C-251/88 Commission v Germany

Judgment of the Court of 23 May 1990. - Commission of the European Communities v Federal Republic of Germany. - Failure of a Member State to fulfil its obligations - Own resources accruing from VAT - Method of calculation applied for the incorporation of exempt transactions. - Case C-251/88. European Court reports 1990 Page I-02107

Summary Parties Grounds Decision on costs Operative part

++++

Own resources of the European Communities - Resources accruing from value-added tax - Basis of assessment - Exempt transactions - Method of calculation - Calculation on the basis of turnover less the amount of value-added tax paid on inputs - Whether permissible

( Council Regulation No 2892/77, Art . 9(2 ) )

The second indent of Article 9(2 ) of Regulation No 2892/77 on the Communities' own resources accruing from value-added tax provides that in respect of certain transactions which Member States are allowed under Directive 77/388 to exempt from tax the basis of assessment for VAT own resources must be calculated as if those transactions were taxed, in such a way that those Member States which choose exemption and those which choose taxation are treated equally in respect of VAT own resources . In view of the imprecision of that article, which allows various methods of calculation, it must be held that a Member State does not fail to fulfil its obligations under the Treaty if, when calculating the amount of own resources corresponding to the exempt transactions which must be incorporated in the basis of assessment for own resources, it deducts from the turnover in respect of those transactions the amount of value-added tax paid on inputs in order to arrive at a basis of assessment which is equal to the sum of the net purchase value of the goods and services used for the transactions in question and the value added in those transactions, that basis of assessment being independent of the rate of value-added tax on inputs .

In Case C-251/88

Commission of the European Communities, represented by John Forman and Goetz zur Hausen, Legal Advisers, acting as Agents, with an address for service in Luxembourg at the office of Georgios Kremlis, a member of the Commission' s Legal Department, Wagner Centre, Kirchberg,

applicant,

v

Federal Republic of Germany, represented by Jochim Sedemund, Rechtsanwalt, Cologne, acting as Agent, with an address for service in Luxembourg at the German Embassy, 20-22 avenue Emile-Reuter,

defendant,

APPLICATION for a declaration that by failing to calculate correctly the basis of assessment for certain VAT own resources, by failing to make some of the Communities' own resources available to the Commission within the stipulated periods and by refusing to pay the interest due in respect of the delay in making the corresponding entries, the Federal Republic of Germany has failed to fulfil its obligations under the EEC Treaty,

THE COURT

composed of : O . Due, President, F . A . Schockweiler ( President of Chamber ), G . F . Mancini, T . F . O' Higgins, J . C . Moitinho de Almeida, F . Grévisse and M . Diez de Velasco, Judges,

Advocate General : F . G . Jacobs

Registrar : J . A . Pompe, Deputy Registrar

having regard to the Report for the Hearing and further to the hearing on 30 January 1990,

after hearing the Opinion of the Advocate General delivered at the sitting on 22 February 1990,

gives the following

Judgment

Grounds

1By an application lodged at the Court Registry on 15 September 1988, the Commission of the European Communities brought an action under Article 169 of the EEC Treaty for a declaration that by failing to calculate correctly the basis of assessment for certain own resources accruing from value-added tax ( hereinafter referred to as "VAT "), by failing to make some of the Communities' own resources available to the Commission within the stipulated periods and by refusing to pay the interest due in respect of the delay in making the corresponding entries, the Federal Republic of Germany has failed to fulfil its obligations under the Treaty .

2The Communities' own resources accruing from value-added tax ( hereinafter referred to as "VAT own resources ") are calculated through the application of the Community rate, as fixed in the budgetary procedure, to a base which must be determined in accordance with Council Regulation ( EEC, Euratom, ECSC ) No 2892/77 of 19 December 1977 implementing in respect of own resources accruing from value-added tax the Decision of 21 April 1970 on the replacement of financial contributions from Member States by the Communities' own resources ( Official Journal 1977, L 336, p . 8 ).

3Under Article 2(1 ) of that regulation, the VAT own resources basis is to be determined from the taxable transactions referred to in Article 2 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 ( hereinafter referred to as "the Sixth Directive", Official Journal 1977, L 145, p . 1 ). The third indent of Article 2(2 ) provides that, for the purposes of applying paragraph 1 of that article, transactions which Member States continue to exempt pursuant to Article 28(3)(b ) of the Sixth Directive are to be taken into account for determining VAT own resources .

4In accordance with Article 28(3)(b ) and Annex F to the Sixth Directive, the Federal Republic of Germany continues to exempt from VAT telecommunications services supplied by the Deutsche Bundespost ( German postal service, hereinafter referred to as "the Bundespost ") and supplies of goods incidental thereto .

5The second indent of Article 9(2 ) of Regulation No 2892/77 is worded as follows :

"2 . For the purposes of applying the ... third ... indent ... of Article 2(2 ):

...;

with regard to the transactions listed in Annex F to Directive 77/388/EEC which Member States continue to exempt pursuant to Article 28(3)(b ) of the said directive, Member States shall calculate the VAT own resources basis as if these transactions were taxed;

..."

6The Commission found that between 1980 and 1985 the Federal Republic of Germany had deducted from the turnover of the Bundespost an amount corresponding to the VAT implicitly contained in the end price invoiced by the Bundespost to its clients . It took the view that such a method of calculation, which reduced the basis of assessment for VAT own resources by deducting the amount of input VAT paid by the Bundespost in the area of telecommunications, amounted to a breach of the third indent of Article 2(2 ) of Regulation No 2892/77 . The Commission therefore initiated the procedure provided for under Article 169 of the Treaty .

7Reference is made to the Report for the Hearing for a fuller account of the background to the case, the course of the procedure and the submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court .

8In support of its application the Commission contends that, in the case of taxation at each production stage, the basis of assessment must be determined in accordance with the net VAT receipts collected by the Member State during the course of a financial year . In the case of exempt transactions, such as those of the Bundespost in the sphere of telecommunications, the Commission believes that the correct method of calculation, as applied by all the other Member States, is to reconstruct the basis of assessment for calculating own resources by using the turnover relating to such transactions, without deducting, as the Federal Republic of Germany is doing, an amount corresponding to the VAT paid on inputs and contained in the final invoice price in the sphere in question . The Commission puts forward two main arguments to support its view that the method used by the Federal Republic of Germany to determine the basis of assessment for calculating VAT own resources is in breach of Regulation No 2892/77 .

9In the first place, the Commission relies on the wording of the second indent of Article 9(2 ) of the above regulation .

10The German Government claims in this connection that the text of that article confirms that it is necessary, in order to determine the basis of assessment for calculating VAT own resources, to act as if VAT were collected on the value added by the Bundespost and to deduct the VAT included in the price paid by the Bundespost for goods purchased or services supplied because those goods or services ought to be regarded as having been used by the Bundespost in taxable transactions within the meaning of Article 17(2 ) of the Sixth Directive .

11It must be held in this regard that the phrase "as if these transactions were taxed" used in Article 9 does not provide an answer to the question whether the transactions at issue must be treated in all respects as if they were transactions taxed at each production stage or simply as exempt transactions which must be incorporated in the basis of assessment for the calculation of VAT own resources .

12Secondly, the Commission takes the view that the purpose of Articles 2 and 9 of Regulation No 2892/77 is to neutralize the effects on Community revenue of derogating legislation which Member States are entitled to apply . If the method of calculation adopted by the Federal Republic of Germany is used, the rate of VAT has a direct effect on the basis of assessment for the calculation of VAT own resources . This is contrary to the structure of the special system of own resources, in respect of which those Member States which have opted for derogations should be placed on an equal footing with those which have refrained from introducing any system of derogations . The basis of assessment arrived at through the method of calculation advocated by the Commission and applied by the other Member States always remains the same regardless of the VAT rate applied .

13The Government of the Federal Republic of Germany does not believe that its method of calculation results in a basis of assessment for calculating VAT own resources which varies according to the rate of VAT applied . In view of the fact that the amount deducted from the turnover of the Bundespost corresponds exactly to the VAT included in the purchase price, the basis of assessment is still calculated according to the sum of the net purchase value and the value added by the Bundespost . Member States which exempt certain transactions from VAT are thus required to pay, in proportion to the cost of those transactions, the same amount in VAT own resources as they would be paying were it not for the VAT exemption . In contrast, says the German Government, the basis of assessment under the method of calculation adopted by the Commission, for any given net purchase price and value added, varies in relation to the amount of VAT included in the purchase price .

14It must be observed that the purpose of the second indent of Article 9(2 ) of Regulation No 2892/77 is to cancel out the effects of the transitional exemption for the transactions listed in Annex F to the Sixth Directive, in order to make it possible to establish a uniform basis of assessment for calculating VAT own resources, incorporating within the basis of assessment the portion of own resources which corresponds to the exempt transactions . In this way, those Member States which choose to exempt a particular sector are placed on an equal footing, in respect of VAT own resources, with the other Member States which do charge VAT in those sectors .

15Where the value added is taxed at each stage of production, the VAT rate has no effect on the basis of assessment for calculating VAT own resources . In so far as the amount deducted by the Federal Republic of Germany from the turnover of the Bundespost in the sphere of telecommunications corresponds exactly to the amount of VAT which the Bundespost has paid to its suppliers, the rate of VAT applied does not affect the basis of assessment calculated from the sum of the net purchase value and the value added by the Bundespost .

16It follows that the second argument submitted by the Commission in support of its application is also unfounded .

17In the light of these considerations it must be concluded that having regard to the imprecision of the second indent of Article 9(2 ) of Regulation No 2892/77, which allows various methods of calculation, none of the criticisms made by the Commission has shown that the method adopted by the Federal Republic of Germany to calculate the amount of own resources corresponding to the exempt transactions of the Bundespost which must be included in the basis of assessment of own resources is contrary to the abovementioned provisions of Regulation No 2892/77 .

18The application made by the Commission must therefore be rejected .

Costs

Costs

19Under Article 69(2 ) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs . Since the Commission has failed in its submissions, it must be ordered to pay the costs .

Operative part

On those grounds,

THE COURT

hereby :

¹ Dismisses the application;

² Orders the Commission to pay the costs .

O P I N I ON OF MR ADVOCATE GENERAL JACOBS delivered on 22 February 1990 * My Lords,

1This case arises from a dispute between the Commission and the Federal Republic of Germany over the treatment of certain transactions for the purposes of the Communities' own resources.

2Provision for the Communities' own resources was introduced by Council Decision of 21 April 1970 (Decision 70/243 on the replacement of financial contributions from Member States by the Communities' own resources, Official Journal, English Special Edition 1970 (I), p. 224). That decision, to which I shall refer as the 'Own Resources Decision', provides that agricultural levies and other charges (Article 2(a)) and Common Customs Tariff and other duties (Article 2(b)) constitute own resources to be entered in the budget of the Communities. Since revenue from those sources is not sufficient to balance the budget, Article 4(1) provides that the Communities' own resources shall include also those accruing from value-added tax ('VAT') and obtained by applying a rate not exceeding a certain percentage to an assessment basis which is determined in a uniform manner for Member States according to Community rules. The maximum percentage, initially set at 1%, was increased in 1985 to 1.4% and fixed at

* Original language: English.

that level by Council Decision 88/376 on the system of the Communities' own resources (Official Journal 1988, L 185, p. 24), which also introduced an additional own resource based on the sum of Member States' gross national product. The Communities' own resources are collected by the Member States and transferred to the Community.

3The provisions for financing the Communities' budget from own resources did not come fully into force until 1980. One of the necessary steps was the introduction of a uniform basis of assessment for VAT own resources, which was effected by the Sixth Directive (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). Article 2 of the directive provides that any supply of goods or services effected for consideration by a taxable person acting as such shall be subject to VAT. Articles 13 to 16, however, provide for certain transactions to be exempt.

4Under Article 28(3)(b), which occurs in Title XVI — Transitional Provisions, Member States may, during a transitional period, 'continue to exempt the activities set out in Annex F under conditions existing in the Member State concerned . . . '. The

I - 2 1 25 activities listed in Annex F include, at item 5, 'telecommunications services supplied by public postal services and supplies of goods incidental thereto'.

5Council Regulation No 2892/77 lays down detailed rules for the determination of the basis of assessment for VAT own resources (Official Journal 1977, L 336, p. 8). Article 3(1) gives Member States a choice between two methods, 'method A' and 'method B'. In fact, it appears from the case file that all Member States have opted for 'method B', according to which the own resources basis is calculated by dividing the total net VAT revenue collected by a Member State by the VAT rate, expressed as a fraction, or, where several rates are applied, by the average weighted VAT rate, again expressed as a fraction (Article 6). The result is to discount the impact of varying rates of VAT, and in effect to base VAT own resources on the turnover in all transactions treated as subject to VAT.

6Crucial to this case are the provisions of Regulation No 2892/77 concerning the transactions to be taken into account for the purpose of determining the basis of assessment. Article 2(1) of Regulation No 2892/77 provides that the VAT own resources basis shall be determined from the taxable transactions referred to in Article 2 of the Sixth Directive, with the exception of the transactions definitively exempted under Articles 13 to 16 of that directive. Under Article 2(2), third indent, the transactions which Member States continue to exempt pursuant to Anicie 28(3)(b) of the Sixth Directive (i.e. those which are only transitionally exempt) 'shall be taken into account for determining VAT own resources'. Article 9(2) is concerned with the application of Article 2(2). The second indent of Article 9(2) provides that:

'With regard to the transactions listed in Annex F to Directive 77/388/EEC which Member States continue to exempt pursuant to Article 28(3)(b) of the said directive, Member States shall calculate the VAT own resources basis as if these transactions were taxed.'

7The validity of Regulation No 2892/77, which was initially limited to five years, was extended by Council Regulation No 3550/82 (Official Journal 1982, L 373, p. 1) and by Council Regulation No 3735/85 (Official Journal 1985, L 356, p. 1). Council Regulation No 1553/89 on the definitive uniform arrangements for the collection of own resources accruing from VAT (Official Journal 1989, L 155, p. 9), which applied from 1 January 1989 and which largely superseded Regulation No 2892/77, provides for a single method of calculation of the VAT own resources basis corresponding to the old 'method B' (Article 3). The provisions which I have just cited from Articles 2(2) and 9(2) of Regulation No 2892/77 are reproduced in the 1989 Regulation (Articles 2(2) and 6(2)).

8Pursuant to Article 28(3)(b) and Annex F of the Sixth Directive, the Federal Republic exempts from VAT the telecommunications transactions of the Deutsche Bundespost (German Federal Post Office). The consequence of that exemption is that the Bundespost cannot take advantage of Article 17(2) of the Sixth Directive, according to which a taxable person is entitled to deduct from the tax which he is liable to pay the VAT paid or due in respect of goods or services supplied to him, in so far as the goods or services are used for the purposes of his taxable transactions. However, when calculating the VAT own resources basis in respect of the telecommunications transactions of the Bundespost in 1980-85, the Federal Republic did deduct from the total value of the transactions the amount of VAT paid by the Bundespost in respect of goods and services supplied to it for the purposes of those transactions. In these proceedings the Commission essentially contends that the Federal Republic was not entitled to make that deduction.

9The dispute turns on the interpretation of the requirement in Article 9(2) of Regulation No 2892/77 that with regard to exempted Annex F transactions Member States are to calculate the VAT own resources basis 'as if these transactions were taxed'. In the Commission's view, that provision means that the entire value of the relevant transactions is to be included in the basis of assessment, without any deduction of input tax ('taxe en amont') implicitly contained in their value. In the view of the German Government, it means that the transactions are to be treated in all relevant respects as if they were taxed; and if they were taxed, a deduction of input tax would be possible in accordance with Article 17(2) of the Sixth Directive. Both parties rely on the wording of Article 9(2), on the general scheme and on the objectives of the Community legislation.

10In my view, reference to the wording alone of Article 9(2) of Regulation No 2892/77 does not conclusively support either party. On a literal reading of the text, the requirement that the basis of assessment in respect of Annex F transactions should be calculated 'as if these transactions were taxed' appears to support the view of the Federal Republic. On the other hand, those words can also be taken to mean merely that the transactions in question, although exempt, are to be included in the own resources basis; in other words, that those transactions are to be assimilated to taxable transactions solely for that purpose, but are not to be treated for all purposes as if they were taxed.

11As regards the general scheme of the legislation, the Federal Republic argues that it is a fundamental principle of the VAT system, which finds expression in particular in Article 11 of the Sixth Directive, that VAT is charged only on the net value of goods or services at each stage of production or marketing, but not on the VAT already paid or to be paid at each stage. The Commission's method would involve the inclusion of an element of 'tax on tax' in the own resources basis contrary to the principle of net value. The Federal Republic also argues that that principle is supported by the case-law of the Court, notably the two Schul cases (Case 15/81 [1982] ECR 1409 and Case 47/84 [1985] ECR 1491).

12The Commission does not dispute the fundamental nature of the principle of net value, but correctly points out that that principle is not absolute. In fact, the principle breaks down where there is an exempt transaction in a chain of taxable transactions. Where a supply of goods or services constitutes an exempt transaction,

I - 2 1 27 the supplier is not permitted to deduct the tax paid to his suppliers, and the tax is therefore passed on as a hidden charge in the selling price. The purchaser of such goods or services is also unable to deduct this hidden charge from his own tax burden, and the result is an accumulation of tax (or tax on tax) contrary to the principle of net value. The total VAT revenue accruing from such a chain of transactions will include an element of tax on tax, and this element will enter the own resources basis. Thus, precisely where there are exempt transactions, a hidden element of non-deductible input tax can form part of the basis of assessment for VAT own resources.

13The Court's case-law moreover supports the view that the principle of net value is not absolute. In its recent judgment of 5 December 1989 in Case C-165/88 ORO Amsterdam Beheer BV and Concerto BV v Inspecteur der Omzetbelasting [1989] ECR 4081, the Court pointed out that the two Schul judgments, relied on here by the Federal Republic, were based not on a general principle prohibiting accumulation of tax, but on Article 95 of the Treaty, which prohibits discriminatory taxation of imported goods (at paragraph 18). In the same judgment, the Court moreover acknowledged that harmonization of VAT was still only partial, and that while it is the objective of the Community legislation to exclude accumulation of tax, that objective had not yet fully been achieved (at paragraphs 22 and 23). The Court therefore ruled that, at its present stage of development, Community law does not prevent the application of national legislation which, as regards the calculation of VAT due on the sale of second-hand goods bought by undertakings from non-taxable individuals with a view to resale, does not permit the deduction of the amount of input tax incorporated in the purchase price of the goods. It thus appears that no firm conclusion can be drawn from the principle of net value.

14As regards the objectives of the Community legislation, the Commission has sought to argue that the method of calculation applied by the Federal Republic permits the level of the rate of VAT to have direct repercussions on the basis of assessment of VAT own resources, contrary to the objective of neutrality pursued by the system of VAT own resources. The Commission points out that the German method involves the direct deduction of a part of VAT revenue from the basis of assessment and argues that since the amount of that revenue is a function of the level of the VAT rate, the deduction permits the rate to affect the basis of assessment of VAT own resources and thus the amount of those own resources.

15However, in my view, the Federal Republic succeeds in refuting that argument. The Federal Republic accepts that the amount of the input tax, and thus the amount of the deduction made under its method of calculation, will indeed vary according to the rate of VAT charged, but points out that since the amount of the deduction always corresponds exactly to the amount of the input tax, there can be no effect on the basis for assessment of VAT own resources, which will always consist of the sum of the amount of the net purchase value and the value added at the stage of the exempt transaction. That, of course, is not surprising, since the method of calculation used by the Federal Republic simulates the ordinary case of taxation, under which, as the Commission itself states, the rate of VAT cannot have repercussions on the basis of assessment. Indeed, it is clear that it is the Commission's method, rather than that of the Federal Republic, which is incompatible with the objective of neutrality. Since under the Commission's method the amount of input tax paid is included in the basis of assessment, and since that amount will vary according to the rate of VAT charged, that method permits an increase or decrease in the VAT rate to have a direct impact on the basis of assessment and thus on the amount of own resources.

16That consideration, however, is not decisive. The answer is to be found, in my view, in consideration of the wider objectives of the Community legislation, and of the specific function of Article 9(2) of Regulation No 2892/77. The objective of Regulation No 2892/77, pursuant to the Own Resources Decision, is to give effect to a uniform basis of assessment for VAT own resources. Equally, one of the objectives of the Sixth Directive is to facilitate the determination of that uniform basis of assessment by the adoption of common rules for the levying of VAT. Implicit in the notion of a uniform basis of assessment is the objective of ensuring a fair and consistent apportionment of the burden of own resources between Member States or, to adopt the words used by Advocate General Darmon in his Opinion in Case 107/84 Commission v Germany [1985] ECR 2655, of ensuring 'an equal system of contribution for the Member States' (at pp. 2659 and 2662).

17It will be recalled that Article 2(1) of Regulation No 2892/77 lays down the basic principle that the VAT own resources basis is to be determined from the taxable transactions laid down in Article 2 of the Sixth Directive, with the exception of the transactions definitively exempted under that directive. The transitional provisions of Anicie 28(3) of the Sixth Directive permit Member States to continue to tax transactions which are otherwise definitively exempt (Article 28(3)(a) and Annex E), to exempt transactions which are otherwise taxable (Article 28(3)(b) and Annex F), or to grant the option of taxation to suppliers of otherwise exempt transactions (Article 28(3)(c) and Annex G). Resort to those transitional provisions is clearly capable of distorting the uniform basis of assessment provided for in Article 2(1) of Regulation No 2892/77, unless a correction is made. It is, in my view, the function of Article 9(2) of Regulation No 2892/77 to make that correction.

18Thus, under the first and third indents of Article 9(2), the transactions referred to in Article 28(3)(a) and Annex E of the Sixth Directive and in Article 28(3)(c) and paragraph (1)(a) of Annex G respectively, are to be treated for the purposes of the calculation of the own resources basis as if they were exempted: this is consistent with the definitive exemption of those transactions under the Sixth Directive and ensures that the own resources basis in respect of such transactions is calculated in the same way irrespective of whether Member States have made use of the transitional provisions. Conversely, the second indent of Article 9(2), which is at issue in this case, provides that the transactions referred to in Article 28(3)(b) and Annex F of the Sixth Directive are to be treated as if they were taxed: this is consistent with the taxable status of those transactions under the Sixth Directive and again restores equality of treatment between the Member States as regards the calculation of the own resources basis.

19The function of Article 9(2), second indent, is thus to cancel out the effect of the transitional exemption of Annex F transactions by restoring to the basis of assessment for VAT own resources the resources which would otherwise be lost as a result of the exemption and to achieve a result which is neutral as between Member States which opt for transitional exemption and those which do not. To that end it is only necessary to restore the amount which would accrue to the basis of assessment if the transactions in question were taxed.

20However, if that principle is correct, the question remains how it is to be implemented. The difficulty is that since Article 9(2) refers to a hypothetical situation (i.e. the situation which would obtain if the transactions were taxed), no obviously correct method exists of calculating the amount which should be restored to the basis of assessment. Indeed, the difficulty in devising a method which will give rise to approximately the correct result is illustrated by the fact that the Federal Republic has at different times used three different methods of calculation. From the case file it appears that from 1980 to 1982 its practice was to deduct from the value of the Bundesposťs telecommunications transactions a flat-rate 13% which was deemed to represent the amount of input tax paid. In 1983 it changed to the method at issue in this case, at the same time revising its calculations for the previous years. Finally, in 1987 it adopted yet another method of calculation designed to eliminate the element of 'tax on tax' contained in the value of the transactions.

21But, even if the principle is difficult to achieve, this does not mean that it is incorrect. In any event, it is in my view clear that the method advocated by the Commission cannot be accepted. That method does not permit any account to be taken of the amount of tax paid by the Bundespost as part of the cost of acquisition of goods and services. Since that amount, in the absence of the right of deduction, is in the normal course of events passed on to the Bundesposťs customers, the Commission's method must result in a substantially higher valuation of the relevant transactions than would occur if the transactions were taxable and the right of deduction did exist. The Commission's method thus goes further than is required for the purposes of restoring the uniform basis of assessment and, in so far as it in effect penalizes Member States which exercise the option of exemption under Article 28(3)(b) of the Sixth Directive, it is incompatible with the objective of equality of treatment underlying the own resources legislation.

22The method advocated by the Federal Republic, is, it is true, open to the objection that it assumes that if the telecommunications transactions of the Bundespost were taxed, so that the Bundespost could exercise the right to deduct input tax, the turnover for the transactions in question would be reduced by exactly the amount of the input tax paid. As the Commission points out, in practice it is not possible to predict the behaviour of the Bundespost if the transactions were taxed: it might choose not to pass on to its customers all or part of the benefit of the deduction.

23In spite of this element of uncertainty in the method of calculation used by the Federal Republic, that method is in my view likely to come closer to the correct result than that proposed by the Commission, which makes no allowance at all for the input tax reflected in the transactions of the Bundespost. In any event, it is not necessary for the purpose of these proceedings to endorse any particular method. It is sufficient to find that the general approach of the Federal Republic is correct and that the Commission has failed to establish the correctness of its own approach.

24The Commission advances certain other arguments in favour of its own method of calculation and against that used by the Federal Republic. Thus it argues that its own method is simpler and more easily verifiable, and results in a larger basis of assessment (and thus higher own resources) than the opposing method. The Commission also points out that if the Federal Republic's method were to prevail, then because of the three-year time-limit on correction of VAT own resources accounts contained in Article 10b of Regulation No 2892/77 (inserted by Article 9 of Council Regulation No 3625/83, Official Journal 1983, L 360, p. 1), other Member States which have duly applied the Commission's method of calculation in relation to Annex F transactions will, as against the Federal Republic, suffer a lasting disadvantage. These arguments are undoubtedly well founded from the practical point of view, but cannot prevail against the clear purpose of the own resources legislation.

Conclusion

25Accordingly, I am of the opinion that the Court should dismiss the action and order the Commission to pay the costs.