C-165/88 ORO Amsterdam Beheer and Concerto

Judgment of the Court of 5 December 1989. - ORO Amsterdam Beheer BV and Concerto BV v Inspecteur der Omzetbelasting Amsterdam. - Reference for a preliminary ruling: Gerechtshof Amsterdam - Netherlands. - VAT - Resale of second-hand goods. - Case C-165/88. European Court reports 1989 Page 04081

Summary Parties Grounds Decision on costs Operative part

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1.Member States - Obligations - Obligation to act in the place of the Council whenever it fails to act - None

( EEC Treaty, Art . 5 )

2.Tax provisions - Harmonization of laws - Turnover taxes - Common system of value-added tax - Sale by taxable persons of second-hand goods purchased from non-taxable persons - National rules which do not allow account to be taken of the residual tax contained in the purchase price - Not incompatible with the Community rules as they now stand

( Council Directive 77/388/EEC, Art . 32 )

1.Although it is true that if the Council fails to adopt measures falling within the exclusive competence of the European Communities, there can be no fundamental objection in certain cases to Member States' maintaining or introducing, pursuant to the duty to cooperate imposed on them by Article 5 of the Treaty, national measures designed to achieve Community objectives, no general principle can be inferred from that fact requiring the Member States to act in the place of the Council whenever it fails to adopt measures falling within its province .

2.Community law and the Community rules governing VAT do not, as they now stand, preclude national legislation which, for the purpose of calculating the VAT payable on the turnover arising from the sale of second-hand goods, does not allow account to be taken of the tax still contained in the price of goods which have been purchased from non-taxable individuals with a view to their resale .

Until the Community legislature has taken action and in so far as nowhere in the common system of value-added tax, as it stands at present, are to be found the necessary bases for determining and laying down detailed rules for applying a common system of taxation enabling double taxation to be avoided in trade in second-hand goods, it is necessary to continue to apply Article 32 of the Sixth Directive, which merely authorizes Member States that apply a special system of VAT to second-hand goods to retain that system but does not impose on them any obligation to introduce such a system if none exists .

In Case C-165/88

REFERENCE to the Court under Article 177 of the EEC Treaty by the Gerechtshof ( Regional Court of Appeal ), Amsterdam, for a preliminary ruling in the proceedings pending before that court between

ORO Amsterdam Beheer BV and Concerto BV

and

Inspecteur der Omzetbelasting, Amsterdam,

on the compatibility with Community law, in particular Article 32 of the Sixth Council Directive on Value-Added Tax ( 77/388/EEC ) of 17 May 1977, of national legislation under which turnover tax is charged at the full rate on the supply of second-hand goods, without taking into account the fact that the goods were purchased from individuals and consequently are already burdened with residual tax,

THE COURT

composed of : O . Due, President, C . N . Kakouris, President of Chamber, T . Koopmans, R . Joliet, J . C . Moitinho de Almeida, G . C . Rodríguez Iglesias and F . Grévisse, Judges,

Advocate General : G . Tesauro

Registrar : J . A . Pompe, Deputy Registrar

after considering the observations submitted on behalf of

the Commission of the European Communities, by J . F . Buhl, Legal Adviser, and B . J . Drijber, a member of its Legal Department, acting as Agents,

the Government of the Netherlands, by E . F . Jacobs and M . A . Fierstra, acting as Agents,

ORO Amsterdam Beheer BV and Concerto BV, by W . Molenaar and G . Molenaar, acting as Director and Agent respectively,

having regard to the Report for the Hearing and further to the hearing on 12 July 1989,

after hearing the Opinion of the Advocate General delivered at the sitting on 24 October 1989,

gives the following

Judgment

Grounds

1By order of 24 May 1988, which was received at the Court on 13 June 1988, the Gerechtshof ( Regional Court of Appeal ), Amsterdam, referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions on the interpretation of the provisions of the Treaty and of the Sixth Council Directive of 17 May 1977 ( 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, hereinafter referred to as "the Sixth Directive ") in order to enable it to assess the compatibility with Community law of Netherlands tax legislation in so far as the latter does not provide special rules for the application of the system of VAT to trade in second-hand goods which have been purchased from individuals with a view to their resale .

2The questions were raised in the course of proceedings between two companies, ORO Amsterdam Beheer BV and Concerto BV, and the Netherlands tax authorities concerning the VAT payable on transactions carried out in December 1986 .

3It appears from the documents before the Court that in December 1986 the plaintiffs in the main proceedings, which run a business retailing new and second-hand gramophone records, music cassettes and compact discs, made sales totalling HFL 256 698 net of tax, of which HFL 250 915 was subject to VAT at the rate of 20 %. After deducting the input tax, the plaintiff companies paid the tax authorities VAT amounting to HFL 37 608 .

4On 5 March 1987, however, the companies lodged an appeal with the Gerechtshof, Amsterdam, seeking the reimbursement of HFL 6 251 of the tax paid, on the ground that they should be allowed to deduct from the tax payable in respect of sales for December 1986 the amount of VAT that was still contained in the price of second-hand articles purchased by them from individuals . Calculating this amount at a flat rate of 20/120ths of the total sum of their purchases of second-hand goods in December 1986, which was HFL 37 509, the undertakings claimed reimbursement of HFL 6 251 .

5The Gerechtshof, Amsterdam, found that no provision of Netherlands tax legislation allowed the deduction of input tax paid on second-hand goods purchased by a taxable person from a non-taxable person . It noted that it was clear from the VAT directives and the judgments of the Court that one of the fundamental characteristics of the VAT system was that at each marketing stage the input tax paid on goods was deductible from the tax payable and it therefore stayed the proceedings and referred to the Court the following two questions :

"¹ Is it in conformity with Community law, and in particular with the provisions of the Treaty establishing the European Economic Community and of the Sixth Council Directive 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 ( 77/388/EEC ), for a Member State to have charged, in December 1986, turnover tax at the full rate on the supply of second-hand goods without taking any account whatsoever of the fact that those goods were bought from individuals, in view of the fact that in the Sixth Directive the Council of the European Communities committed itself to, and gave notice of, the adoption before 31 December 1977 of a Community taxation system applicable to trade in second-hand goods but has so far taken no action in that regard?

² If the first question is answered in the negative, how is account to be taken, in the determination of the turnover tax payable on the supply of second-hand goods, of the fact that the goods were bought from individuals?"

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

7By its first question, the Gerechtshof, Amsterdam, seeks to ascertain essentially whether Community law and, in particular, the Sixth Directive preclude national tax legislation which, for the purpose of calculating the VAT payable on the turnover arising from the sale of second-hand goods, does not allow account to be taken of the tax still contained in the price of goods which have been purchased from non-taxable individuals with a view to their resale .

8As it stands at present, Community law has no special VAT rules for second-hand goods . In its Proposal for a sixth directive, submitted to the Council on 29 June 1973 ( Official Journal 1973, C 80, p . 1 ), the Commission had provided, in Article 26, for a "special scheme for second-hand goods", which were defined in paragraph ¹ as follows : "' Second-hand goods' means used moveable property which can be reused as it is or after repair, excluding original works of art created by the hand of the artist, antiques, collectors' items, and stamps and coins being collectors' items ."

9This "special scheme" provided that, where second-hand goods were acquired from a non-taxable person by a taxable person with a view to their resale, the latter could take account of the VAT borne by the goods in question and laid down detailed rules for the calculation of the deduction to which the taxable person acquiring the goods was thus entitled .

10Since no decision could be reached on the basis of the Commission' s proposals, the Council adopted a transitional measure in the form of Article 32 of the Sixth Directive, which provides as follows :

"The Council, acting unanimously on a proposal from the Commission, shall adopt before 31 December 1977 a Community taxation system to be applied to used goods, works of art, antiques and collectors' items . Until this Community system becomes applicable, Member States applying a special system to these items at the time this directive comes into force may retain that system ."

11On 11 January 1978, the Commission submitted to the Council, pursuant to the first paragraph of that provision, a Proposal for a seventh directive laying down the "common system of value-added tax to be applied to works of art, collectors' items, antiques and used goods" ( Official Journal 1978, C 26, p . 2 ), which was subsequently amended ( amendments submitted to the Council on 16 May 1979, Official Journal 1979, C 136, p . 8 ). Since the Council was unable to reach a decision, this proposal was withdrawn by the Commission in November 1987 . A fresh proposal was submitted to the Council on 11 January 1989 ( Official Journal 1989, C 76, p . 10 ) but has not yet been adopted .

12The plaintiffs in the main proceedings and the Commission contend first of all that it is clear from the judgments of the Court ( judgments of 5 May 1982 in Case 15/81 Gaston Schul Douane-Expediteur BV v Inspecteur der Invoerrechten en Accijnzen (( 1982 )) ECR 1409, and of 21 May 1985 in Case 47/84 Staatssecretaris van Financiën v Gaston Schul Douane-Expediteur BV (( 1985 )) ECR 1491 ) that there is a general principle prohibiting double taxation, so that national measures designed to avoid it, in particular in the case of second-hand goods, are valid ( judgments of 10 July 1985 in Case 16/84 Commission v The Netherlands (( 1985 )) ECR 2355, and in Case 17/84 Commission v Ireland (( 1985 )) ECR 2375 ).

13The second contention is that if the Council fails to act the Member States are entitled, in accordance with the judgments of 5 May 1981 in Case 804/79 Commission v United Kingdom (( 1981 )) ECR 1045 and of 28 March 1984 in Joined Cases 47 and 48/83 Pluimveeslachterij Midden-Nederland BV and Van Miert (( 1984 )) ECR 1721, to maintain or adopt measures designed to achieve the Community objectives . Although the Council has exclusive power to adopt tax harmonization measures, the Member States themselves are, in their view, obliged, in view of the Council' s failure, to take action with regard to the rules on the taxation of second-hand goods in order to ensure that the fundamental principle prohibiting double taxation is observed . That obligation to act is made necessary by the development of Community law in the field of VAT .

14The Netherlands Government, however, observes that Article 32 of the Sixth Directive contains a "standstill" clause which prohibits the Member States from amending or extending the existing special provisions for second-hand goods, in order to prevent additional disparities in national legislation . There is nothing in Article 32 to suggest that the Member States are obliged to act in order to introduce a special scheme for second-hand goods .

15Before replying to the question whether the Member States are entitled or obliged to act as a result of the Council' s failure to lay down a Community system of taxation to be applied to used goods, as provided for in the first paragraph of Article 32 of the Sixth Directive, it is necessary to point out that the Court has held that if the Council fails to adopt measures falling within the exclusive competence of the European Communities, there can be no fundamental objection in certain cases to Member States' maintaining or introducing, pursuant to the duty to cooperate imposed on them by Article 5 of the Treaty, national measures designed to achieve Community objectives . However, no general principle requiring the Member States to act in the place of the Council whenever it fails to adopt measures falling within its province can be inferred from those judgments .

16The essential point, however, is that under the system to which the national court refers, if an individual sells goods to a taxable trader, no VAT is charged on that supply, but upon their resale by the taxable person an amount of VAT proportionate to the resale price is payable and the taxable person may not deduct the VAT already borne by the goods .

17The question is thus whether the fact that national legislation does not provide for a special scheme of VAT for second-hand goods whereby such double taxation may be avoided is contrary to the Treaty and to the Sixth Directive . The question also arises where national legislation contains provisions which, because they relate to special arrangements for taxing certain transactions in second-hand goods, are fragmentary and cannot be regarded as a complete system of VAT rules applicable to used goods . A comprehensive and positive reply to that question cannot be given on the basis of the judgments of the Court alone .

18First of all, it should be noted that, although in its judgments of 5 May 1982 and 21 May 1985 in the two Gaston Schul cases, cited above, to which reference is made by the plaintiffs in the main proceedings and by the Commission, the Court held that the imposition of VAT on the importation of goods supplied by a private person from another Member State, where no VAT was levied on a transaction of the same type within the territory of the State of importation, was incompatible with Community law, that ruling was not based on a general principle prohibiting tax cumulation but on Article 95 of the Treaty, which prohibits internal taxation which discriminates against imported goods .

19For the purposes of the application of Article 6(2)(a ) of the Sixth Directive, which provides that the private use by the taxable person or by his staff of goods forming part of the assets of his business, where the VAT on such goods is deductible, is to be taxed as a supply of services, the Court has indeed ruled that such a charge to tax was precluded in the case of goods which were purchased second hand and which did not therefore give rise to a right of deduction ( judgment of 27 June 1989 in Case 50/88 Kuehne v Finanzamt Munich (( 1989 )) ECR 1925 ).

20However, that ruling is based on the actual terms of Article 6(2)(a ), the aim of which is to prevent a situation wherein goods belonging to a business might eventually be used free of VAT through private use and which therefore requires the use of those goods to be taxed only if the VAT paid on the acquisition of the goods is deductible .

21On the whole the Community system of VAT is the result of a gradual harmonization of national legislation pursuant to Articles 99 and 100 of the Treaty . The Court has consistently held that this harmonization, as brought about by successive directives and in particular by the Sixth Directive, is still only partial .

22The harmonization is designed in particular to preclude double taxation, so that the deduction of input tax at each stage of taxation is an integral part of the system of VAT .

23That objective has not yet been achieved, however, as is clear from Article 32 of the Sixth Directive, and nowhere in the common system of value-added tax, as it stands at present, are to be found the necessary bases for determining and laying down detailed rules for applying a common system of taxation enabling double taxation to be avoided in trade in second-hand goods .

24Until the Community legislature has taken action, it is therefore necessary to continue to apply Article 32 of the Sixth Directive, which merely authorizes Member States that apply a special system of VAT to second-hand goods to retain that system but does not impose on them any obligation to introduce such a system if none exists .

25The answer to the first question should therefore be that Community law and the Community rules governing VAT do not, as they now stand, preclude national legislation which, for the purpose of calculating the VAT payable on the turnover arising from the sale of second-hand goods, does not allow account to be taken of the tax still contained in the price of goods which have been purchased from non-taxable individuals with a view to their resale .

26In the light of the reply to the first question, it is unnecessary to reply to the second question asked by the Gerechtshof, Amsterdam .

Costs

Costs

27The costs incurred by the Netherlands Government and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable . Since these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court .

Operative part

On those grounds,

THE COURT,

in answer to the questions referred to it by the Gerechtshof, Amsterdam, by order of 24 May 1988, hereby rules :

Community law and the Community rules governing VAT do not, as they now stand, preclude national legislation which, for the purpose of calculating the VAT payable on the turnover arising from the sale of second-hand goods, does not allow account to be taken of the tax still contained in the price of goods which have been purchased from non-taxable individuals with a view to their resale .

OPINION OF MR ADVOCATE GENERAL TESAURO delivered on 24 October 1989 Mr President, Members of the Court,

1These questions for a preliminary ruling are the result of the incomplete state of the harmonization of tax legislation within the Community. Although the First, Second and Sixth Directives 1 introduced the bases and general principles for a harmonized system of value-added tax, the express provision of temporary derogations and the existence of sectors which have not been fully harmonized mean that the Court is required to resolve discrepancies arising out of the conflict between the requirement that the general principles must be observed and the lack of any common rules to govern significant parts of the system.

The case with which I am dealing today is a typical example. Whereas it is a fundamental principle of the common system of value-added tax — consistently referred to in the judgments of the Court — that there should be no tax cumulation, the absence of common rules on the taxation of second-hand goods means that this principle is not observed in a case such as that pending before the national court. Consequently, it is necessary to assess whether or

* Original language Italian

not the failure to observe the principle that double taxation must be eliminated is compatible with Community law.

2Let me examine briefly the facts of the case pending before the national court, the Gerechtshof (Regional Court of Appeal), Amsterdam, between the plaintiffs, ORO Amsterdam Beheer BV and Concerto BV, and the Inspecteur der Omzetbelastingen (Inspector of Turnover Taxes), the defendant.

After duly paying to the Netherlands tax authorities the difference between the amount of VAT resulting from the sale of new and second-hand goods and the amount of turnover tax paid as input tax, the plaintiffs claimed the repayment of a certain amount in respect of the VAT still contained in the price of second-hand goods purchased with a view to their resale. The Netherlands tax authorities refused that request.

The national court, finding that there was no provision of national law which permitted the total or partial deduction of the VAT which was still contained in the price of second-hand goods and that the resulting legal situation raised a problem of the interpretation of Community law, and in particular Article 32 of the Sixth Directive, referred to the Court the following questions for a preliminary ruling:

'(1) Is it in conformity with Community law, and in particular with the provisions of the Treaty establishing the European Economic Community and of the Sixth Council Directive 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 (77/388/EEC), for a Member State to have charged, in December 1986, turnover tax at the full rate on the supply of second-hand goods without taking any account whatsoever of the fact that those goods were bought from individuals, in view of the fact that in the Sixth Directive the Council of the European Communities committed itself to, and gave notice of, the adoption before 31 December 1977 of a Community taxation system applicable to trade in second-hand goods but has so far taken no action in that regard?

(2) If the first question is answered in the negative, how is account to be taken, in the determination of the turnover tax payable on the supply of second-hand goods, of the fact that the goods were bought from individuals?'

3The arguments of the parties are set out in the Report for the Hearing and did not substantially change at the hearing. There is therefore no need for me to recall them.

4I would state at the outset that it is clear both from the written observations and the argument at the hearing that in this case the

4088 parties are agreed as to the analysis of the tax position. It is common ground that, by not permitting the total or partial deduction of the VAT contained in the price of second-hand goods sold by a private individual to a taxable person on the subsequent sale of those goods by the taxable person, Netherlands legislation gives rise to double taxation (tax cumulation).

As I shall show, the central issue is whether such double taxation can be justified on the basis of Article 32 of the Sixth Directive or whether the Member States should not have made up for the Council's failure to act by introducing in their tax legislation provisions to avoid tax cumulation.

5The first question submitted by the national court requires an examination of Article 32 of the Sixth Directive in order to ascertain whether, in view of the Council's failure to act by not adopting before 31 December 1977 a Community taxation system to be applied to second-hand goods, the Member States may retain the special system which they applied before the entry into force of the Sixth Directive.

6In this regard the Government of the Netherlands claimed that Article 32 should be interpreted as prohibiting the modification of special systems which existed prior to the entry into force of the Sixth Directive until the Council has adopted a Community system.

That view is rejected by the Commission and by the plaintiffs in the main proceedings.

7It seems to me clear that the Netherlands Government's interpretation of the second paragraph of Article 32 cannot be accepted. I do not see how it can be thought that a provision authorizing the Member States to continue to apply a special system can change so radically as to prohibit them from amending such a system. Apart from any doubt as to the interpretation of the text, I need only state that the Court itself, in its judgment of 10 July 1985 in Case 16/84 v [1985] ECR Commission The Netherlands 2355, replying on an incidental point to the Commission, which was then arguing — curiously enough — that Article 32 'prohibits any amendment of existing national systems', stated that 'that cannot apply to adjustments whose sole objective is to ensure that a national system entirely conforms to that article'.

8Consequently, I do not feel able to accept the view put forward by the Netherlands Government. The standstill provided for in the second paragraph of Article 32 must in my view be interpreted in such a way that Member States wishing to introduce into their legislation a taxation system for second-hand goods to avoid double taxation are entitled to amend the special taxation system for second-hand goods which existed prior to the entry into force of the Sixth Directive. By so doing, they would not infringe the second paragraph of Article 32. The argument of a technical nature that amendment of existing legislation would make harmonization throughout the Community more difficult does not seem to me to be convincing; the aim in view must, of course, even if the means are different in each Member State, be to attain an objective in accordance with the general principles of the system of VAT, and in particular the principle that double taxation must be eliminated.

9It is clear that this first conclusion does not resolve the problem submitted by the national court. It is apparent both from the terms of the first question and from the observations submitted to the Court by the plaintiffs and the Commission that the true question is not whether a Member State has the power to amend its taxation system but rather whether it is in the light of obliged, the Council's failure to act, to adopt national measures to avoid double taxation.

10In this regard I have to state that at first sight it does seem strange that, in spite of the express provision in the first paragraph of Article 32, the Council has not yet, 13 years after the prescribed date, adopted a Community taxation system in a sector as important as that of second-hand goods.

11However, I do not consider that this situation can impose an obligation on the Member States to adopt national measures to make up for the Council's failure to act.

12First of all, I agree with the Netherlands Government that the ratio decidendi of the judgment of the Court of 5 May 1982 in Case 15/81 Schul v Invoerrechten en Accijnzen [1982] ECR 1409, does not apply in this case. That case related to the infringement of a specific provision of the Treaty, namely Article 95, which is not applicable in this case.

In strictly legal terms, the Council's failure consists in its not having satisfied an obligation to lay down rules within a prescribed period which it imposed upon itself and which was not prescribed by a specific provision of the Treaty. Applying the theory of the hierarchy of norms, one could even be tempted to argue that the Council has not infringed any higher-ranking norm and has merely failed by its own inaction to comply with a procedural rule which it imposed upon itself and in which the peremptory nature of the time-limit remains entirely open.

To claim that such a failure to comply with a time-limit which is clearly procedural must impose an obligation on all the Member States to introduce into their own national law rules having the same effects as those which the Council should have adopted but has not adopted is in practice tantamount to denying that the Council has a discretionary power in the field of tax harmonization.

I therefore do not consider that the failure to comply with the prescribed time-limit imposes an obligation on Member States to 'anticipate' a Community decision which the Council for reasons of its own has been unable to adopt.

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13I would add that the terms of Article 32 do not themselves seem to me to support the Commission's argument. If the legislature had intended that the authorization given to Member States to continue to apply a special system should be limited in time solely to the period up to 31 December 1977, it would not have chosen to use in the second paragraph the words 'until this Community system becomes applicable'. It would have been simpler and more straightforward to use the expression 'until 31 December 1977'.

In this regard I would point out that this is the interpretation put forward by Mr Advocate General Darmon in his Opinion in Case 16/84 Commission v The Netherlands, cited above. With reference to Article 32, he stated as follows: 'That provision allows on a transitional basis pending complete harmonization in the sphere of VAT, derogation from the common system established by the Sixth Directive ... ' (emphasis added).

14I do not think that this conclusion may be challenged, as the Commission seeks to do, on the basis of the judgments of the Court of 28 March 1984 in Joined Cases 47 and 48/83 Pluimveeslachterij Midden-Nederland and Van Miert [1984] ECR 1721 and of 5 May 1981 in Case 804/79 Commission v United Kingdom [1981] ECR 1045. According to the Commission it is clear from those judgments that in principle, where the Council has failed to act, there can be no objection to a Member State's retaining or introducing, pursuant to the duty to cooperate imposed by Article 5 of the Treaty, national measures designed to attain the objectives to be achieved by Community rules.

15The Commission's argument does not bear critical examination. It is clear that the ratio decidendi of the aforesaid judgments is totally different from that put forward by the Commission. The tenor of the judgments does not raise the slightest doubt: they merely recognize that the Member States have a power, where the Council has failed to act, to 'retain or introduce' national rules. There is an enormous difference between recognizing that there is a and alleging the existence of an power obligation, which not even the Court's reference to the fulfilment of an obligation to cooperate under Article 5 of the EEC Treaty can bridge. The argument based on Article 5, which reappears in the aforesaid judgment in Case 804/79 Commission v United Kingdom, performs a function that is wholly different from the one which the Commission seeks to attribute to it. In other words, the Court did not state that, because there is an obligation to cooperate under Article 5, the Member States are bound to remedy the failure on the part of the Community legislature. Instead it had recourse to the argument based on Article 5 with a view to limiting the power of Member States to legislate in a sector governed by a common organization of the market. It clearly states, in paragraph 23 of its judgment in Joined Cases 47 and 48/83 Pluimveeslachterij Midden-Nederland and Van Miert, as follows: 'However, ..., such measures must not be regarded as involving the exercise of the Member State's own powers'.

Lastly, it is clear from the remainder of the judgment (paragraph 25) that it is always a matter of a 'power' ('provisions adopted or maintained by Member States in the circumstances described above are and permissible ) not of an obligation imposed on Member States. Finally I would state, so far as is necessary, that it is clear from the opinion of Mrs Advocate General Rozès that we are concerned here with a 'substitutive' power of the Member States (see in particular [1984] ECR 1745) and not an obligation to adopt legislation in place of the Council in the event of its failure to act. That would, moreover, raise another problem which I would prefer merely to mention without considering it in detail, as to the purpose of the action for failure to act under Article 175 if it were accepted that the Council's inaction gave rise to an obligation to act on the part of the Member States.

16For the sake of completeness I would mention, even though the Commission has not used such an argument, that an obligation on the part of the Member States in the event of the Council's failure to act cannot be inferred either from the fact that the Commission has repeatedly submitted proposals for directives in order to implement the first paragraph of Article 32. In its judgment of 16 December 1981 in Case 269/80 Regina v Tynien [1981] ECR 3079, the Court clearly stated that:

'It is to be remarked in this connection that a proposal submitted by the Commission to the Council with a view to taking concerted Community action cannot be considered as constituting in itself approval of a unilateral national measure, even of one having the same content, which is adopted in a sphere coming within the powers of the Community. To accept the reasoning of the British Government would amount to recognizing the lawfulness of national measures adopted in a sphere within which the powers of the Community apply solely by reason of the existence of a Community proposal which is identical in principle. That would not only be contrary to legal certainty but would lead to a distortion of the division of powers between the Community and the Member States and 17. Since the first question has been would thus adversely affect the essential answered in the negative, it is unnecessary balances establishing the Treaty.' to reply to the second question.

Conclusion

18In conclusion, I propose that the Court should rule, in reply to the question submitted by the national court, that in the present state of Community law the fact that a Member State imposes turnover tax on the sale of second-hand goods without providing for any reduction and without taking account of the fact that these goods were purchased from private persons is not incompatible with the Sixth Council Directive on the harmonization of the laws of the Member States relating to turnover taxes, and in particular with Article 32 thereof.

Notes

(1) First and Second Council Directives of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes (OJ, English Special Edition 1967, pp. 14 and 16) Sixth Council Directive 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 (77/388/EEC, OJ L 145,

(136) 1977, p. 1)

(2) Article 32 provides as follows: 'The Council, acting unanimously on a proposal from the Commission, shall adopt before 31 December 1977 a Community taxation system to be applied to used goods, works of art, antiques and collectors' items. Until this Community system becomes applicable, Member States applying a special system to these items at the time this directive comes into force may retain that system'.