C-295/84 Rousseau Wilmot v Organic

JUDGMENT OF THE COURT (Fourth Chamber)

27 November 1985 *

In Case 295/84

REFERENCE to the Court under Article 177 of the EEC Treaty by the Cour d'appel [Court of Appeal], Douai, for a preliminary ruling in the proceedings pending before that court between

Rousseau Wilmot SA, Caudry,

and Caisse de compensation de l'organisation autonome nationale de l'industrie et du commerce [Compensation Fund of the National Independent Organization for Trade and Industry] Valbonne, (Organic),

on the interpretation of Article 33 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax: uniform basis of assessment (Official Journal 1977, L 145, p. 1),

THE COURT (Fourth Chamber)

composed of: Lord Mackenzie Stuart, President, K. Bahlmann (President of Chamber), G. Bosco, T. Koopmans and T. F. O'Higgins, Judges,

Advocate General: G. F. Mancini Registrar: D. Louterman, Administrator

after considering the observations submitted on behalf of:

Rousseau Wilmot SA, in receivership, the plaintiff in the main proceedings, by F. Spriet, of the Lille Bar,

* Language of the Case: French.

the Caisse de compensation de l'organisation autonome nationale de l'industrie et du Commerce (Organic), the defendant in the main proceedings, by J. Thieffry of the Paris Bar,

the Government of the French Republic, by Gilbert Guillaume of the Ministry of Foreign Relations, acting as Agent

the Commission of the European Communities, by J. F. Bühl, Legal Adviser,

after hearing the Opinion of the Advocate General delivered at the sitting on 22 October 1985,

gives the following

JUDGMENT

(The account of the facts and issues which is contained in the complete text of the judgment is not reproduced)

Decision

Grounds

1By a judgment of 29 November 1984, which was received at the Court on 10 December 1984, the Cour d'appel, Douai, referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the interpretation of Article 33 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax: uniform basis of assessment.

2That question arose in proceedings between Rousseau Wilmot SA, a company which is the subject of judicial composition proceedings, and its receiver, on the one hand, and the Caisse de compensation de l'organisation autonome nationale de l'industrie et du commerce (hereinafter referred to as 'Organic'), a body responsible for collecting the solidarity levy and the mutual assistance charge, on the other. Organic found that the company was liable to pay part of those two levies for the 1981 financial year and their full amount for the 1982 financial year, but the company and its receiver filed a notice of objection to Organic's claim. When the objection was dismissed as unfounded by the Tribunal de Commerce [Commercial Court], Cambrai, the company and its receiver lodged an appeal.

3Before the Cour d'appel, Rousseau Wilmot claimed that the solidarity levy was calculated at 0.1% of turnover, whereas the Community rules governing the harmonization of laws relating to turnover taxes limited the powers of the Member States to introduce or maintain such taxes. In particular, it relied on Article 33 of the Sixth Directive. Organic objected that the purpose of the solidarity levy and the mutual assistance charge was to provide additional funds for the old-age and sickness benefit schemes for traders and self-employed craftsmen. Thus, in its view, the levies concerned were in the nature of social security contributions whereas Article 33 of the Sixth Directive related purely to fiscal matters.

4In those circumstances, the national court asked the Court of Justice to give a preliminary ruling on the question whether Article 33 of the Sixth Directive must be interpreted as making inapplicable legislation of a Member State introducing a 'solidarity levy and mutual assistance charge' on undertakings in the private and public sectors, calculated on the basis of their total annual turnover before tax, the proceeds of which are used in financing the sickness and maternity benefit scheme for self-employed persons in sectors other than agriculture and the old-age pension schemes for traders and self-employed craftsmen.

5Observations were submitted by Organic, the French Government and the Commission. Rousseau Wilmot was represented at the hearing.

6It can be seen from the documents before the Court that the solidarity levy was introduced by Order 67/828 (Journal Officiel de la République Française of 28 September 1967) to provide finance for sickness and maternity benefit schemes and old-age pension schemes for self-employed persons in sectors other than agriculture. Since the entry into force of Law No 70-13 (Journal Officiel de la République Française of 6 January 1970), the levy is chargeable on the various classes of commercial companies, subject to certain exemptions. It is annual and its rate is fixed by decree up to a maximum of 0.1% of the company's turnover. It is not levied when turnover is less than FF 500 000. Disputes relating to the levy are matters for the courts having jurisdiction under the Code de la sécurité sociale [Social Security Code]. Payment of the levy is secured by a charge on the debtor's moveable and immoveable property, subject to the conditions laid down by the Code de la sécurité sociale.

7The mutual assistance charge was introduced by Law No 72-657 (Journal Officiel de la République Française of 14 July 1972) in order to finance support for certain classes of elderly traders and craftsmen. That charge, which represented a specific portion of the solidarity levy, was abolished as from 31 December 1984 by Law No 84-1208 of 31 December 1984). (Journal Officiel de la République Française

8Article 33 of the Sixth Directive reads 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.'

9The reply to be given to the Cour d'appel therefore depends on the question whether levies, such as the solidarity levy and the mutual assistance charge, the rate of which is based on companies' turnover, can be characterized as turnover taxes within the meaning of the Sixth Directive.

10In that regard, Rousseau Wilmot claims that the two French levies in question are manifestly 'duties or charges' within the meaning of the aforementioned Article 33 and that they are based on turnover. The provision makes it clear that such taxes may no longer be introduced or maintained by a Member State. In its view, the question whether the charges in question are fiscal or are more accurately described as social security contributions is irrelevant since they constitute in any event compulsory levies in the nature of turnover taxes.

11Organic emphasizes first the non-fiscal character of the solidarity levy and then contends that the principal characteristics of turnover taxes, as defined in the harmonizing directives and the case-law of the Court, are not present in a charge such as the solidarity levy. A turnover tax within the meaning of the Community directives is a general tax levied on a transaction. The chargeable event is the sale of goods or the provision of a service. The taxable amount is the price of the transaction. The tax is directly included in the price of the goods or the service.

12The French Government puts forward similar arguments. Unlike turnover taxes, the solidarity levy is not a tax on consumption which is proportional to the price of goods or services, but a levy charged annually on the pre-tax turnover for the preceding year.

13According to the Commission, Article 33 of the Sixth Directive must be interpreted in the context of the process of harmonizing turnover taxes initiated by the first directive on that subject, adopted in 1967 (Directive 67/227/EEC, Official Journal, English Special Edition 1967, p. 14). It is clear from the preamble to the First Directive that the purpose of that harmonization is to bring about the abolition of cumulative multi-stage taxes and the adoption by all Member States of a common system of value-added tax. Consequently, the turnover taxes which are the subject of the harmonizing directives are taxes levied on the movement of goods and services. They do not include a social security levy which is not directly chargeable on transactions.

1 4 It must first be observed that, as the Commission has rightly pointed out, the scope of Article 33 of the Sixth Directive must be determined in the light of the role of that provision in the harmonized system of turnover tax, which takes the form of a common system of value-added tax.

15By virtue of Article 2 of the First Directive the principle of the common system of value-added tax consists in the application to goods and services up to and including the retail stage of a general tax on consumption which is exactly proportional to the price of the goods and services, irrespective of the number of transactions which take place in the production and distribution process before the stage at which the tax is charged. However, value-added tax is chargeable on each transaction only after deduction of the amount of value-added tax borne directly by the costs of the various price components. The procedure for deduction is so arranged by Article 17 (2) of the Sixth Directive that taxable persons are authorized to deduct from the value-added tax for which they are liable the value-added tax which the goods have already borne.

16In 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', Article 33 of the Sixth Directive 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 purpose of that provision cannot therefore be to prohibit the Member States from maintaining or introducing duties or charges which are not fiscal but have been introduced specifically in order to finance social funds and which are based on the activity of undertakings or certain categories of undertakings and calculated on the basis of the total annual turnover without directly affecting the price of goods or services.

17The reply to the question referred to the Court must therefore be that the expression 'duties or charges which cannot be characterized as turnover taxes' in Article 33 of the Sixth Directive must be interpreted as including a charge of a non-fiscal nature which is levied on companies or certain categories of companies to provide finance for social security schemes and which is calculated on the basis of the total annual turnover of the companies concerned.

Costs

Costs

18The costs incurred by the French Republic and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the action pending before the national court, the decision as to costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Fourth Chamber)

in answer to the question referred to it by the Cour d'appel, Douai, by order of 29 November 1984, hereby rules:

The expression 'duties or charges which cannot be characterized as turnover taxes' in Article 33 of the Sixth Directive must be interpreted as including a charge of a non-fiscal nature which is levied on companies or certain categories of companies to provide finance for social security schemes and which is calculated on the basis of the total annual turnover of the companies concerned.

Mackenzie Stuart Bahlmann

Bosco Koopmans O'Higgins

Delivered in open court in Luxembourg on 27 November 1985.

P. Heim A. J. Mackenzie Stuart President Registrar

OPINION OF MR ADVOCATE GENERAL MANCINI

delivered on 22 October 1985 ( *1 )

Mr President,

Members of the Court,

1By a judgment of 29 September 1984, the Cour d'appel [Court of Appeal], Douai, asked the Court to give a preliminary ruling on the interpretation of 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 (Official Journal 1977, L 145, p. 1). That article provides that ‘without prejudice to other Community provisions, the provisions of this directive shall not prevent a Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, stamp duties and, more generally, any taxes, duties or charges which cannot be characterized as turnover taxes’.

2The Caisse de compensation de l'Organisation autonome nationale de l'industrie et du commerce [Compensation Fund of the National Independent Organization for Trade and Industry] (‘Organic’) is a social security institution. One of its duties is to collect a solidarity levy (contribution sociale de solidarité) and a mutual assistance charge (taxe d'entr'aide) to which commercial companies, with certain exceptions, are liable. The method of calculating and collecting those levies is laid down in Law No 70-13 of 3 January 1970 and Law No 70-657 of 13 July 1972.

The facts giving rise to this reference for a preliminary ruling are as follows:

Following the failure on the part of Rousseau Wilmot SA, a French undertaking in receivership, to pay those levies for 1981 and 1982, Organic instituted legal proceedings, during which the parties presented argument concerning the compatibility of the French legislation with the rules contained in the directive. Rousseau Wilmot expressed the view that the levies were of a fiscal nature because they were charged at a rate of 0.1% of companies' total turnover for the preceding year. They were thus contrary to the uniform rules introduced by the directive and in particular Article 33 thereof. On the other hand, Organic contended that, as the levies were intended to provide finance for the old-age and sickness benefit schemes for traders and self-employed craftsmen, they were in the nature of social security contributions. They were thus outside the scope of the directive, whose objectives are essentially fiscal.

On appeal that difference of opinion led the Court to stay the proceedings and to request the Court of Justice to give a preliminary ruling on the following question:

‘Must Article 33 of the Sixth Council Directive 77/388/EEC, which provides that ‘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’, be interpreted as making inapplicable legislation of a Member State introducing a solidarity levy on undertakings in the private and public sectors, calculated on the basis of their total annual turnover before tax, the proceeds of which are used in financing the sickness and maternity benefit scheme for self-employed persons in sectors other than agriculture and the old age pension scheme for traders and self-employed craftsmen?’

3During the procedure before the Court of Justice, written observations were submitted by Organic, the Government of the French Republic, and the Commission of the European Communities. Rousseau Wilmot SA presented its case only at the hearing.

The predominant view expressed in those observations and interventions is that the legislation at issue is compatible with the Community rules. Only Rousseau Wilmot is convinced of the contrary. If I have correctly understood its argument, it considers that Article 33 must be interpreted broadly. In other words, the prohibition on introducing charges in the nature of a turnover tax applies to all kinds of levies of a fiscal nature; and the levies under consideration are undoubtedly of such a nature even though they are imposed to meet the requirements of social security.

However, the basic premises of that argument are dubious and it is of no value for present purposes. It does not show that the levies in question are also in the nature of turnover taxes. Nor is the opposing argument (that the two charges are not of a fiscal nature but are social security contributions), which was advanced in this Court by Organic and by the French Government, any more helpful in this case. The problem which the Court has been asked to resolve is not whether or not the solidarity levy and the mutual assistance charge constitute charges of a fiscal nature. What the Court must establish is whether the specific prohibition laid down in Article 33 (‘specific’ because it refers solely and expressly to a certain type of tax, namely turnover tax) also covers charges of that type.

On that basis it is clear that the social or fiscal purpose which the levies in question are intended to achieve does not constitute a sure and satisfactory criterion for determining whether or not such levies are covered by the Community rule. It is, however, essential for that purpose to determine first what the Community legislature meant by duties or charges which can be characterized as turnover taxes. Once that expression has been defined, it then remains to determine whether it covers the charges at issue.

4Let us begin at the beginning. The first two directives dealing with fiscal matters (67/227/EEC and 67/228/EEC of 11 April 1967, Official Journal, English Special Edition 1967, p. 14 et seq.) were adopted to harmonize the national legislation concerning turnover taxes. It was thus intended to eliminate factors which, like the levies in question, were capable of either falsifying the conditions of competition or impeding the free movement of goods and services in the Common Market. The Member States were thus required to enact legislation to replace, within a specified time-limit, their systems of turnover taxes by a common system of value-added tax (Article 1 of the First Directive). Moreover, from the entry into force of the legislation adopted for that purpose, the Member States could no longer maintain or introduce any measure providing for flatrate equalization of turnover taxes on importation or exportation in intra-Community trade.

It can therefore be said that once the two directives had been implemented by the original six Member States (1 January 1973), a Community turnover tax had come into existence, namely VAT. That represented a considerable progress. While it is true that the Member States retained (and still retain) the power to determine many aspects of the rules governing value-added tax, it is also true that the turnover taxes which they levy have to a large extent lost their character of national taxation and become part of a system which, if not entirely uniform, is certainly ‘common’ (see the Opinion of Advocate General Rozès in Case 15/82, Schul v Inspecteur der Invoerrechten en Accijnzen [1982] ECR 1437, at p. 1441).

What does that system involve? Article 2 of the First Directive states that it involves ‘the application to goods and services of a general tax on consumption exactly proportional to the price of goods and services, whatever the number of transactions which take place in the production and distribution process before the stage at which tax is charged’. As well as establishing that machinery, the second directive also lays down definitions and rules intended to ensure uniform implementation of the system by the national legislatures. For example, Article 2 provides, that the following are to be subject to value-added tax: ‘(a) The supply of goods and the provision of services within the territory of the country by a taxable person against payment; (b) the importation of goods’. ‘Taxable person’ means ‘any person who independently and habitually engages in transactions pertaining to the activities of producers, traders or persons providing services, whether or not for gain’ (Article 4). Finally, the basis of assessment is the consideration for the supply of the goods or the provision of the services (Article 8).

It is already possible from that outline to identify the particular characteristics which distinguish value-added tax from other forms of indirect taxation. It is:

A general tax because it covers all stages of the production and distribution of goods and the provision of services (see Article 2 of the First Directive) ;

A neutral tax because the tax burden is the same for identical or similar products. Neutrality also means that the tax is not part of the cost of the goods. That makes it possible to calculate its exact effect at all stages of the production and distribution chain and thus facilitates the verifications carried out on importation and exportation (see the eighth recital in the preamble to the First Directive) ;

A transparent tax because, since it is distinct from the cost of the product, it permits traders to determine the amount of the tax burden at any time and to establish the true price of the product in the light of competition (see the abovementioned eighth recital).

Let us now take a step forward. In May 1977, that is to say ten years after its first intervention, the Council adopted the Sixth Directive, which may be regarded as the codified version of the Community rules on value-added tax. The experience of those years showed clearly that the replacement of national turnover taxes by a common system stimulated the process of economic and commercial integration between the Member States. It was therefore necessary to continue in the same direction and to make the initial rules governing that matter as precise and as complete as possible (third recital).

From that point of view particular importance attaches to Article 33 of the Sixth Directive, which is intended to clarify situations (such as the one in this case) in which legislative power is, in regard to certain sectors, divided between institutions of the Community and the national authorities. In particular, the Community legislature made it clear that the existence of a common system of turnover tax does not prevent the Member States from maintaining or introducing other forms of indirect taxation such as, for example, stamp duties or taxes on betting and gambling. They may not, however, maintain or introduce charges which can be characterized as turnover taxes, because the rules relating to such charges would ultimately affect a matter which now falls within the exclusive competence of the Community. That is the significance of the prohibition contained in Article 33; the legislature wished to avoid a situation in which goods and services were taxed twice on the same basis, once under the common system and once under the national system, with consequences which are both inequitable and of such a nature as to distort competition within the common market.

5At this point I do not consider it necessary to examine in detail the rules concerning the ‘contribution sociale de solidarité’ and the ‘taxe d'entr'aide’. The judgment for reference already makes clear that: (a) those levies do not attach either to deliveries of goods or the provision of services for gain within the country, or to imported products, but to the whole economic activity of commercial undertakings; (b) the basis of assessment is not constituted by the consideration for each taxable transaction but by the turnover of the undertaking during the preceding financial year; and (c) the class of persons liable to them is limited to certain legal persons and, consequently, does not include natural persons even if they engage in an economic activity. It seems to me that that is sufficient to arrive at a conclusion which does not leave any room for doubt: the two levies lack the generality, neutrality and transparency which, as I have already shown, characterize the common tax and, consequently, charges prohibited by Article 33 of the Directive.

Conclusion

6In the light of the foregoing considerations, I propose that the Court reply to the question referred to it by the Cour d'appel, Douai, by judgment of 29 September 1974 in the proceedings pending before that court between Rousseau Wilmot SA and Organic as follows :

‘Article 33 of the Sixth Council Directive 77/388/EEC of 17 May 1977 must be interpreted as meaning that, without prejudice to other Community provisions, Member States are not prohibited from introducing or maintaining charges having the characteristics of the solidarity levy and the mutual assistance charge described by the national court, since charges of the nature cannot be characterized as turnover taxes, within the meaning of that provision.’

( *1 ) Translated from the Italian.