C-83/99
ECLI:EU:C:2000:516
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OPINION OF MR ALBER — CASE C-83/99
O P I N I O N OF ADVOCATE GENERAL ALBER delivered on 2 8 September 2000 1
I — Introduction I I — Relevant provisions
A — Community law
3. The rates applicable as a result of the 1. In these proceedings for failure to fulfil harmonisation of turnover taxes are listed Treaty obligations the Commission claims in Title IX of the Sixth Council Directive that the Kingdom of Spain has subjected 77/388/EEC of 17 May 1977 on the har- motorway tolls not to the standard rate of monisation of the laws of the Member VAT but to a reduced rate thereof. States relating to turnover taxes — Com- mon system of value added tax: uniform basis of assessment 2— hereinafter 'the Sixth Directive'.
4. In that respect the first subparagraph of Article 12(3)(a) 3provides as follows:
2. Spain justifies its action on the ground that the provision of road infrastructure by concessionaires constitutes a service which may be equated with the transport of passengers and their accompanying lug- 'The standard rate of value added tax shall gage, in respect of which a reduced rate of be fixed by each Member State as a tax is possible. The tax reduction is also percentage of the taxable amount and shall necessary in order to offset distortions of be the same for the supply of goods and for competition caused by the failure of other the supply of services. From 1 January Member States to subject tolls to VAT. 2 — OJ 1977 L 145, p. 1. 3 — Amended by Council Directive 96/95/EC of 20 December 1 — Original language: German. 1996 (OJ 1996 L 338, p. 89).
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1997 to 31 December 1998, this percen- B — National law tage may not be less than 15.'
8. Royal Decree No 14-1997 of 29 August 1997 and Law No 9/1998 of 21 April 1998, which amended Law No 37/1992 of 28 December 1992 concerning VAT, 5. Under the third subparagraph of Arti- provide that a reduced rate of 7% is to be cle 12(3)(a), the Member States 'may also applied to motorway tolls instead of the apply either one or two reduced rates. standard rate of 16%. In order to bring this These rates shall be fixed as a percentage of about, the provision of road infrastructure the taxable amount which may not be less by concessionaires was equated with the than 5% and shall apply only to supplies of transport of passengers and their accom- the categories of goods and services speci- panying luggage specified in category 5 of fied in Annex H'. Annex H of the Sixth Directive.
6. Annex H 4contains the 'List of supplies III— Pre-litigation procedure and forms of goods and services which may be subject of order sought to reduced rates of VAT'.
9. By letter of formal notice of 22 Decem- ber 1997 the Commission informed the Spanish Government of its view that the provisions of the Sixth Directive precluded the application of the reduced rate to the 7. Category 5 of the total of 17 categories collection of motorway tolls. refers to 'Transport of passengers and their accompanying luggage.' 5
4 — Inserted by Council Directive 92/77/EEC of 19 October 1992 supplementing the common system of value added tax and amending Directive 77/388/EEC (approximation of VAT rates) (OJ 1992 L 316, p. 1). 5 — The other 16 categories concern, for example, foodstuffs, 10. The Spanish Government put forward water supplies, pharmaceutical products, medical equip- its view in a letter of 24 April 1998 to ment, supply of books, admissions to shows, services supplied by or royalties due to writers, supply of housing, which certain observations of the Minister supply of goods and services by organisations recognised as for Economic and Financial Affairs of charities and engaged in welfare, and services supplied in connection with street cleaning and waste treatment. 13 April 1998 were attached. Essentially,
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the following arguments for the application 13. However, since the Commission still of the reduced rate were set out therein. considered that the Sixth Directive had been infringed, it delivered a reasoned opinion pursuant to Article 169 of the EC Treaty (now Article 226 EC) by letter of 10 August 1998. In that opinion it again pointed out to the Spanish Government that the application of a reduced rate constituted a failure to fulfil the obligations under Article 12 of the Sixth Directive and invited it to take appropriate measures 11. First, there is between the Member within two months of service in order to States, some of which collect no VAT, comply with that opinion. unequal treatment of taxable persons, that is to say the concessionaires as operators of the road infrastructure, as a result of the differential tax treatment of the relevant tolls paid for the use of roads. Spain therefore decided to reduce the rate of tax 14. The response from the General Secre- in order to reduce this imbalance. Further- tary of the Ministry of Economic and more, this action has no effect on the Financial Affairs responsible for technical Community's own resources and was thus matters of 28 September 1998 essentially not at variance with the Sixth Directive. reiterated the arguments which had already been put forward.
15. In the light of these submissions by the Spanish authorities, the Commission brought the present proceedings — 12. Second, category 5 of Annex H of the received by the Registry of the Court of Sixth Directive is applicable in the present Justice on 8 March 1999 — since in its case. Although it is possible that a strict view the Kingdom of Spain had failed to interpretation of the term 'transport of comply with the reasoned opinion. passengers and their accompanying lug- gage' does not cover the provision of road infrastructure on payment of a toll, in the present case a logical or teleological inter- pretation, which is not guided by the wording of the provision alone, must be 16. It claims that the Court should taken as a basis. Since it is necessary to find a solution which enables the Member States to apply a comparable rate, a broad interpretation must be placed on the term in question. This serves to safeguard the principles of neutrality and non-discrimi- (1) declare that, by applying a reduced rate nation in respect of taxation. of tax to the supply of services consist-
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ing in making road infrastructure avail- avoid discrimination. Furthermore, the able to users, the Kingdom of Spain has Commission disputes Spain's contention failed to fulfil its obligations under that there is distortion of competition as a Article 12 of the Sixth Council Direc- result of the differential tax treatment of tive 77/388/EEC of 17 May 1977; tolls paid for the use of roads in the individual Member States. Tolls for the use of roads are charged in a total of nine of the 15 Member States. Only four Member States (France, Italy and Portugal in addi- (2) order the Kingdom of Spain to pay the tion to Spain) have a comparable toll road costs. infrastructure in terms of size. In the other Member States tolls are collected only in respect of certain stretches of road or specific bridges or tunnels. Five of these countries — including France — have not 17. The Kingdom of Spain contends that subjected tolls to VAT and therefore pro- the Court should ceedings for failure to fulfil Treaty obliga- tions have been instituted against them. 6 The alleged distortion of competition is not as great as Spain claims in order to justify its action. (1) dismiss the action brought by the Commission;
(2) order the Commission to pay the costs. 19. Furthermore, a Member State cannot rely on unlawful acts of other Member States in order to justify its failure to fulfil Treaty obligations.
IV — Arguments of the parties
18. The Commission contends that the reduced rate of VAT is applicable only to the services listed in Annex H of the Sixth 20. It should also be borne in mind that the Directive. It is unable to concur with the claiming of VAT allows users of the infra- broad interpretation which Spain places on the Directive and cannot accept the equa- tion of the provision of infrastructure by 6 — See in this connection Case C-276/97 Commission v France concessionaires with the transport of pas- [2000] ECR I-6251, Case C-358/97 Commission v Ireland [2000] ECR I-6301, Case C-359/97 Commission v United sengers and their accompanying luggage Kingdom [2000] ECR I-6355, Case C-408/97 Commission v Netherlands [2000] ECR I-6417, and Case C-260/98 which is allegedly necessary in order to Commission v Greece [2000] ECR I-6537.
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structure to avail themselves of a possible 24. Even if the service concerned — the tax deduction, and that this system there- provision of road infrastructure — varies fore safeguards the neutrality of the tax. in extent in the individual Member States, this does not justify distortions of competi- tion which place traders at a disadvantage.
21. The Commission further contends that category 5 of Annex H is not applicable in 25. Unequal treatment to the detriment of the present case. As regards the 'transport Spanish motorway operators in the event of passengers and their accompanying lug- that the standard rate of VAT were applied gage', the taxable persons undertake to is demonstrated by the fact that a large transport passengers and goods from one number of users would be unable to claim a location to another. In the present case, deduction of input tax. This would result in however, the concessionaires are making the service supplied becoming more expen- road infrastructure, that is to say motor- sive, which would have a unfavourable ways, available to users so that they may effect on demand, and consequently the move more quickly. Even if a broad inter- differential tax treatment would lead to an pretation is placed on the term, the two imbalance since operators in the other cases are not comparable. countries would be able to expand their trading volumes.
22. The real reason for the application of a reduced rate lies in the concessionaires' 26. Furthermore, the Spanish Government demand for tolls to be reduced or any relies on the principle of the protection of increase to be avoided. legitimate expectations. In 1989 the Com- mission instituted several sets of proceed- ings for failure to fulfil Treaty obligations against other Member States who had not subjected such services to the standard rate of VAT. However, up until the end of 1997 these proceedings were not pursued further. Consequently, when the Royal Decree of 23. As in the pre-litigation procedure, the August 1997 was adopted Spain had no Spanish Government claimed that there reason to expect that the Commission were distortions of competition resulting would nevertheless take further action from the differential tax treatment of against the Member States. The staying of motorway tolls in the Member States and the relevant proceedings for failure to fulfil referred to category 5 of Annex H of the Treaty obligations gave rise to legitimate Sixth Directive to justify its action. expectations to the benefit of Spain.
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27. By its action, that is to say by applying for in Article 2(1) of the Sixth Directive. 7 tax at a reduced rate, Spain intended to The requirement that there must be a direct attain three objectives. First, the action was link between the service and the considera- designed to limit the consequences of the tion, that is to say the toll, is fulfilled. 8 distortion of competition and the unequal treatment of users. Second, it was a provi- sional measure intended to remain in force until a definitive solution was found at Community level. This was also notified to the Commission as such. Thirdly, a course of action had been chosen which caused no damage to the Community — a reduced rate was applied to avoid any impact on the 30. An economic activity within the mean- system of the Communities' own resources. ing of Article 4(2) of the Sixth Directive also exists in particular since, according to the case-law of the Court, the scope of the term must be assumed to be very broad without regard to its purpose or results 9 and the service does not have to be primarily or exclusively orientated towards 28. As regards the applicability of cate- the market or economic life. It is sufficient gory 5 of Annex H of the Sixth Directive, that it is actually connected with economic the Spanish Government contends that it life in some way or other, 10 regard being did not interpret this provision too broadly, had to the actual economic situation. 11 In but merely in the light of the Treaty. The the present case road infrastructure is being Treaty lays down the principle of the made available on payment of a toll in protection of free competition. In view of accordance with a system of concessions. the situation prior to the introduction of the reduced rate, Spain was not only permitted to reduce the effects distorting competition but was actually required to do so.
31. Since the concessionaires carry out this economic activity independently, they are
7—Under Article 2(1) of the Sixth Directive, the supply of goods or services effected for consideration within the V — Opinion territory of the country by a taxable person acting as such is subject to value added tax. 8 — See Case 102/86 Apple and Pear Development Council [1988] ECR 1443, paragraph 11. 9 — Case 235/85 Commission v Netherlands [1987] ECR 1471, paragraph 8, Case 348/87 Stichting Uitvoering Financiële Acties [1989] ECR 1737, paragraph 10, and Case C-186/89 Van Tiem [1990] ECR I-4363, paragraph 17. 29. The provision of road infrastructure by 10 — Opinion of Advocate General Lenz in Case 235/85 Com- concessionaires is a service effected for mission v Netherlands [1987] ECR 1478, point 22, and judgment in the same case (cited in footnote 8). consideration subject to VAT as provided 11 — Case C-260/95 DFDS [1997] ECR I-1005, paragraph 23.
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taxable persons within the meaning of examine its context, regard being had to Article 4(1) of the Sixth Directive. They the system of the Sixth Directive. carry out this activity in their own name and not as representative for or on behalf of the State. Therefore, the question whether the activity of providing road infrastructure is an activity carried out in the exercise of public authority, in respect of which the 35. It is clear from the spirit and purpose of State as the person carrying out the activity the directive, and the wording of Article 2 is not considered a taxable person pursuant in particular, that the basic principle of the to Article 4(5) of the Sixth Directive, may directive must be construed as being that be left undecided. any supply of goods or services is, if effected for consideration by a taxable person, subject to VAT in full unless it is expressly exempted or a reduced rate is possible. The provisions relating to reduc- tion and exemption must therefore be interpreted strictly, since they constitute an exception to the basic principle of the 32. It follows from all the foregoing that directive. the relevant activity constitutes a service subject to VAT. For a reduced rate to apply, the relevant activity would have to be a service within the meaning of Annex H.
36. This means therefore that in the present case the term 'transport of passengers and their accompanying luggage' has to be viewed in light of its usual meaning. Thus not every contract which displays elements 33. However, I am unable to accept the of transport in the widest sense can auto- comparison made between the service con- matically be subsumed to this term. This sisting in making a road infrastructure would result in a broad interpretation of generally available and the 'transport of the reduction, which is precisely the oppo- passengers and their accompanying lug- site of what is intended. Consequently, it is gage' specified in category 5 of Annex H of a condition that elements of a contract of the Sixth Directive. carriage are predominant in a contractual agreement between the concessionaires, as the operators of the infrastructure, and the users thereof.
34. No Community law definition of this term is to be found in the relevant provi- 37. However, the provision of road infra- sions. Therefore, in order to determine its structure on payment of a toll does not meaning more precisely it is necessary to satisfy this condition. Although the stretch
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of road to be travelled on is made available 40. Consequently, there is no real need to to the user for a specific period (travelling examine further the other arguments for a time) for consideration, elements of a reduction and grounds of justification put contract of carriage are not predominant forward by Spain. Moreover, they do stand in this respect, since the user is merely up to scrutiny either. interested in covering a specific stretch of road as quickly and safely as possible. However, the concessionaires are precisely not contractually bound to effect any 'transport'. That remains a matter for the relevant users, who use the toll motorways merely to move from one point to another and to reach their destination more quickly and conveniently. 41. The Spanish Government justifies the application of the reduced rate on the ground that distortions of competition allegedly exist as a result of the differential tax treatment of tolls in the other Member States.
38. The need for a strict interpretation is also apparent from a comparison of the other 16 categories specified in Annex H 42. First, it must be noted that there is no (see footnote 4 above), which concern competition between the Spanish motor- predominantly supplies and services of a way operators and those of other Member social or cultural nature or relate to public services. States in which tolls are, wrongly, not subjected to VAT. On account of the geographic situation no Spanish driver would switch to a possibly cheaper French motorway. The fact that the profit situation of the Spanish concessionaires is possibly less favourable is a separate issue.
39. Equating the provision of transport infrastructure for quicker and safer move- ment and general mobility with the trans- port of passengers and luggage would 43. A distortion of competition in this extend the scope of Annex H and therefore specific case would arise only if, for exam- constitute a derogation from the basic rule ple, non-taxable State bodies were compet- of full taxation contrary to the spirit and ing for the supply of the same services with purpose of the directive. a taxable private person and were therefore
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able to offer their services at a lower price VAT is levied, it is not for the Member because of the tax exemption. However, the States to even out such differences by Spanish Government has put forward no means of unilateral measures. factual evidence to show that any such competitive situation exists.
44. Furthermore, the other arguments 46. The purpose of the Sixth Directive is to advanced by the Kingdom of Spain in harmonise the laws of the Member States respect of distortions of competition do relating to turnover taxes. The aim in not stand up to scrutiny. First, the scope of particular is thus to ensure — according to the Directive — as is clear from a number the ninth recital in the preamble — that of provisions — is limited to transactions the application of the Community rate to within the country. There is at any rate no taxable transactions leads to comparable breach visible of the duty to treat other results in all the Member States. Conse- nationals equally in the present case. Sec- quently, it is evident as a whole from the ond, the cases of distortion mentioned — harmonised VAT system that the Member no right to deduct input tax on the one States have a margin of discretion only hand and reduced costs on the other — are where the relevant provisions of Commu- not the result of waiving tax in other nity law specifically so provide. countries or charging tax in Spain as the case may be, but of the misapplication of the law by other Member States. Following clarification by the Court, the Member States in which there is a toll road infra- structure will certainly levy VAT in a uniform manner.
47. But if all Member States are obliged to apply the standard rate of VAT to a service such as the provision of road infrastructure by concessionaires, a Member State is barred under the Sixth Directive from 45. Even where differences regarding the following the unlawful example of others application of VAT to motorway tolls in order to eliminate differences regarding undoubtedly exist between the Member taxation. The other Member States pre- States, since in certain Member States the cisely are required, for their part, to apply standard rate is applied and in others no the rate laid down by the Sixth Directive.
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48. According to the constant case-law of vourable) impact on the system of the the Court, a Member State cannot success- Communities' own resources, is also imma- fully rely on the fact that other Member terial, since the standard rate should have States have likewise failed to fulfil their been applied to the service in question. obligations. 12
51. Consequently, the argument put for- 49. In that respect the Spanish Government ward by the Spanish Government regarding may likewise not rely on an infringement of the elimination of distortions of competi- tax neutrality to justify its conduct, parti- tion must be rejected in its entirety. cularly since no infringement has taken place, or rely on the principle of the protection of legitimate expectations. First, the Commission conducted the proceedings for failure to fulfil Treaty obligations brought against Spain swiftly in under 15 months (see paragraphs 9 to 15 above), and second, the unlawful conduct of other 52. To sum up, the Court should declare Member States cannot create effective that, by applying a reduced rate to the legitimate expectations which would justify provision of services consisting in making one's own failures. The admittedly inex- road infrastructure available, the Kingdom plicably long period of many years between of Spain has failed to fulfil its obligations the initiation of proceedings for failure to under the Sixth Directive. fulfil Treaty obligations and the bringing of the actions in the five cases referred to above (see paragraph 26 and footnote 5 in respect of paragraph 17 above) could have effects at most if additional retrospective payments were requested, which, however, is not so in the present case. VI — Costs
50. The other argument advanced by the 53. Under Article 69(2) of the Rules of Spanish Government that the relevant Procedure, the unsuccessful party is to be Spanish provisions were merely interim ordered to pay the costs if they have been measures which, moreover, had no (unfa- applied for in the successful party's plead- ings. Since the Commission has asked for the Kingdom of Spain to be ordered to pay 12 — Case 52/75 Commission v Italy [1976] ECR 277, Case 232/78 Commission v France [1979] ECR 2729, the costs and the latter has been unsuccess- Case 325/82 Commission v Germany [1984] ECR 777, ful in its pleadings, it must be ordered to and Case C-146/89 Commission v United Kingdom [1991] ECR I-3533. pay the costs.
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V I I— Conclusion
54. For the foregoing reasons I therefore propose that the Court should rule as follows:
(1) By applying a reduced rate to the provision of services consisting in making road infrastructure available to users by concessionaires, the Kingdom of Spain has failed to fulfil its obligations under Article 12 of the 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 added tax: uniform basis of assessment.
(2) The Kingdom of Spain shall bear the costs of the proceedings.
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