, as cases subject to the rule failure to fulfil Treaty obligations. regarding limitation periods in Article 43 of the EC Statute of the Court of Justice do. Rather, proceedings for failure to fulfil 19 — Case 7/71 Commission v France [1971] ECR 1 0 0 3 , paragraphs 5 and 6. 2 0 — C a s e C - 3 1 7 / 9 2 Commission v Germany [1994] ECR I-2039, paragraph 4, and Case C-422/92 Commis- 23 — Under Article 7(1) of Regulation N o 1553/89, before sion v Germany [1995] ECR I-1097, paragraph 18 and 31 July the Member States are to send the Commission a the references contained therein. statement of the total amount of the VAT resources base 21 — C a s e C - 9 6 / 8 9 Commission v Netherlands [1991] for the previous calender year. ECR I-2461, paragraphs 15 and 16. 24 — Case 57/69 ACNA v Commission [1972] ECR 9 3 3 , 22 — Ibid, footnotes 20 and 2 1 . paragraphs 31 to 33.

78. On the face of it, the fact that the Court has consistently held that 'certainty and foreseeability are requirements which must 80. On the other hand, retrospective col- be observed all the more strictly in the case lection of VAT on fees paid for the use of of rules liable to entail financial conse- roads must be ruled out for both practical quences' constitutes an argument against and legal reasons. In a case such as the temporal limitation. 25 Weighing up con- present one retrospective collection of VAT siderations of legal certainty diminishes would also be ruled out under national law such certainty and foreseeability. However, for reasons relating to the protection of legitimate expectations. Quite apart from

25 — Case C-30/89 Commission v France [1990] ECR I-691, paragraph 23 and the references contained therein. 26 — Case C-96/89, cited above at footnote 21, paragraph 37.

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defined. The application seeks a declara- legal points which also underlie this appli- tion of failure and relates to the period cation were discussed with Greece. from 1987. Although the Commission took no further action in respect of sub- sequent years between the end of the pre- litigation procedure and the bringing of the action, it must be assumed that its intention was to put an end to the infringement with all that this implied for the subsequent 89. There is a strong case for interpreting years. The extent to which the financial the second part of Article 9(2) to mean that years since 1987 are now closed so that the exceptions to the 43-month time-limit are annual statements cannot now be corrected only to be allowed if those concerned have must therefore be examined. continued in the intervening period to make an effort to solve the problems raised. However, if the proceedings come to a lengthy and unwarranted standstill, it would be contrary to the spirit and purpose of the provision to continue to apply it. In the present case there was not sufficient further dialogue in the years between 1992 87. The first part of Article 9(2) of Regula- and 1998 to enable a solution to the tion No 1553/89 provides that no further problems to be found. In response to corrections may be made to the annual questioning in the oral procedure the statement after 31 July of the fourth year Commission stated that it regularly raised following the financial year concerned, that the problem of own resources with the is to say, after 43 months. The annual Member States concerned and that there statement for the 1987 financial year could was an ongoing dialogue on the question of accordingly no longer be corrected after levying VAT. 27 However, this cannot be 31 July 1991. The equivalent calculation is viewed as sufficient to have enabled an to be made for the subsequent years. It amicable agreement to be reached. That would, therefore, no longer be possible for was not possible because of the stance the Commission to collect own resources taken by the parties. It should also be borne for those years. in mind that a compromise solution was not possible either because of the mutually exclusive alternatives inherent in the legal position.

parties must be seen to be making an effort 93. Even if one were to take the view that to reach a solution; otherwise the Commis- the pre-litigation procedure itself had the sion could circumvent the 43-month time- effect of interrupting the running of the limit under the first part of Article 9(2) by time allowed, such interpretation cannot routinely raising objections to the Member continue beyond the 43-month time-limit. States' annual statements. It would then be As more than four years — six, to be able to investigate the circumstances for an exact — elapsed between the last exchange unlimited time and postpone the closure of of letters in the pre-litigation procedure and the financial year indefinitely. However, the bringing of the action, an argument on that would be neither desirable on eco- the basis of the interruption of the time nomic grounds, nor compatible with the allowed cannot be sustained. principle of legal certainty. The Commis- sion would be able, without having to justify it, to circumvent the requirements of the first part of Article 9(2) according to which the time-limit for the closure of the 94. The principle of the protection of annual statements is 31 July of the fourth legitimate expectations and the general year following the relevant financial year. timetable resulting from the 43-month time-limit for the correction of annual statements mean that the collection of contributions to own resources must be limited to the four years before the bringing of the action. In the present case, since the Commission's action was lodged at the Court of Justice on 16 July 1998, that 91. As the provisions of Article 9(2) do not means that the financial years since 1994 impose a limitation period, it is of no are not yet closed and that corrections are relevance that the Member State has not still possible. 28 The action was brought raised a plea that the action is time-barred. within the 43-month time-limit since Only claims can be out of time. However, there are no other procedural time-limits. Article 9(2) does not provide for any Although the application may have been claims, but merely regulates the time served on Greece after 31 July 1998, no allowed for the correction of annual state- further conclusions in respect of the effects ments. on third parties can be drawn since the date on which the action was lodged at the Court of Justice must be regarded as the material date.

obligations, the remainder of the applica- ordered to pay the costs if they have been tion cannot be dismissed despite the partial applied for in the successful party's plead-, expiry of time-limits — which indirectly ings. The Commission has asked for Greece amounts to a partial success for Greece. to be ordered to pay the costs. Although the The same applies to the decision as to costs. claim for payment of contributions to own resources has partially extended the time- limits, this has no implications for a costs order as this claim is only a consequence of the declared failure to fulfil obligations and cannot be pursued by means of this action. VI — Costs The subject at issue in the present case is only the declaration of conduct contrary to the Treaty. As the Hellenic Republic has 96. Under Article 69(2) of the Rules of essentially been unsuccessful, it should be Procedure, the unsuccessful party is to be ordered to pay the costs.

V I I— Conclusion

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

(1) In not subjecting road fees to value added tax, contrary to Articles 2 and 4 of the Sixth Council Directive 77/388/EEC of 17 May 1977, and by therefore failing to make available to the Commission the relevant amounts of own resources, the Hellenic Republic has failed to fulfil its obligations under the

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