C-109/90 Giant

Judgment of the Court (Fourth Chamber) of 19 March 1991. - NV Giant v Gemeente Overijse. - Reference for a preliminary ruling: Bestendige Deputatie van de Provincieraad van Brabant - Belgium. - Interpretation of Article 33 of the Sixth VAT Directive. - Case C-109/90. European Court reports 1991 Page I-01385

Summary Parties Grounds Decision on costs Operative part

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Tax provisions - Harmonization of laws - Turnover tax - Common system of value added tax - Levying of national taxes which cannot be characterized as turnover taxes - Permissible - Concept of "turnover taxes" - Scope - Special tax on performances and entertainments - Excluded

(Council Directive 77/388, Art. 33)

It is apparent from Article 33 of the Sixth Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes that Member States may introduce indirect taxes, provided that those taxes cannot be characterized as turnover taxes. In order to decide whether a given tax can be so characterized it is necessary, in particu lar, to determine whether it has the effect of compromising the functioning of the common system of value added tax by levying a charge on the movement of goods and services and on commercial transactions in a way comparable to value added tax.

A special tax on performances and entertainments introduced by a commune under a tax regulation, under which any person who habitually or occasionally organizes public performances or entertainments within the commune and requires those attending or participating to pay an entrance fee must pay a special tax on the gross amount of all receipts, does not possess the characteristics of a turnover tax within the meaning of that provision if it is established that the tax in question:

(i) applies only to a limited category of goods and services and thus is not a general tax;

(ii) is not charged at each stage of the production and distribution process, since it is imposed annually on the aggregate receipts of taxable undertakings; and

(iii) is not levied on the value added at each transaction but on the gross amount of all receipts, so that it is impossible to establish precisely what fraction of the tax charged on each sale or service may be regarded as having been passed on to the consumer.

In Case C-109/90

REFERENCE to the Court under Article 177 of the EEC Treaty by the Bestendige Deputatie van de Provincieraad van Brabant (executive branch of the Provincial Council of Brabant), Belgium, for a preliminary ruling in the proceedings pending before that body between

NV Giant

and

Commune of Overijse

on the interpretation of Article 33 of Directive 77/388/EEC, the Sixth Council Directive on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment (Official Journal L 145, p. 1),

THE COURT (Fourth Chamber)

composed of: M. Díez de Velasco, President of the Chamber, C. N. Kakouris and P. J. G. Kapteyn, Judges,

Advocate General: F. G. Jacobs

Registrar: D. Louterman, Principal Administrator,

after considering the written observations submitted on behalf of the Commission of the European Communities, by J. F. Buhl and B. J. Drijber, members of its Legal Department, acting as Agents,

having regard to the Report for the Hearing,

after hearing oral argument from the Commission at the hearing on 15 January 1991,

after hearing the Opinion of the Advocate General delivered at the sitting on 7 February 1991,

gives the following

Judgment

Grounds

1By order dated 23 January 1990, which was received at the Court on 19 April 1990, the Bestendige Deputatie van de Provincieraad van Brabant referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the interpretation of Article 33 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment (Official Journal L 145, p. 1, hereinafter referred to as "the Sixth Directive").

2That question arose in the context of a dispute between NV Giant and the Commune of Overijse over the levying of a tax on performances and entertainments charged by the commune.

3It appears from the documents in the case that on 2 March 1983, the Commune of Overijse adopted a tax regulation under Article 2 of which any person who habitually or occasionally organizes public performances or entertainments within the commune and requires those attending or participating to pay an entrance fee must pay a special tax on the gross amount of all receipts. Under Article 3 of the regulation, that tax is payable on the total amount of entrance fees, rental and cloakroom charges, the sale of programmes or dance cards, the proceeds from any refreshments, and so forth. In accordance with paragraph 1 B (c) of Article 4 of the tax regulation, the tax is levied at the rate of 25% on dance halls and restaurants attached to them. It is collected on a yearly basis. The tax regulation was adopted for a period of six years, until the end of 1988.

4On 28 June 1989, NV Giant lodged an appeal before the Bestendige Deputatie van de Provincieraad van Brabant against the tax levied for 1988. It claimed that the tax can be characterized as a turnover tax and is contrary to Article 33 of the Sixth Directive, which prohibits the introduction of turnover taxes other than value added tax.

5The Bestendige Deputatie, considering that the settlement of the dispute depended on the interpretation of the Sixth Directive, decided to seek a preliminary ruling on the following question:

"Is the tax regulation of the Commune of Overijse dated 2 March 1983,by which any person who habitually or occasionally organizes public performances or entertainments within the commune and requires those attending or participating to pay an entrance fee must pay a special tax on the gross amount of all receipts and by which in particular an annual tax of 25% is imposed on dance halls and restaurants attached to them on the total amount of entrance fees, rental and cloakroom charges, the sale of programmes or dance cards, the proceeds from all refreshments and any contributions or consideration which may replace or supplement such fees or prices, as well as any other charges, contrary to the prohibition on the imposition of any taxes on turnover other than value added tax laid down in Article 33 of Directive 77/388/EEC, or not?"

6Reference is made to the Report for the Hearing for a fuller account of the legal background, the facts of the case and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

7The purpose of the question referred to the Court is essentially to ascertain whether Article 33 of the Sixth Directive precludes the collection of a special tax on performances and entertainments of the kind levied by the Commune of Overijse under its regulation of 2 March 1983.

8It must be borne in mind that Article 33 of the Sixth Directive provides that "without prejudice to other Community provisions, the provisions of this Directive shall not prevent a Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, stamp duties and, more generally, any taxes, duties or charges which cannot be characterized as turnover taxes".

9As the Court pointed out in its judgment in Case 73/85 (Kerrutt v Finanzamt Moenchengladbach-Mitte [1986] ECR 2219), it is apparent from that provision that Community law permits systems of taxation which are concurrent with value added tax. Member States may therefore introduce taxes which cannot be characterized as turnover taxes.

10The answer to the question referred to the Court thus depends on whether the special tax on performances and entertainments in issue, as described in the order for reference, is to be regarded as a turnover tax within the meaning of Article 33 of the Sixth Directive.

11In order to decide whether a tax can be characterized as a turnover tax it is necessary, in particular, to determine, as the Court stated in its judgment in Case 295/84 (Rousseau Wilmot v Organic [1985] ECR 3759) and in Case 252/86 (Bergandi v Directeur-général des impôts [1988] ECR 1343), whether it has the effect of compromising the functioning of the common system of value added tax by levying a charge on the movement of goods and services and on commercial transactions in a way comparable to value added tax.

12As the Court has consistently held (see, in particular, the judgments in Rousseau Wilmot and Bergandi, cited above, and in Joined Cases 93/88 and 94/88, Wisselink and Others v Staatssecretaris van Financiën [1989] ECR 2671), the principle of the common system of value added tax consists, by virtue of Article 2 of the First Directive, in the application to goods and services up to the retail stage of a general tax on consumption which is exactly proportional to the price of the goods and services, irrespective of the number of transactions which take place in the production and distribution process before the stage at which the tax is charged. However, value added tax is chargeable on each transaction only after deduction of the amount of value added tax borne directly by the costs of the various price components. The procedure for deduction is so arranged by Article 17(2) of the Sixth Directive that taxable persons are authorized to deduct from the value added tax for which they are liable the value added tax which the goods have already borne.

13A tax of the kind to which the national court refers in the present case does not possess the characteristics of a turnover tax within the meaning of Article 33 of the Sixth Directive.

14In the first place, it is not a general tax, since it applies only to a limited category of goods and services. Secondly, it is not charged at each stage of the production and distribution process, since it is imposed annually on the aggregate receipts of taxable undertakings. Thirdly, it is not levied on the value added at each transaction but on the gross amount of all receipts, and it is therefore impossible to establish precisely what fraction of the tax charged on each sale or service may be regarded as having been passed on to the consumer.

15The answer to the question raised by the Bestendige Deputatie van de Provincieraad van Brabant must therefore be that Article 33 of the Sixth Directive must be interpreted as not precluding the charging of a special tax on performances and entertainments of the kind charged by the Commune of Overijse under its regulation of 2 March 1983.

Costs

Costs

16The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. Since these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Fourth Chamber),

in answer to the question referred to it by the Bestendige Deputatie van de Provincieraad van Brabant by order of 23 January 1990, hereby rules:

Article 33 of the Sixth Council Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment (Official Journal L 145, p. 1) must be interpreted as not precluding the charging of a special tax on performances and entertainments of the kind charged by the Commune of Overijse under its regulation of 2 March 1983.

O P I N I ON OF MR ADVOCATE GENERAL JACOBS delivered on 7 February 1991 My Lords,

1In this case, the Bestendige Deputatie (executive branch) of the Provincieraad (Provincial Council) of Brabant, Belgium, has asked for a preliminary ruling under Article 177 of the EEC Treaty on the interpretation of Article 33 of the Sixth VAT Directive (Directive 77/388/EEC on the harmonization of the laws of the Member States relating to turnover taxes — common system of value added tax: uniform basis of assessment, Official Journal 1977 L 145, p. 1). Article 33 provides as follows:

'Without prejudice to other Community provisions, the provisions of this Directive shall not prevent a Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, stamp duties and, more generally, any taxes, duties or charges which cannot be characterized as turnover taxes.'

The case turns on the meaning of the expression 'turnover taxes' for the purposes of that provision.

2The main action arises out of a claim made against NV Giant by the Commune of Overijse for the payment of tax in respect of the year 1988. The claim is based on a local

* Original language: English.

regulation dated 2 March 1983, approved by the Bestendige Deputatie on 31 December 1983, under which any person who organizes public performances or entertainments within the area of the Commune, and for which those attending or participating are required to pay an entrance fee, is liable to a special tax on the gross amount of all receipts. The tax in question is imposed on the total amount of the entrance fees, rents and cloakroom charges, proceeds from the sale of programmes or dance cards and refreshments and any other charges. The claim made by the Commune relates to a dance hall operated by Giant and is for tax on its receipts at the rate of 25%.

3Giant appealed against this claim to the Bestendige Deputatie of the Provincieraad of Brabant, before which it maintained that the contested tax was in substance a turnover tax within the meaning of Article 33 of the Sixth VAT Directive and that the Commune was not therefore entitled to levy it. The Bestendige Deputatie has submitted the following question to the Court for a preliminary ruling:

'Is the tax regulation of the Commune of Overijse dated 2 March 1983, by which any person who habitually or occasionally organizes public performances or entertainments within the area of the Commune and requires those attending or participating to pay an entrance fee must pay a special tax on the amount of all receipts and by which in particular an annual tax of 25% is imposed on dance halls and restaurants connected therewith on the total amount of entrance fees, rents and cloakroom charges, the sale of programmes or dance cards, the proceeds from any refreshments and contributions or consideration which may replace or supplement such fees or prices, as well as any other charges, contrary to the prohibition on the imposition of any taxes on turnover other than VAT laid down by Article 33 of Directive 77/388/EEC, or not?'

4The Court clearly cannot answer this question as framed, for it asks for a ruling on the compatibility with the Sixth VAT Directive of a specific provision of national law. It is well established that the Court has no jurisdiction in proceedings under Article 177 to give such a ruling. I would therefore interpret the question as asking in essence whether a provision possessing the characteristics of the contested local regulation is compatible with Article 33 of the directive.

5Before examining the substance of the question, it is necessary to consider the jurisdiction of the Bestendige Deputatie to make use of the procedure established by Article 177. That procedure is available only to a 'court or tribunal of a Member State' and the question arises whether the Bestendige Deputatie constitutes such a body.

6It appears that, in Belgium, each provincial council elects from among its members a Bestendige Deputatie, which acts under the chairmanship of the governor of the province, who is appointed by the King. The role of the Bestendige Deputatie is mainly administrative, but for historical reasons it also has jurisdiction in disputes over local taxes. In exercising this jurisdiction, the Bestendige Deputatie holds public hearings in accordance with an adversarial procedure and is required to give reasons for its decisions.

7The jurisdiction of the Bestendige Deputatie in disputes over local taxes is now based on a Belgian Law of 23 December 1986 (Moniteur belge, 12. 2. 1987, p. 1993). Article 7 of that Law provides that where the dispute relates to a sum of not less than BFR 10 000, appeal from the decisions of a Bestendige Deputatie lies to a Cour d'appel. Where the sum in issue is less than BFR 10 000, a Bestendige Deputatie sits as a tribunal of last resort, although its decisions are subject to review on a point of law ('recours en cassation').

8In the light of these factors, I have no doubt that the Bestendige Deputatie must, in the circumstances of the main action, be regarded as a court or tribunal of a Member State within the meaning of Article 177. Its jurisdiction to make a reference to this Court under that article is not therefore in doubt.

9As for the substance of the question referred, the Court's case-law makes it clear that Community law does not at present contain any restrictions on the power of the Member States to introduce taxes other than turnover taxes: see Joined Cases 93/88 and 94/88 Wisselink ECR 2671, paragraph 13, and Case 252/86 Bergandi [1988] ECR 1343, paragraph 10. Moreover, the fact that a tax is levied on a transaction which is already subject to VAT and that double taxation of that transaction may result does not necessarily mean that the tax constitutes a turnover tax for the purposes of Article 33 of the Sixth VAT Directive: see Case 73/85 Kerrutt [1986] ECR 2219, paragraph 22; Wisselink, cited above, paragraph 14.

10According to the Court's decision in Wisselink, the purpose of Article 33 is 'to prevent the functioning of the common system of value added tax from being compromised by fiscal measures of a Member State levied on the movement of goods and services and charged on commercial transactions in a way comparable to value added tax' (paragraph 17). It is therefore necessary to determine whether the local tax at issue in these proceedings is levied in a way comparable to VAT and whether it consequently jeopardizes the functioning of the common system of value added tax.

11The essential characteristics of the VAT system were described by the Court in Wisselink as follows:

‘The principle of the common system of value added tax consists... in the application to goods and services up to the retail stage of a general tax on consumption which is exactly proportional to the price of the goods and services, irrespective of the number of transactions which take place in the production and distribution process before the stage at which the tax is charged. However, value added tax is chargeable on each transaction only after deduction of the amount of value added tax borne directly by the cost of the various price components. The procedure for deduction is so arranged . .. that taxable persons are authorized to deduct from the value added tax for which they are liable the value added tax which the goods have already borne' (paragraph 18).

12As the Commission points out, the disputed tax differs from VAT in a number of respects. In the first place, it is not of general application: it applies only within a limited geographical area and to a limited class of goods and services (see Wisselink, paragraph 20). Moreover, because it is based on gross receipts rather than on the value added at the stage of each transaction, it is not possible to establish precisely what fraction of the tax on each sale or provision of services may be taken to have been passed on to the consumer.

13However, there is in my view a more basic distinction between the disputed tax and VAT. As the passage from Wisselink set out at paragraph 11 above makes clear, VAT is charged at each stage in the process of production and distribution. Taxable persons may deduct from the amount of tax payable the VAT which the goods have already borne. These characteristics, which are fundamental to the VAT system, are not possessed by the disputed tax.

14I conclude that the tax in issue is not does not therefore constitute a turnover tax levied in a way comparable to VAT and that within the meaning of Article 33 of the it is not likely to compromise the func Sixth VAT Directive.

tioning of the VAT system. In my view, it

15Accordingly, I am of the opinion that the question referred by the Bestendige Deputatie should be answered as follows:

'A local tax imposed annually on dance halls and restaurants connected therewith in respect of entrance fees, rents and cloakroom charges, proceeds from the sale of programmes or dance cards and refreshments and any other receipts which replace or supplement such charges does not constitute a turnover tax within the meaning of Article 33 of Council Directive 77/388/EEC of 17 May 1977.'