C-200/90 Dansk Denkavit and Poulsen Trading

Judgment of the Court of 31 March 1992. - Dansk Denkavit ApS and P. Poulsen Trading ApS, supported by Monsanto-Searle A/S v Skatteministeriet. - Reference for a preliminary ruling: Østre Landsret - Denmark. - Article 33 of the Sixth VAT Directive - Direct effect - Turnover tax - Law on the employment market contribution. - Case C-200/90. European Court reports 1992 Page I-02217 Swedish special edition Page I-00013 Finnish special edition Page I-00043

Summary Parties Grounds Decision on costs Operative part

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1. Tax provisions - Harmonization of legislation - Turnover taxes - Common system of value added tax - Prohibition on the levying of other domestic taxes which can be characterized as turnover taxes - Aim - "Turnover taxes" - Meaning - Tax of the same type as the Danish employment market contribution - Inclusion

(Council Directive 77/388/EEC, Art. 33)

2. Tax provisions - Harmonization of legislation - Turnover taxes - Common system of value added tax - Prohibition on the levying of other domestic taxes which can be characterized as turnover taxes - Possibility for individuals of relying upon the relevant provision

(Council Directive 77/388/EEC, Art. 33)

3. Preliminary rulings - Interpretation - Effects of interpretative rulings ratione temporis - Retroactive effect - Judgment declaring a domestic tax incompatible with Community law - Exclusion on the ground of lack of uncertainty as to the extent of obligations under Community law

(EEC Treaty, Art. 177)

1. The purpose of Article 33 of the Sixth Directive 77/388/EEC, which prohibits Member States from introducing taxes, duties or charges which can be characterized as turnover taxes, is to prevent the functioning of the common system of VAT from being jeopardized by the introduction of taxes, duties or charges levied on the movement of goods and services in a way comparable to VAT. Taxes, duties and charges must in any event be regarded as taxation of that kind if they exhibit the essential characteristics of VAT, even though they do not resemble it in every respect.

That provision consequently precludes the introduction or maintenance of a tax of the same type as the Danish employment market contribution, which:

- is paid both on activities subject to VAT and on other industrial or commercial activities which consist in the supply of services for consideration;

- is charged, in the case of undertakings which are taxable persons for VAT purposes, on the same basis of assessment as that used for VAT, in other words as a percentage of the volume of sales after deduction of purchases;

- unlike VAT, is not paid on importation, but is charged on the full sale price of imported goods at the first sale in the Member State concerned;

- unlike VAT, does not have to be indicated separately on the invoices; and

- is charged alongside VAT.

2. Since the rule in Article 33 of the Sixth Directive 77/388/EEC prohibiting Member States from introducing taxes, duties or charges which can be characterized as turnover taxes is clear, precise and unconditional, it satisfies the conditions under which provisions of a directive can be relied upon by individuals before the national courts. That article therefore creates rights for the benefit of individuals which the national courts are obliged to protect.

3. The Court cannot accede to a Member State' s request to limit the effect ratione temporis of a preliminary ruling that a tax was levied in that State in contravention of Community law, if at the date when it was introduced, the prohibition with which it conflicted clearly arose from a provision of Community law whose scope had been defined by the Court, and the Commission, having been notified of the proposed tax, had swiftly drawn the attention of the authorities of the Member State concerned to the problems which its application could give rise to from the point of view of Community law.

In Case C-200/90,

REFERENCE to the Court under Article 177 of the EEC Treaty by the OEstre Landsret (Eastern Regional Court), Denmark, for a preliminary ruling in the proceedings pending before that court between

Dansk Denkavit ApS and P. Poulsen Trading ApS,

supported by

Monsanto-Searle A/S,

and

Skatteministeriet (Ministry for Fiscal Affairs),

on the interpretation of Article 9 et seq. and Article 95 of the EEC Treaty and 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,

THE COURT,

composed of: O. Due, President, R. Joliet, F.A. Schockweiler, F. Grévisse (Presidents of Chambers), G.F. Mancini, C.N. Kakouris, J.C. Moitinho de Almeida, G.C. Rodríguez Iglesias, M. Díez de Velasco, M. Zuleeg and J.L. Murray, Judges,

Advocate General: G. Tesauro,

Registrar: H.A. Ruehl, Principal Administrator,

after considering the written observations submitted on behalf of:

- Dansk Denkavit ApS, P. Poulsen Trading ApS and Monsanto-Searle A/S, by K. Dyekjaer-Hansen, of the Copenhagen Bar,

- the Skatteministeriet, by M. Gregers Larsen, of the Copenhagen Bar, and J. Molde, Legal Adviser, acting as Agent,

- the Portuguese Government, by L. Fernandes, Director of the Legal Service of the European Communities Directorate General, A. Correia, Deputy Director General for VAT, and T. Lemos, legal officer in the VAT Administrative Service, acting as Agents,

- the Commission of the European Communities, by J.F. Buhl, Legal Adviser, acting as Agent,

having regard to the Report for the Hearing,

after hearing the oral observations of Dansk Denkavit ApS, P. Poulsen Trading ApS and Monsanto-Searle A/S, the Skatteministeriet and the Commission of the European Communities at the hearing on 28 November 1991,

after hearing the Opinion of the Advocate General at the sitting on 30 January 1992,

gives the following

Judgment

Grounds

1By order of 20 June 1990, which was received at the Court on 2 July 1990, the OEstre Landsret referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty four questions on the interpretation of Article 9 et seq. of the EEC Treaty, Article 95 of that Treaty and 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 1977 L 145, p. 1, hereinafter "the Sixth Council Directive").

2Those questions were raised in proceedings between two Danish companies, Dansk Denkavit ApS (hereinafter "Dansk Denkavit") and P. Poulsen Trading ApS (hereinafter "Poulsen Trading"), and the Skatteministeriet (Danish Ministry for Fiscal Affairs) relating to an application by those companies for reimbursement of the sums paid by them in 1988 and 1989 by way of the employment market contribution (hereinafter "the levy").

3It appears from the case file that the levy was introduced by Law No 840 of 18 December 1987 on the employment market contribution ("Lov om arbejdsmarkedsbidrag") and came into effect on 1 January 1988. It formed part of the economic policy pursued at the time by the Danish Government with the aim of stimulating growth and expanding employment. In order to reduce undertakings' costs, the Danish Government considered it necessary to arrange for certain social expenditure, which had until then been borne by employers, to be financed by the State. To obtain the necessary public funds it planned to introduce a levy which would be passed on to Danish consumers.

4The levy, which was replaced from 1 January 1992 by an equivalent increase in the rate of value added tax (hereinafter "VAT"), was imposed on undertakings which were taxable persons for VAT purposes and on other undertakings which had also benefited from the financing by the State of the aforementioned costs. The rate of levy was fixed at 2.5% of the total sales effected and services provided by each undertaking during a specified period, less the purchases of goods and services by that undertaking during that period. Where it was not possible for that method to be used, as in the case of certain undertakings that were not taxable persons for VAT purposes, the basis for assessment of the tax consisted of the total amount paid by the undertaking in question as wages, increased by 90%. In addition, the levy was not charged on the export or import of goods or services; in the latter case, importing undertakings were not entitled to deduct the value of the imported goods or services on the occasion of the first transaction in Denmark.

5The plaintiffs in the main proceedings, Dansk Denkavit and Poulsen Trading, purchase goods in the Netherlands for resale in Denmark; the former deals in feedstuffs, the latter in loudspeakers. Dansk Denkavit paid to the Skatteministeriet the sum of DKR 811 470 in 1988 and 1989, and Poulsen Trading paid that ministry the sum of DKR 745 756 for those years, by way of the levy. The two companies instituted proceedings before the national courts for the annulment of the levy and for an order requiring the Danish State to reimburse them the sums which they alleged had been wrongfully paid. In support of their claim they argued primarily that the levy was a turnover tax which was prohibited by Article 33 of the Sixth Council Directive, and alternatively that it was a charge having equivalent effect which was prohibited by Article 9 et seq. of the EEC Treaty, or, in the event of the latter provisions not being applicable in this case, discriminatory internal taxation caught by Article 95 of that Treaty.

6The OEstre Landsret considered that the outcome of the case depended on the interpretation of the aforementioned provisions and, by order of 20 June 1990, stayed the proceedings and referred the following questions to the Court for a preliminary ruling:

"1. Should Article 33 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) be interpreted as precluding a Member State from charging a fiscal levy that has the following characteristics:

(i) The levy is paid both on activities that are subject to VAT and on any other business activities which consist in the supply of goods or services for consideration, and is calculated according to criteria laid down by law, which give the tax authorities no discretion and make no distinction between domestically-produced and imported goods.

(ii) For undertakings which are taxable persons for VAT purposes the same basis of assessment is used as for VAT, since the levy, like VAT, is charged at each stage as a percentage of the undertaking' s sales (excluding exports) with deduction of purchases on which the levy has been paid at an earlier stage.

(iii) In contrast to the VAT system, the levy is not paid on importation, but is, however, paid on imported goods on the full sale price at the first sale by a domestic undertaking.

(iv) In contrast to VAT, the levy need not be indicated separately on invoices.

(v) The levy is settled with the customs authorities according to the same principles as VAT, and the customs authorities thus make refunds in the event of a negative basis of assessment.

(vi) The levy is charged alongside the existing VAT system, since it replaces neither wholly nor in part the amount of VAT to be paid under the VAT legislation in force, and the levy is itself included in the price on which VAT is calculated.

2. With regard to a national levy with the characteristics described in the first question, does Article 33 of the said directive create rights for the benefit of individuals which national courts are obliged to protect?

3. If the first or second questions, or both, are answered in the negative, should the prohibition of charges having an effect equivalent to customs duties in Article 9 et seq. of the EEC Treaty be interpreted as meaning that a tax scheme such as that described in the first question is, as far as imported products are concerned, contrary to that prohibition because the levy in respect of undertakings which are taxable persons for VAT purposes is calculated on the VAT basis without deduction of the value of imported products?

4. If the third question is answered in the negative, should Article 95 of the EEC Treaty be interpreted as meaning that the tax scheme, in particular on the ground of the matters referred to in the third question, is contrary to the prohibition of discriminatory domestic taxation laid down in the said provision?"

7Reference is made to the Report for the Hearing for a fuller account of the facts of the case, a detailed description of the Danish levy and a summary of 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.

Question 1

8The OEstre Landsret' s first question seeks essentially to ascertain whether Article 33 of the Sixth Council Directive precludes the introduction or maintenance of a fiscal levy which:

- is paid both on activities subject to VAT and on other industrial or commercial activities which consist in the supply of services for consideration;

- is charged, in the case of undertakings which are taxable persons for VAT purposes, on the same basis of assessment as that used for VAT, in other words as a percentage of the volume of sales after deduction of purchases;

- unlike VAT, is not paid on importation, but is charged on the full sale price of imported goods at the first sale in the Member State concerned;

- unlike VAT, does not have to be indicated separately on invoices; and

- is charged alongside VAT.

9In answering this question, it should be noted first of all that Article 33 of the Sixth Council Directive 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."

10As the Court has stated on several occasions, including its judgments in Case 252/86 Bergandi v Directeur-Général des Impôts [1988] ECR 1343, at paragraphs 10 and 11, and in Joined Cases 93/88 and 94/88 Wisselink and Others v Staatssecretaris van Financiën [1989] ECR 2671, at paragraphs 13 and 14, that provision as worded prohibits Member States from introducing or maintaining taxes, duties or charges which can be characterized as turnover taxes. It follows that in order to answer Question 1, it is necessary to determine first what the characteristics of a turnover tax are, and then whether a levy such as the Danish levy is to be regarded as constituting such a tax.

11With respect first of all to the concept of "turnover taxes", it should be noted that, as the Court stated in the abovementioned judgments and in the judgment in Case 295/84 Rousseau Wilmot v Organic [1985] ECR 3759, at paragraph 16, the purpose of Article 33 is to prevent the functioning of the common system of VAT from being jeopardized by the introduction of taxes, duties or charges levied on the movement of goods and services in a way comparable to VAT. Taxes, duties and charges must in any event must be regarded as being imposed on the movement of goods and services in a way comparable to VAT if they exhibit the essential characteristics of VAT. As the Court stated in the above judgments, those characteristics are as follows. VAT applies generally to transactions relating to goods or services; it is proportional to the price of those goods or services; it is charged at each stage of the production and distribution process; and finally it is imposed on the added value of goods and services, since the tax payable on a transaction is calculated after deducting the tax paid on the previous transaction.

12Secondly, it is necessary to examine whether a levy such as the Danish levy exhibits the essential characteristics of VAT, and consequently whether it is to be regarded as a turnover tax. It should be noted in that respect that the levy, like VAT, was charged on commercial or industrial activities, whether or not subject to VAT, which consisted in the supply of goods or services for consideration; it was charged at all stages of production and distribution; and it was calculated, in the case of undertakings that were taxable persons for VAT purposes, as a percentage of the value of the goods sold or services provided during a specified period, after deducting purchases of goods and services during that period.

13Admittedly, as the Danish Government has emphasized, the levy differed from VAT in certain respects. First, it was imposed on undertakings which were not taxable persons for VAT purposes, in which case the basis of assessment, where it was not possible to apply the method used for undertakings which were taxable persons for VAT purposes, was the total amount paid by the undertaking as wages, increased by 90%. Secondly, the levy was not charged on imports, and importing undertakings were not allowed to deduct from the basis for assessment of the levy the value of goods or services imported. Finally, it was regarded as part of the cost of the goods or services and for that reason was not indicated separately on invoices.

14However, for a tax to be characterized as a turnover tax, it is not necessary for it to resemble VAT in every respect; it is sufficient for it to exhibit the essential characteristics of VAT. In the present case, the differences which have been mentioned do not affect the nature of a levy such as the Danish levy, which resembled VAT in all essential respects. It follows that, notwithstanding those differences, the levy still retained the character of a turnover tax.

15Accordingly, the answer to Question 1 must be that Article 33 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 VAT: uniform basis of assessment (77/388/EEC) precludes the introduction or maintenance of a fiscal levy which:

(i) is paid both on activities subject to VAT and on other industrial or commercial activities which consist in the supply of services for consideration;

(ii) is charged, in the case of undertakings which are taxable persons for VAT purposes, on the same basis of assessment as that used for VAT, in other words as a percentage of the volume of sales after deduction of purchases;

(iii) unlike VAT, is not paid on importation, but is charged on the full sale price of imported goods at the first sale in the Member State concerned;

(iv) unlike VAT, does not have to be indicated separately on invoices; and

(v) is charged alongside VAT.

Question 2

16With respect to the second question, as to whether Article 33 can be relied upon before the national courts, the Danish Government argued that that provision is purely procedural and was inserted in the Sixth Council Directive exclusively in the interest of the Communities. It stated at the hearing that only substantive provisions aimed at safeguarding the interests of individuals could have direct effect and that those conditions were not met in the present case.

17It is sufficient to point out in that regard that, according to the settled case-law of the Court, a provision of a directive can be relied upon by individuals before the national courts if it is clear, precise and unconditional, and that the rule in Article 33, prohibiting Member States from introducing taxes, duties or charges which can be characterized as turnover taxes, satisfies those conditions.

18It follows that the answer to Question 2 must be that Article 33 of the Sixth Council Directive creates rights for the benefit of individuals which the national courts are obliged to protect.

Questions 3 and 4

19In view of the answers to the Questions 1 and 2, there is no need to deal with Questions 3 and 4.

Effects of this judgment ratione temporis

20The Danish Government has asked the Court, with reference to the judgments in Case 43/75 Defrenne v Sabena [1976] ECR 455, Case 24/86 Blaizot v University of Liège [1988] ECR 379, and Case C-262/88 Barber v Guardian Royal Exchange Assurance Group [1990] ECR I-1889, to limit the effects of its judgment ratione temporis in the event of a decision that the levy is incompatible with Community law. In support of its request it described the extremely serious consequences which such a decision would have for Denmark' s public finances and its judicial system. It explained at the hearing that the amount yielded by the contested levy was approximately 7 000 million ECU, or 4% of Denmark' s revenue during the period in question. Merely having to consider applications for repayment of the levy, which had moreover been passed on to consumers, from only some of the 150 000 to 200 000 taxable persons would lead to the collapse of the Danish judicial system. Moreover, the Danish Government argued that, in the light of the Court' s case-law at the time, the Government had been entitled to consider that the levy contested in the main proceedings did not jeopardize the functioning of the common system of VAT and was thus not prohibited by Article 33.

21It must be held in that regard that the Danish Government has not shown that at the time when the contested levy was introduced, Community law could reasonably be construed as permitting such a tax. The prohibition of turnover taxes contained in Article 33 is quite apparent from the wording of that provision. The scope of that prohibition has already been defined by the Court in the Rousseau Wilmot judgment, cited above, in which it held that Article 33 "seeks to prevent the functioning of the common system of VAT 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 VAT" (paragraph 16). It follows that a tax which is levied alongside VAT and which exhibits the essential characteristics of VAT, as specified in paragraph 15 of the Rousseau Wilmot judgment, is charged on commercial transactions in a way comparable to VAT and thus jeopardizes the functioning of the common system.

22Moreover, the Commission, which had been notified by the Danish Government of its proposal in November 1987, drew that Government' s attention as early as 29 January 1988, only a few weeks after the introduction of the levy, to the problems which that levy could give rise to from the point of view of Article 33.

23It follows that in those circumstances it is inappropriate to limit the effects of this judgment ratione temporis.

Costs

Costs

24The costs incurred by the Portuguese Government and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, 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,

in answer to the questions referred to it by the OEstre Landsret, by order of 20 June 1990, hereby rules:

1. Article 33 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 VAT: uniform basis of assessment (77/388/EEC) precludes the introduction or maintenance of a fiscal levy which:

- is paid both on activities subject to VAT and on other industrial or commercial activities which consist in the supply of services for consideration;

- is charged, in the case of undertakings which are taxable persons for VAT purposes, on the same basis of assessment as that used for VAT, in other words as a percentage of the volume of sales after deduction of purchases;

- unlike VAT, is not paid on importation, but is charged on the full sale price of imported goods at the first sale in the Member State concerned;

- unlike VAT, does not have to be indicated separately on invoices; and

Signatures

- is charged alongside VAT.

2. Article 33 of the Sixth Council Directive 77/388/EEC creates rights for the benefit of individuals which the national courts are obliged to protect.

OPINION OF MR ADVOCATE GENERAL TESAURO delivered on 30 January 1992 * Mr President, Members of the Court,

1The national court has submitted four questions for a preliminary ruling on the interpretation of Article 33 of the Sixth Council Directive on value added tax, 1 and on Article 9 et seq. and Article 95 of the EEC Treaty.

Those questions were raised in proceedings brought by two Danish companies for the reimbursement of the tax introduced by the Kingdom of Denmark by Law No 840 of 18 December 1987.

2The tax in question, known as the 'employment market contribution' (hereinafter referred to as 'the employment levy'), was introduced in order to offset the decrease in State revenue as a result of the adoption of measures to pay for social expenditure out of tax with a view to strengthening the competitiveness — especially abroad — of Danish undertakings.

As is apparent from the order for reference the employment levy exhibits the following characteristics :

* Original language: Italian.

It applies to the supply of goods and the provision of services subject to value added tax and to various transactions that are exempt from value added tax (including, in particular, banking and insurance services).

In the case of undertakings subject to value added tax, the basis of assessment for the levy is calculated in accordance with the same rules as those laid down for the calculation of value added tax. Accordingly, the principle of the deduction of input tax is applied.

In the case of undertakings exempt from value added tax, the basis of assessment is, where possible, the value of sales less the value of purchases; otherwise, it is fixed on a flat-rate basis, namely the undertaking's total wages bill with a supplement of 90%.

The rate of the employment levy is fixed at 2.5% of the basis of assessment.

In contrast to value added tax, the levy is not paid on importation, but on subsequent marketing by the importing undertakings. Since imports are not subject to the levy, no deduction is made when the imported goods are marketed for the first time.

The employment levy is not invoiced separately.

3The first question submitted by the national court turns on the compatibility of the tax in question with Article 33 of the Sixth Directive. I would point out, in passing, that an action for failure to fulfil its obligations, dealing with the same matter, has been brought by the Commission against Denmark and is currently pending before the Court (Case C-234/91).

4Article 33 of the Sixth Directive, which forms part of Title XVIII ('Miscellaneous'), 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.'

5It follows from the wording of that provision that although Article 33 permits the Member States, in the exercise of their sovereignty in tax matters, to charge value added tax concurrently with other taxes, duties or charges (see the Court's judgment of July 1986 in Case 73/85 v Kerrut Finanzamt Mönchengladbach-Mitte [1986] ECR 2219), it expressly prohibits the introduction of duties which can be 'characterized as turnover taxes'.

The scope of that prohibition, as the Court has consistently held (see the judgments of 27 November 1985 in Case 295/84 Rousseau Wilmot v Organic [1985] ECR 3759, and of 13 July 1989 in Joined Cases 93/88 and 94/88 v Wisselink Staatssecretaris van Financien [1989] ECR 2671), must be determined in the light of the role of Article 33 in the harmonized system of turnover tax, which takes the form of a common system of value added tax.

As is already apparent from the First Directive on value added tax, 2 harmonization in that sector must result in the abolition of cumulative multi-stage taxes and in the adoption by all Member States of a common system of value added tax (see the fourth recital in the preamble). A harmonized system of that kind is designed, in particular, to ensure that a single commercial transaction is subject to uniform tax provisions, so far as turnover tax is concerned, regardless of the Member State in which the transaction takes place (see the Court's judgment of 3 March 1988 in Case 252/86 v Bergandi Directeur Général des Impôts [1988] ECR 1343).

In order to achieve that objective the First and Second Directives on value added tax provide that the Member States are to replace their system of turnover tax by the common system of value added tax.

Viewed in that context, Article 33 is in fact designed to ensure the proper functioning of the common system by expressly prohibiting the Member States, whose power to introduce charges other than value added tax is simultaneously recognized, from unilaterally introducing or maintaining in force taxes which exhibit the basic characteristics of value added tax and therefore overlap with the latter jeopardizing the unity of the system.

That is the rationale behind Article 33, as is clear from the case-law of the Court. In its aforesaid judgment in Rousseau Wilmot, the Court points out that the provision in question, in leaving the Member States free to maintain or introduce certain indirect taxes such as excise duties on the condition that they are not taxes which can be 'characterized as turnover taxes', seeks 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.

The Court has expressed itself in similar terms in Bergandi, stating that Article 33 must be interpreted as meaning that, as from the introduction of the common system of value added tax, the Member States are no longer entitled to impose on the supply of goods, the provision of services or imports liable to value added tax, taxes, duties or charges which can be characterized as turnover taxes.

6Turning to the scope of Article 33, let me point out first of all that this provision does not define the concept of charges which can be 'characterized as turnover taxes'.

It is self-evident that — as the Court pointed out in Bergandi — it is a Community concept in so far as it is relied upon with a view to the attainment of the objective pursued by Article 33, which is to ensure that the common system of value added tax is fully effective.

The principle underlying that system 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 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 (see the judgments in Rousseau Wilmot, Bergandi and Wisselink and, most recently, the Court's judgment of 19 March 1991 in Case C-109/90, Giant v Gemeente Overijse [1991] ECR I-1394).

In the light of that legislation, the Court has so far taken the view that the concept of charges which can be 'characterized as turnover taxes' must be defined essentially by reference to three factors (see the judgment in Giant):

— the tax is of general application, that is to say it applies in principle to all transactions involving the supply of goods and the provision of services;

— the tax collected at each stage in the production and distribution process; — it is charged only on the added value as a result of the deduction of input tax.

7The contested levy exhibits all the distinctive features outlined in the case-law. In the first place, it is a tax of general application levied on the supply of goods and the provision of services. Its field of application in fact is even wider than that of value added tax itself, inasmuch as it extends to sectors which are exempt from value added tax. The fact that imports are not subject to tax is immaterial in that regard, since imported goods are in any event subject to tax at each subsequent marketing stage.

Secondly, the levy constitutes, as the Danish Government itself acknowledges, a 'cascade' tax on turnover which is collected at each stage of the marketing chain and whose basis of assessment, as in the case of value added tax, is determined by reference to the revenue earned by the undertakings concerned. As for the fact that in some cases the tax is determined on a flat-rate basis (that is to say, on the basis of the total wages bill increased by a given percentage), it should be pointed out that the purpose of that criterion is to reconstruct the amount of revenue purportedly earned by the undertakings in question and that, as the Court has confirmed in its case-law, in particular in a flat-rate tax may be Bergandi, regarded as a turnover tax for the purposes of Article 33 where — as is precisely the case here — the amount thereof is fixed on the basis of an objective evaluation of the undertaking's foreseeable receipts.

Thirdly, it is also clear that the levy is charged only on the value added at the stage of each transaction since the tax payable on each transaction is in principle calculated after deduction of input tax.

In the light of those considerations, it seems to me that the contested levy must be classified as a turnover tax for the purposes of Article 33 of the Sixth Directive.

8That conclusion — in my view — is not invalidated by the Danish Government's objections.

The first of those objections concerns the interpretation of Article 33. According to the Danish Government, that provision prohibits only taxes which distort competition or which compromise the common system of value added tax, either because they replace value added tax wholly or in part or because they affect the manner in which the system operates. On the other hand, Article 33 does not prohibit the mere introduction of 'cascade' turnover taxes which exhibit characteristics similar to those of the system of value added tax.

That objection must be rejected inasmuch as it is based on a misinterpretation of Article 33.

The scope of the prohibition laid down by that provision is not limited solely to taxes that distort or replace value added tax, which, moreover, would in any event be incompatible with the common system even in the absence of Article 33. On the contrary, as is clear from the case-law referred to earlier — and in particular from the judgments in Rousseau Wilmot and Bergandi — Article 33 lays down an absolute prohibition on the charging of value added tax concurrently with national taxes which, like the contested levy, are charged 'on the movement of goods and services and on commercial transactions in a way comparable to value added tax'.

In that regard, it should also be pointed out that the role of a provision against concurrent taxation, which Article 33 assumes in the context of the common system, is, if viewed in perspective, one of growing importance. With the gradual attainment of harmonized rates of value added tax, the continued existence of national taxes essentially identical to value added tax would entail the application of a distinct rate in addition to the common rates, thereby enabling the harmonized system to be circumvented.

It must also be emphasized, moreover, that the employment levy, though charged on transactions in a manner comparable to value added tax, is governed exclusively by national rules which do not coincide with those of the common system as regards, for instance, the range of activities that are exempted. Those possible difference between the systems governing the two taxes, one being a Community tax and the other a national tax, which, however, exhibit the same characteristics and are intended to be charged in the same manner on the same transactions, demonstrate that the overlap between value added tax and similar national taxes has a far from negligible effect on the uniform functioning of the common system.

Secondly, the Danish Government denies that the contested levy displays characteristics which are similar to those of value added tax, regard being had to the aforementioned differences between the systems governing the two taxes.

That objection has already been met in paragraph 8 of this Opinion. At this juncture, I shall confine myself to the following points:

— the Danish Government acknowledges that, instead of introducing the employment levy, it would have been possible simply to increase the rate of value added tax; moreover, the day before the hearing the Danish Government submitted a draft law replacing the levy with an increase in value added tax, and the interchangeability of those two measures confirms the similarity between them;

— only economic considerations (primarily the supposedly lesser impact on prices of a tax which is not invoiced separately) were at the time behind the Danish Government's preference for introducing the levy, instead of increasing value added tax; however, it is clear, and confirmation is to be found in the Court's case-law, that 'the reasons for the introduction of a national tax into internal law and the circumstances surrounding its introduction cannot affect its nature with regard to Community law' (see the judgment in Wisselink);

— the fact that the levy is not invoiced separately from the price reflects a choice of accounting method which cannot affect the nature of the tax since, as stated earlier, the levy constitutes a cascade tax which is charged only on the added value and which is ultimately borne by the final consumer (in practical terms the introduction of the levy did not lead to a corresponding increase in prices only because, at the same time as it was introduced, the Danish Government reduced the social expenditure borne by undertakings and, consequently, the costs of production).

9In the light of those considerations, I consider that Article 33 of the Sixth Directive must be interpreted as precluding the introduction and maintenance in force of a tax such as the 'employment market contribution' which forms the subject-matter of the dispute in the main proceedings.

10The second question concerns the direct effect of Article 33. That provision, as stated earlier, lays down an absolute prohibition on introducing and maintaining in force taxes similar to value added tax. It therefore imposes a negative obligation, which is precise and unconditional, and therefore has direct effect in legal relations between States and individuals.

Moreover, the same view has been expressed by Air Advocate-General Mancini in his Opinion in and it seems to Bergandi, me that the Court adopted that suggestion in its entirety, stating in its judgment that 'Article 33 of the Sixth Directive must be interpreted as meaning that as from the introduction of the common system of value added tax the Member States are no longer entitled to impose on the supply of goods, the provision of services or imports liable to value added tax, taxes, duties or charges which can be characterized as turnover taxes'.

11The interpretation of Article 33 of the Sixth Directive which is advocated here renders consideration of the third and fourth questions submitted by the national court on the application of Article 9 et seq. and Article 95 of the Treaty devoid of purpose. However, in the event that the Court should opt for a different reading of Article 33, I shall confine myself to the following observations:

As the Court has consistently held, Article 9 et seq. and Article 95 do not apply concurrently (see, for a representative decision, the judgment of 22 March 1977 in Case 78/76 Steinike und Weinlig v Germany [1977] ECR 595). The essential characteristic which distinguishes a charge having an effect equivalent to a customs duty from discriminatory internal taxation is that the first is imposed exclusively on imported products, whilst the second is imposed on both imported and domestic products (see Steinike und Weinlig).

The employment levy is borne — as has repeatedly been emphasized — by domestic products and imported products. It must therefore be assessed exclusively in the light of the provisions of Article 95 of the Treaty. In that regard, that plaintiffs in the main proceedings maintain that the contested levy has discriminatory effects in relation to imported products inasmuch as, in the case of the latter, the basis of assessment of the levy is calculated in accordance with rules which differ to some extent from those laid down for domestic products.

The Court has already held that Article 95 is infringed 'where the taxation on the imported products and that on the similar domestic product are calculated in a different manner on the basis of different criteria which lead, if only in certain cases, to higher taxation being imposed on the imported product' (see the judgment of 17 February 1976 in Case 45/75 REWE v Hauptzollamt Landau [1976] ECR 181).

It follows that a tax system may be considered compatible with Article 95 only if it is established that its structure is such as to preclude discrimination against imported products in any circumstances whatsoever. Furthermore, the Court has held, in relation to tax systems which provide for the application of different criteria to domestic products and to imported products, that where the detailed rules of application are not transparent, it is for the State which established the system to demonstrate that it does not have discriminatory effect in any circumstances (see the judgment of 26 June 1991 in Case C-152/89 v Commission Luxembourg [1991] ECR I-3160). A rebuttable presumption of that kind arises, in my view, even in national proceedings involving the application of Article 95.

In practice, it is for the national court to ascertain in the light of those principles whether the rules governing the contested levy are such as to preclude discrimination against imported products in all cases. Such an appraisal must be carried out by reference to the fiscal impact both of the levy as such and of other charges, in particular value added tax, whose impact may vary owing to the existence of the levy.

12There is a final point which has not been raised in the order for reference.

The Danish Government asks the Court to limit the temporal effects of its judgment in the event of a declaration that the contested levy is incompatible with Community law.

In that regard let me recall the view I expressed in my Opinion in Joined Cases C-19/90 and C-20/91 (Karelia v Minister for Industry, Energy and Technology [1991] ECR I-2704) to the effect that, according to the case-law of the Court, the interpretation of a provision of Community law, given in the exercise of the jurisdiction conferred on the Court by Article 177 of the EEC Treaty, clarifies and defines where necessary the meaning and scope of that provision as it must be or ought to have been understood and applied from the time of its coming into force. It follows that the provision as thus interpreted may, and must, be applied by the courts even to legal relationships arising and established before the judgment ruling on the request for interpretation, provided that in other respects the conditions enabling an action relating to the application of that provision to be brought before the courts having jurisdiction are satisfied (see the judgments of 27 March 1980 in Case 61/79 Amministrazione delle v Finanze dello Stato Denkavit Italiana [1980] ECR 1205, and of 27 March 1980 in Joined Cases 66, 127 and 128/79 Amministrazione delle Finanze dello Stato v Salumi [1980] ECR 1237).

In the light of those principles, it is only exceptionally that the Court may be moved to restrict the effects of a ruling on interpretation (see the aforesaid judgments in and The Court Denkavit Italiana Salumi).

has had recourse to that possibility in very specific circumstances, that is to say where there was a risk of serious economic repercussions resulting in particular from the large number of legal relationships established in good faith on the basis of a provision considered to be validly in force, and having regard to the consideration that individuals and national authorities had been induced to behave in a manner inconsistent with Community legislation by reason of an objective and significant uncertainty relating to the scope of that legislation, to which the same behaviour on the part of other Member States or the Commission may have contributed (see the judgments of 17 May 1990 in Case C-262/88 v Barber Guardian Royal Exchange Assurance Group [1990] ECR 1889; 2 February 1988 in Case 24/86 Blaizot v University of Liège [1988] ECR 379; and 8 April 1976 in Case 43/75 Defrenne v Sabena [1976] ECR 455).

Having said that, I consider that in this case the imposition of a restriction on the effects of the judgment should be categorically excluded.

The interpretation of Article 33 is quite clear and is supported by a wide and unambiguous body of case-law. Accordingly, there cannot have been any objective uncertainty with regard to the fact that the employment levy was prohibited in the light of that provision.

Moreover, the Commission informed the Danish Government that it considered the contested levy to be incompatible with Article 33 only a few days after its introduction, and subsequently instituted proceedings against Denmark under Article 169 for failing to fulfil its obligations.

As for the financial consequences for the Danish Government of a declaration that the employment levy is unlawful, it must be pointed out that this factor in itself certainly does not justify restricting the effects of the Court's ruling. If it were otherwise, there would be a risk of according more favourable treatment precisely for the more serious infringements since it is those infringements which may have financial implications of greater significance for the Member States: an aberrant and clearly unacceptable solution.

Furthermore, cases concerned with the legality of national charges under Community law may frequently have serious financial implications for the recovery of charges unduly levied. Accordingly, to restrict the effects of the judgment solely on account of the magnitude of those implications would not only run counter to the previous case-law of the Court (see, for from negligible) but would also constitute a example, the judgment of 25 May 1989 in dangerous precedent inasmuch as it could Case 15/88 Maxi-Di v Ufficio del Registro di lead to a substantial reduction in the judicial Bolzano [1989] ECR 1391 concerning a protection accorded to the rights of charge whose financial importance was far taxpayers under Community tax law.

13To conclude, therefore, I propose that the questions submitted by the national court be answered as follows:

'1. Article 33 of the Sixth Directive precludes the introduction and maintenance in force of a national tax such as the "employment market contribution" introduced by Danish Law No 840 of 18 December 1987.

2. In prohibiting the introduction and maintenance in force of charges which can be characterized as turnover taxes, Article 33 of the Sixth Directive confers on individuals rights which may be relied upon before the national courts.

3. A national charge such as the contested levy, which is borne by both domestic products and imported products, does not fall within the scope of Article 9 et seq. of the Treaty.

4. A national tax system may be considered compatible with Article 95 of the Treaty only if it is established that its structure is such as to preclude discrimination against imported products in any circumstances whatsoever. It is for the national court to ascertain whether the rules governing the contested levy are such as to preclude discrimination against imported products in all cases.'

Notes

(1) 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 (OJ 1977 L 145, p. 1).

(2) First Council Directive of 11 April 1967 (67/227/EEC) on the harmonization of legislation of Member States concerning turnover taxes (OJ, English Special Edition

(196) 7, p. 14).

(3) Second Council Directive of 11 April 1967 (67/228/EEC) on the harmonization of legislation of Member States concerning turnover taxes — Structure and procedures for application of the common system of value added tax (OJ, English Special Edition 1967, p. 16). DANSK DENKAVTT AND POULSEN v SKATTEMINISTERIET