C-149/01

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OPINION OF MR TIZZANO — CASE C-149/01

2. All transactions performed by the travel toms & Excise (hereinafter 'the Commis- agent in respect of a journey shall be sioners'). 3 treated as a single service supplied by the travel agent to the traveller. It shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has provided the services. The taxable amount and the price exclusive of tax, within the meaning of Article 22(3)(b), II — Facts, the proceedings before the in respect of this service shall be the travel national court and the questions referred agent's margin, that is to say, the difference for a preliminary ruling between the total amount to be paid by the traveller, exclusive of value added tax, and the actual cost to the travel agent of supplies and services provided by other taxable persons where these transactions are for the direct benefit of the traveller.' A — Facts giving rise to the dispute in the main proceedings

5. Again according to the order for refer- However, by letter of 29 September 1998, ence, First Choice is generally unaware it then claimed a refund from the Commis- either of the fact that its own holidays are sioners of VAT paid in the sum of sold at a discount or of the extent of the GBP 921 456, submitting that, in calculat- discounts given. The customers, for their ing the taxable margin, account had to be part, are unaware of the financial arrange- taken only of the price of the holidays in ments between First Choice and its agents. fact paid by the customers, and not of the It further appears from the order for amounts corresponding to any discounts reference that the amount of the discounts given by the travel agents and remaining in question is, in most cases, less than the payable by the latter. The Commissioners commission owed by First Choice to the did not accept that interpretation and agent, though it may at times equal it or therefore rejected First Choice's claim by even exceed it. letter of 9 October 1998.

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Tribunal according to which that amount the price published in the tour oper- represents the amount paid by the travel ator's brochure (the customer being agent to First Choice for the facility pro- liable to pay only the discounted price vided to them by the latter to determine the for the holiday); selling price of the holidays as they saw fit constitutes a finding of fact which cannot be disturbed on appeal. 4

(c) requires the agent who arranges the 9. The Commissioners then brought an supply of a package holiday at a appeal against the judgment of the High discount not only to pass on to the Court before the Court of Appeal, Civil tour operator the price actually Division, which stayed proceedings and charged to the customer but also to referred to the Court of Justice for a pay to the tour operator an additional preliminary ruling: sum equal to the discount given to the customer (who is unaware of the financial arrangements between the tour operator and the agent), so that the agent accounts to the tour operator for the full brochure price of the 'Where a tour operator within the meaning holiday; of Article 26 of Council Directive 77/388/EEC

(a) supplies package holidays to customers (d) agrees to pay the agent a commission through the disclosed agency of a travel based on the brochure price of the agent; holiday, which in practice is paid by set-off against the sums due from the agent as mentioned in (c) above;

(b) permits the agent to arrange the supply of package holidays at a discount from

2. Does "the total amount to be paid by the traveller" within Article 26.2 include the additional sum referred to in (c) above?' 12. I therefore begin with the first part of the question. If I have understood the arguments correctly, First Choice seeks to argue that, according to the division of jurisdiction laid down by Article 234 EC, it is for the national court to make a deter- mination as to the categorisation in law, for the purposes of Article 26(2) of the Sixth I I I— Procedure before the Court Directive, of the additional amount paid by the travel agent to the tour operator, in the circumstances indicated in that question. In its opinion such a determination is con- cerned not with the interpretation of the 10. In the course of the written stage of the provision of Community law in question, procedure, First Choice, the United King- which is a matter for the Court of Justice, dom, the Federal Republic of Germany and but with the application of that provision the Commission of the European Commu- to the facts in the main proceedings, which nities submitted written observations to the is, instead, a matter for the national court. 5 Court. With the exception of the German Government, all those participants in the proceedings also presented oral argument 5 — On this subject First Choice refers to the judgment in Case C-320/88 Shipping and Forwarding Enterprise Safe [1990] at the hearing on 14 March 2002. ECR I-285, in particular paragraph II.

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16. In any event, from an examination of 14. For my part, I take the view, however, the file in the case, it is clear that the that a reformulation of the first part of the relevant point of law for the resolution of question in the terms suggested by First the main proceedings, on which the Court Choice, which moreover the United King- should rule, is not at all that stated by First dom and the Commission oppose, is not Choice, namely the possible conflict justified. In that regard, I must point out between Community law and the rules of that, for the purposes of the cooperation United Kingdom procedural law in the between the national courts and the Court matter of appeals. On the contrary, it is of Justice established by Article 234 EC, it is for the latter, when seised of questions formulated inappropriately or which 6 — See, ex multis, Case 35/85 Teissier [1986] ECR 1207, paragraph 9 and, more recently, Case C-107/98 Teckal exceed the limits of its jurisdiction, to (1999] ECR I-8121, paragraph 34, containing further extract from all the information provided references; Joined Cases C-223/99 and C-260/99 Agorà e Excelsior [2001] ECR I-3605, paragraph 24. See also the by the national court, and in particular Opinion of Advocate General Léger in Case C-175/99 Mayeur [2000] ECR I-7755, point 25. from the grounds of the order for reference, 7 — As to the distinction between the interpretation and the points of Community law which require application of Community law in proceedings under Article 234 EC in an earlier case in which the Court was interpretation, having regard to the subject- asked expressly to rule on the facts of the case before the matter of the dispute in the main proceed- national court see the Opinion of Advocate General Jacobs in Case C-342/97 Lloyd Schuhfabrik Meyer [1999] ECR ings. In those circumstances the Court will, I-3819, paragraphs 8 to 13.

19. Turning now to the substance of the question referred for a preliminary ruling, in the formulation that I have suggested, I consider that it is advisable to proceed by stages, establishing first and foremost whether the concept 'total amount to be paid by the traveller' in Article 26(2) also covers the amounts paid by third parties to 17. More specifically, I consider that, taken a travel agent or (in the circumstances of as a whole, the question referred by the the present case) to a tour operator. If that Court of Appeal is directed to establishing is the case, it will then be necessary to whether the additional amount paid by the determine whether the 'additional amount' travel agent to the tour operator must be paid by the travel agent in the particular regarded as part of the 'total amount to be circumstances indicated by the referring paid by the traveller' for the purpose of court falls within that concept. calculating the operator's taxable margin within the meaning of Article 26(2) of the Sixth Directive. On a proper view, the two parts of the question have in reality the same purpose: to ask what is the legal categorisation of the additional amount in question for the purposes of Article 26(2) 20. On the first point, First Choice's pos- seems to me to be no different than asking ition may be summarised as follows. It whether the same amount falls within the contends that the scheme laid down by concept 'the total amount to be paid by the Article 26 of the Sixth Directive constitutes traveller'. In both cases, the question is an exception to the general rules for the essentially whether the payment made by determination of the taxable amount laid the travel agent can be treated as a payment down in Article 11 of that directive, and for the service provided to the traveller by not a particular case of the application of the tour operator. those rules. It is therefore wrong to inter- pret the expression 'total amount to be paid by the traveller' in Article 26(2) in the light of the concept of consideration adopted in 8 — See in particular paragraphs 2, 7, 9, 11 and 12 of the grounds of the order for reference (pages 13 to 16). Article 11 of the directive, which, under

21. The United Kingdom, the Federal Republic of Germany and the Commission 22. For its part, the Commission insists in take the opposite view. In particular, the particular that the inclusion in the 'total United Kingdom and, up to a point, the amount to be paid by the traveller' of all Federal Republic of Germany contend that, that is paid to the tour operator for the as with all derogating measures, the dero- service supplied to the traveller, including gation from the general scheme of the Sixth the amounts paid by third parties, is in Directive introduced by Article 26 thereof accordance with a general principle in this must be limited to what is strictly necessary sphere. If that were not so, an unwarranted to attain the objective envisaged by that distinction would be created between the provision, namely to simplify the appli- special scheme laid down in Article 26 and cation of the general scheme of VAT in the the ordinary scheme of VAT. Since the particular context of the operations of latter scheme takes into account, for the purposes of determining the taxable amount, all that is paid to the supplier for 9 — 1 would recall that under Article 11A(1)(a) of the Sixth the service provided, regardless of whether Directive, for most supplies of services, the taxable amount the payment is made by the recipient of the is stated to be 'everything which constitutes the consider- ation which has been or is to be obtained by the supplier service, by the purchaser or by a third from the purchaser, the customer or a third parry for such supplies including subsidies directly linked to the price of party, that scheme would be less favourable such supplies'. than the special one. I - 6298

25. Under the ordinary scheme of VAT, under Article 11A(1)(a) of the Sixth Direc- tive, the taxable amount for most supplies of services is the consideration for the 24. Article 26(2) lays down a special sys- service supplied; it follows that, in order tem for calculating the taxable amount, to recover the input tax on supplies of which serves to simplify the recovery of services acquired from other taxable per- input VAT paid by travel agents and tour sons for the organisation of the holiday, the operators in purchasing the services necess- operator would have to comply with the ary for a holiday from third parties. It must necessary administrative formalities, in be considered that the services supplied by particular the identification for VAT pur- poses in every Member State in which it has acquired those services. It is evident that 10 —See Case C-163/91 Van Cinkel [1992] ECR I-5723, paragraphs 13 to 15; Joined Cases C-308/96 and C-94/97 that would render the normal conduct of Madgett and Baldwin [1998] ECR I-6229, paragraph 33, the business of travel agents and tour and the Opinion of Advocate General Léger in that case, paragraph 27. It should however be noted that the operators difficult. By contrast, in the operation of the special scheme laid down by Article 26 also meets the requirement of ensuring that the revenue scheme under Article 26(2), the taxable from VAT is allocated to the Member State in which the final 'consumption' of the individual services which amount for VAT is the trader's profit comprise the sole supply rendered to the traveller takes place, that is in which the traveller enjoys those services margin, that is, the difference between the (see here the proposed amendment to the Sixth Directive concerning Article 26, cited above at footnote 2; see also Terra, B.J.M. and Kajus, J., A Guide to European VAT Directives, Commentary on the Value Added Tax of the 12 — Van Ginkel, cited above, paragraph 14. As Advocate European Community, IBFD, 2002, under Article 26, in General Gulmann noted in his Opinion in that case (at particular at page 106.14). That objective is pursued by point 3), the special scheme under Article 26, even though means of the particular method for calculating the taxable it applies regardless of the fact that the business of travel amount and of the determination of the place of taxation agents (or of tour operators) is carried out in one or more laid down by Article 26 (see footnote 13 below). Member States, is justified essentially in the light of the 11 — Madgett and Baldwin, cited above, paragraph 34. 'cross-border' elements of that business.

26. However, whilst it is true that the different system for calculating the taxable amount in respect of VAT under the scheme under Article 26 is justified in the light of the objectives of that special scheme, I do not see why, in the context of that scheme, the concept 'total amount to be paid by the traveller' should have a 28. Neither does the distinction made by meaning different to that of the concept of First Choice, to the effect that the amounts 'consideration' under the ordinary scheme. paid by a third-party agent or represen- The fact that the method employed for tative of the traveller fall within 'the total calculating the taxable amount is not the amount to be paid by the traveller' whilst same under the two schemes does not imply the sums paid by a third party which has no that the factors to be taken into consider- legal relationship with the traveller do not, ation for that purpose are also different. seem to me to be well founded. As has been Those concepts clearly both identify the seen, under the scheme of Article 26 the same economic fact, namely the price paid expression 'total amount to be paid by the to the supplier for the service provided, and traveller' identifies nothing more than the should therefore have the same scope, price of the holiday, that is the consider- unless a different interpretation is justified ation for the 'service... supplied by the specifically in the light of the objectives travel agent to the traveller' within the pursued by Article 26. meaning of that provision. What Article 26 takes into consideration is the economic and not the legal aspect of the mutual 13 — Guaranteeing at the same time a correct allocation of the exchange of services (holiday/consider- tax yield between the Member States. The VAT revenue from the services of which the holiday is made up is ation) for the purpose of calculating the allocated to the Member States in which the traveller enjoys those services (since the trader does not recover it in profit margin of the operator by means of those States), whilst the tax on the agent's profit is the comparison between the price of the allocated, under the express wording of Article 26(2), to the Member State in which he is established (see above, holiday and the costs borne by the tour footnote 10). operator to that end. But nothing permits I - 6300

the conclusion that, in using the term the tour operator by way of consideration 'traveller', the Community legislature for the holiday. 15 intended to exclude from the calculation of the margin the amounts paid by way of consideration by third parties who are not recipients of the service, with the sole exception of third parties who act in the name of and on behalf of the traveller. Neither has First Choice put forward any 31. In the light of the foregoing, it is convincing substantiation in that respect. necessary next to determine, as I have anticipated would be the case, whether the additional amount paid by the travel agent to the tour operator falls within the abovementioned concept, in the particular circumstances indicated by the referring court. In other words, it is necessary to ascertain whether that additional amount 29. I would add that, as already pointed can be regarded as part of the consideration out, an interpretation that would bring paid to the tour operator for the holiday. within the concept 'total amount payable by the traveller' the amounts paid by third parties by way of consideration for the organisation of the holiday finds confirma- tion in the case-law of the Court, which, also on the subject of sales at discounted prices, applies the principle of 'subjective' value, according to which, for the purposes 32. First Choice submits, on that point, of calculating the taxable amount under the that the additional amount paid by the o r d i n a r y s c h e m e laid d o w n by travel agent is in reality attributable to an Article HA(1)(a) of the Sixth Directive, economic operation different to that relat- the consideration should be treated as ing to the sale of the holiday. It claims that everything that the supplier, of goods or this amount constitutes the consideration services has actually received in each spe- for a service supplied by the tour operator cific case. 14 to the travel agent, a service consisting in the facility provided to the agent to deter- mine the selling price of the holiday as he sees fit. In support of that assertion, First Choice claims that the customer is ignorant of the arrangements existing between the agent and the operator; he is simply required to pay the reduced price of the 30. I therefore consider that the expression holiday, benefiting specifically from that 'total amount payable by the traveller' reduction and not from the payment of an under Article 26(2) of the Sixth Directive additional amount to the operator by the covers the amounts paid by a third party to

travel agent. Since therefore the only rel- the question it seems that it must be evant economic operation for the purposes inferred that that is specifically what of the application of Article 26 is precisely happens: in particular, it seems to me to that relating to the sale of the holiday, First be significant that, in the hypothesis stated Choice contends that the additional by the referring court, the tour operator is amount paid by the agent escapes from prepared to sell the holiday to the customer the application of the special scheme laid only on condition that he receives the full down by that provision, remaining instead brochure price, and that furthermore he subject to taxation under the ordinary remunerates the travel agent on the basis of scheme. Consequently, even if the concept that price, and not on the basis of any 'total amount to be paid by the traveller' reduced price paid by the customer. 17 under Article 26(2) had to be interpreted as Having said that, I consider that it is in including the sums paid to third parties by any event for the referring court to ascer- the tour operator by way of consideration tain, in the light of all the information for the holiday, the additional amount paid available to it, whether those conditions are by the travel agent could not be brought met in the particular circumstances of the within that concept. case before it.

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V — Conclusion

35. In the light of the foregoing considerations, I therefore suggest that the Court replies in the following terms to the question referred by the Court of Appeal (England and Wales) (Civil Division) by order of 13 March 2001:

Article 26(2) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the rules of the Member States relating to turnover taxes — common system of value added tax: uniform basis of assessment is to be interpreted as meaning that the concept 'total amount to be paid by the traveller' contained in that provision covers all amounts received by way of consideration for the supply of the holiday by the travel agent or by the tour operator to which the special scheme laid down by that provision applies, regardless of whether those amounts are paid by the traveller himself or by third parties. It is for the national court to ascertain whether the amount that, in the circumstances indicated by that court, a travel agent, acting as agent on behalf of a tour operator, has paid to the latter in addition to the price paid by the purchaser of a package holiday constitutes consideration of that kind.

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