C-317/94 Elida Gibbs

JUDGMENT OF THE COURT (Sixth Chamber)

24 October 1996*

In Case C-317/94,

REFERENCE to the Court under Article 177 of the EC Treaty by the VAT and Duties Tribunal, London, for a preliminary ruling in the proceedings pending before that court between

Elida Gibbs Ltd

and

Commissioners of Customs and Excise

on the interpretation of Article 11 of 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 (OJ 1977 L 145, p. 1),

THE COURT (Sixth Chamber),

composed of: G. F. Mancini, President of the Chamber, C. N. Kakouris (Rapporteur) and G. Hirsch, Judges,

* Language of the case: English.

Advocate General: N . Fennelly, Registrar: L. Hewlett, Administrator,

after considering the written observations submitted on behalf of:

— Elida Gibbs Ltd, by David Milne QC, instructed by Coopers & Lybrand, Chartered Accountants,

— the United Kingdom Government, by Stephen Braviner, of the Treasury Solicitor's Department, acting as Agent, and Kenneth Parker QC,

— the German Government, by Ernst Röder, Ministerialrat in the Federal Ministry of the Economy, and Gereon Thiele, Assessor in the same ministry, acting as Agents,

— the French Government, by Edwige Belliard, Deputy Director, Directorate for Legal Affairs, Ministry of Foreign Affairs, and Jean-Louis Falconi, Secretary for Foreign Affairs in the same Directorate, acting as Agents,

— the Italian Government, by Umberto Leanza, Head of the Contentious Diplomatic Affairs Department of the Ministry of Foreign Affairs, acting as Agent, assisted by Maurizio Fiorilli, Avvocato dello Stato,

— the Commission of the European Communities, by Peter Oliver and Enrico Traversa, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing, after hearing the oral observations of Elida Gibbs Ltd, represented by David Milne QC and John Arnold, Tax Adviser, the United Kingdom Government, represented by Kenneth Parker QC, the Greek Government, represented by Fokion Georgakopoulos, Legal Adviser in the State Legal Service, and Anna Rokofyllou, Adviser to the Deputy Minister for Foreign Affairs, acting as Agents, the French Government, represented by Gautier Mignot, Secretary for Foreign Affairs in the Directorate for Legal Affairs, Ministry of Foreign Affairs, acting as Agent, and the Commission, represented by Peter Oliver and Enrico Traversa, at the hearing on 25 April 1996,

after hearing the Opinion of the Advocate General at the sitting on 27 June 1996,

gives the following

Judgment

Grounds

1By order of 30 November 1994, received at the Court Registry on 6 December 1994, the VAT and Duties Tribunal, London, referred to the Court for a preliminary ruling under Article 177 of the EC Treaty two questions on the interpretation of Article 11 of 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 (OJ 1977 L 145, p. 1, hereinafter 'the Sixth Directive').

2Those questions have been raised in proceedings brought by Elida Gibbs Ltd (hereinafter 'Elida Gibbs') against the Commissioners of Customs and Excise (hereinafter 'the Commissioners'), who are responsible for collecting value added tax in the United Kingdom (hereinafter 'VAT'), in which Elida Gibbs seeks a refund of sums paid by it in respect of VAT.

The promotion schemes at issue in the main proceedings

3According to the order for reference, Elida Gibbs, a subsidiary of Unilever, is a manufacturer of toiletries, 70% of which are sold to retailers and the remainder to wholesalers or cash-and-carry traders for resale to retailers.

4To promote retail sales of its products, Elida Gibbs operates a 'money-off coupon' scheme, of which there are two categories, namely the 'basic scheme' and the 'retailer-specific scheme', and a 'cash-back coupon' scheme.

5Using the money-off coupons under its basic scheme, Elida Gibbs promotes a particular product for a limited period. It arranges for money-off coupons to be distributed to the public, either directly or as cut-out coupons in magazines, newspapers, and similar publications. Each coupon has a face value (for example 15 pence) and carries instructions to consumers, indicating that it may be presented for partial payment for one or more specific Elida Gibbs products. Each coupon also bears instructions to retailers as to how and within what period it should be returned to Elida Gibbs for redemption.

6In the case of the money-off coupons under the retailer-specific scheme, Elida Gibbs enters into an arrangement with a retailer to organize a promotion scheme for a particular product or a particular line of products. The operation lasts for a limited period. The retailer concerned prints the coupons under contract to Elida Gibbs and distributes them to the public. Again, each coupon has a face value (for example 15 pence) and mentions the product or products for which it may be presented as part payment of the price. The name of the retailer also appears on the voucher, which can be used only in that retailer's shops.

7Whether the buyer of Elida Gibbs products is a wholesaler or a retailer, Elida Gibbs charges the supply at a specific, VAT inclusive, price, which it invoices to its buyer under both variants of the money-off coupon schemes described above. The amount invoiced for the supply is determined irrespective of any present or future promotion scheme. Thus, the wholesaler or retailer may not know, when purchasing goods from Elida Gibbs, that those goods are, or are to be, the subject of a money-off coupon promotion scheme. At that stage, it may be that no scheme is in existence or even planned.

8Sales by wholesalers to retailers take place at the wholesaler's prices which are likewise unaffected by any promotion campaign.

9The retailer puts the specified goods on sale at the shelf price. Where the basic scheme is in operation, the customer buying the product specified on a voucher may present the voucher and the retailer may accept it. In such cases, the retailer receives the shelf price, less 15p, and keeps the voucher. He is not, however, required to accept the voucher in place of the 15p cash. On the other hand, where a retailer has an arrangement with Elida Gibbs under a retailer-specific scheme, it is contractually committed to accept the voucher in place of the 15p in cash.

10Moreover, under the basic scheme the retailer makes its redemption applications direct to Elida Gibbs. Only the retailer and Elida Gibbs are concerned with this transaction. The retailer is entitled to redemption, provided that he shows that he has made sufficient purchases, that the product in question was bought by him from Elida Gibbs or from a wholesaler, and that it was purchased before or during the period of the promotion campaign. In the case of the retailer-specific scheme, the coupon must be redeemed by Elida Gibbs, irrespective of whether the product in question was sold by Elida Gibbs before or during the period of the promotion scheme.

11Under the cash-back coupon scheme, the coupon is printed on the packaging of an Elida Gibbs product. It carries Elida Gibbs's offer, subject to certain conditions, to refund the consumer part of the purchase price paid by him to the retailer. That part of the price corresponds to the face value of the voucher which also provides the consumer with proof of purchase. A consumer who purchases the product is entitled to send the voucher direct to Elida Gibbs or to its agents, who will then make the promised cash refund.

The dispute in the main proceedings

12On 24 August 1992, Unilever, of which Elida Gibbs is a subsidiary company, asked the Commissioners to repay to it £883 894, being VAT wrongly paid, in its view, since 1984 in respect of money-off coupons and cash-back coupons. Unilever considered that the reimbursement of the face value of the coupons constituted a retroactive discount and that the taxable base for calculation of the VAT due by Elida Gibbs should be reduced accordingly.

13Taking the view that there was no retroactive discount, the Commissioners rejected Unilever's request by decisions of 5 May 1993 as regards money-off coupons and of 8 October 1993 as regards cash-back coupons.

14In the case of money-off coupons, the Commissioners considered that the amounts that they represented were part of the consideration received by the retailer for supply of the goods to the customer. Being paid by Elida Gibbs, those amounts constituted 'third-party consideration' which, under Article 11(A)(1) of the Sixth Directive, was to be included in the taxable amount for VAT in respect of the retailer's supply.

15As regards cash-back coupons, the Commissioners considered that, since the consumer obtained his refund direct from the manufacturer, after making the appropriate application, the retailer played no part in the transaction. There was therefore no direct link between the supply of goods by the manufacturer to the retailer or wholesaler and the reimbursement from the manufacturer to the consumer.

16Elida Gibbs challenged those decisions of the Commissioners by two applications to the Value Added Tax Tribunal (now the VAT and Duties Tribunal), London, which were joined.

17The VAT and Duties Tribunal, entertaining doubts as to the interpretation of the relevant Community provisions, decided to stay proceedings pending a preliminary ruling from the Court of Justice on the following questions:

'1. Money-off coupons

What, on the proper construction of Article 11(A)(1)(a) and 11(C)(1), is the "taxable amount" of an original supplier in the situation of Elida Gibbs (as found in paragraph 4 of the Interim Decision), namely where:

(a) the original supplier is a "manufacturer" who procures the issue of a money-off coupon which is redeemable at the "stated amount" (as printed on the coupon) by or at the expense of the manufacturer in favour of the retailer,

(b) the coupon which is distributed to a potential customer in the course of a sales promotion campaign may be accepted by the retailer when the customer purchases a specified item of goods from the retailer,

(c) the manufacturer has sold the specified item of goods at the "original supplier's price" either direct to the retailer or to a wholesaler, and (d) the retailer accepts the coupon on sale of the item of goods to the customer, presents it to the manufacturer and is paid the stated amount?

Is the manufacturer's taxable amount the manufacturer's price or that price less the stated amount?

Is the answer to the above question any different if the original supply is made by the manufacturer to a wholesaler rather than directly to a retailer?

2. Cash-back coupons

What, on the proper construction of Article 11(A)(1)(a) and 11(C)(1), is the "taxable amount" of an original supplier in the situation of Elida Gibbs (as found in paragraph 4 of the Interim Decision), namely where:

(a) in the course of a promotion scheme the original supplier ("the manufacturer") sells items of goods at the "manufacturer's price" either direct to a retailer or to a wholesaler,

(b) a cash-back coupon for a "stated amount" is printed on the wrapping of those items of goods entitling the customer, who proves purchase of one of those items of goods and satisfies other conditions printed on the coupon, to present the coupon to the manufacturer in return for payment of the stated amount, and

(c) a customer purchases such an item of goods from a retailer, presents the coupon to the manufacturer and is paid the stated amount?

Is the manufacturer's taxable amount the manufacturer's price or that price less the stated amount?

Is the answer to the above question any different if the original supply is made by the manufacturer to a wholesaler rather than to a retailer?'

General considerations

18Before replying to these questions, it is appropriate to describe briefly the basic principle of the VAT system and how it operates.

19The basic principle of the VAT system is that it is intended to tax only the final consumer. Consequently, the taxable amount serving as a basis for the VAT to be collected by the tax authorities cannot exceed the consideration actually paid by the final consumer which is the basis for calculating the VAT ultimately borne by him.

20Thus, in Case 89/81 v [1982] Staatssecretaris van Financiën Hong Kong Trade ECR 1277, paragraph 6, the Court held that it was apparent from the First Directive (Council Directive 67/227/EEC of 11 April 1967 on the harmonization of the legislation of the Member States concerning turnover tax (OJ, English Special Edition 1967, p. 16) that one of the principles on which the VAT system was based was neutrality, in the sense that within each country similar goods should bear the same tax burden whatever the length of the production and distribution chain.

21That basic principle clarifies the role and obligations of taxable persons within the machinery established for the collection of VAT.

22It is not, in fact, the taxable persons who themselves bear the burden of VAT. The sole requirement imposed on them, when they take part in the production and distribution process prior to the stage of final taxation, regardless of the number of transactions involved, is that, at each stage of the process, they collect the tax on behalf of the tax authorities and account for it to them.

23In order to guarantee complete neutrality of the machinery as far as taxable persons are concerned, the Sixth Directive provides, in Title XI, for a system of deductions designed to ensure that the taxable person is not improperly charged VAT. As the Court held in its judgment in Case 15/81 Schul v Inspecteur der Invoerrechten en Accijnzen [1982] ECR 1409, paragraph 10, a basic feature of the VAT system is that VAT is chargeable on each transaction only after deduction of the amount of VAT borne directly by the cost of the various price components of the goods and services. The procedure for deduction is so arranged that only taxable persons are authorized to deduct from the VAT for which they are liable the VAT which the goods and services have already borne.

24It follows that, having regard in each case to the machinery of the VAT system, its operation and the role of the intermediaries, the tax authorities may not in any circumstances charge an amount exceeding the tax paid by the final consumer.

25The questions submitted by the VAT and Duties Tribunal, London, must be considered together in the light of those considerations.

The preliminary questions

26By virtue of Article 11(A)(1)(a) of the Sixth Directive, the taxable amount for supplies of goods and services within the territoiy of a state comprises all sums which make up the consideration which has been or is to be obtained by the supplier from the purchaser.

27According to the Court's settled case-law, that consideration is the 'subjective' value, that is to say, the value actually received in each specific case, and not a value estimated according to objective criteria (see cited above, paraHong Kong Trade, graph 13, Case 230/87 [1988] ECR 6365, paragraph 16, Naturally Yours Cosmetics and Case C-126/88 v [1990] Boots Company Commissioners of Customs and Excise ECR 1-1235, paragraph 19).

28In circumstances such as those in the main proceedings, the manufacturer, who has refunded the value of the money-off coupon to the retailer or the value of the cash-back coupon to the final consumer, receives, on completion of the transaction, a sum corresponding to the sale price paid by the wholesalers or retailers for his goods, less the value of those coupons. It would not therefore be in conformity with the directive for the taxable amount used to calculate the VAT chargeable to the manufacturer, as a taxable person, to exceed the sum finally received by him. Were that the case, the principle of neutrality of VAT vis-à-vis taxable persons, of whom the manufacturer is one, would not be complied with.

29Consequently, the taxable amount attributable to the manufacturer as a taxable person must be the amount corresponding to the price at which he sold the goods to the wholesalers or retailers, less the value of those coupons.

30That interpretation is borne out by Article 11(C)(1) of the Sixth Directive which, in order to ensure the neutrality of the taxable person's position, provides that, in the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount is to be reduced accordingly under conditions to be determined by the Member States.

31It is true that that provision refers to the normal case of contractual relations entered into directly between two contracting parties, which are modified subsequently. The fact remains, however, that the provision is an expression of the principle, emphasized above, that the position of taxable persons must be neutral. It follows therefore from that provision that, in order to ensure observance of the principle of neutrality, account should be taken, when calculating the taxable amount for VAT, of situations where a taxable person who, having no contractual relationship with the final consumer but being the first link in a chain of transactions which ends with the final consumer, grants the consumer a reduction through retailers or by direct repayment of the value of the coupons. Otherwise, the tax authorities would receive by way of VAT a sum greater than that actually paid by the final consumer, at the expense of the taxable person.

32That interpretation is not invalidated by the arguments advanced by the United Kingdom, German and Greek Governments to the effect that deduction from the taxable amount of reductions granted directly, or of refunds made directly, to the consumer by the initial supplier after delivery to a wholesaler or retailer would upset the functioning of the VAT machinery and render the system unworkable because it would require each wholesaler or retailer in the chain retroactively to adjust the price and, consequently, the amount of VAT they had paid to their own supplier and would require the latter to issue amended invoices.

33The VAT system is not disturbed as a result of such deduction since there is no need to readjust the taxable amount for the intermediate transactions. On the contrary, that amount remains unchanged since, for those transactions, observance of the principle of neutrality is ensured by application of the conditions for deduction set out in Title XI of the Sixth Directive. Under those conditions, the intermediate links in the distribution chain, such as wholesalers and retailers, may deduct from their own taxable amount the sums paid by each to his own supplier in respect of VAT on the corresponding transaction and thus pass on to the tax authorities the part of the VAT representing the difference between the price paid by each to his supplier and the price at which he supplied the goods to his purchaser.

34In view of all the foregoing considerations, the answer to the first question submitted must be that Article 11(A)(1)(a) and Article 11(C)(1) of the Sixth Directive are to be interpreted as meaning that where (a) a manufacturer issues a money-off coupon, which is redeemable at the amount stated on the coupon by or at the expense of the manufacturer in favour of the retailer, (b) the coupon, which is distributed to a potential customer in the course of a sales promotion campaign, may be accepted by the retailer in payment for a specified item of goods, (c) the manufacturer has sold the specified item at the Original supplier's price' direct to the retailer and (d) the retailer takes the coupon from the customer on sale of the item, presents it to the manufacturer and is paid the stated amount, the taxable amount is equal to the selling price charged by the manufacturer, less the amount indicated on the voucher and refunded. The same applies if the original supply is made by the manufacturer to a wholesaler rather than directly to a retailer.

35The answer to the second question must then be that Article 11(A)(1)(a) and Article 11(C)(1) of the Sixth Directive are to be interpreted as meaning that where (a) in the course of a promotion scheme a manufacturer sells items of goods at the 'manufacturer's price' direct to a retailer, (b) a cash-back coupon for an amount stated on the packaging of those items entitles the customer, if he proves purchase of one of those items and satisfies other conditions printed on the coupon, to present the coupon to the manufacturer in return for payment of the stated amount, and (c) a customer purchases such an item from a retailer, presents the coupon to the manufacturer and is paid the stated amount, the taxable amount is equal to the selling price charged by the manufacturer, less the amount indicated on the coupon and refunded. The same applies if the original supply is made by the manufacturer to a wholesaler rather than directly to a retailer.

Costs

Costs

36The costs incurred by the United Kingdom, German, Greek, French and Italian Governments, 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 action pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Sixth Chamber),

in answer to the questions referred to it by the VAT and Duties Tribunal, London, by order of 30 November 1994, hereby rules:

1. Article 11(A)(1)(a) and Article 11(C)(1) of 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, are to be interpreted as meaning that where (a) a manufacturer issues a money-off coupon, which is redeemable at the amount stated on the coupon by or at the expense of the manufacturer in favour of the retailer, (b) the coupon, which is distributed to a potential customer in the course of a sales promotion campaign, may be accepted by the retailer in payment for a specified item of goods, (c) the manufacturer has sold the specified item at the Original supplier's price' direct to the retailer and (d) the retailer takes the coupon from the customer on sale of the item, presents it to the manufacturer and is paid the stated amount, the taxable amount is equal to the selling price charged by the manufacturer, less the amount indicated on the voucher and refunded. The same applies if the original supply is made by the manufacturer to a wholesaler rather than directly to a retailer.

2. Article 11(A)(1)(a) and Article 11(C)(1) of the Sixth Directive are to be interpreted as meaning that where (a) in the course of a promotion scheme a manufacturer sells items of goods at the 'manufacturer's price' direct to a retailer, (b) a cash-back coupon for an amount stated on the packaging of those items entitles the customer, if he proves purchase of one of those items and satisfies other conditions printed on the coupon, to present the coupon to the manufacturer in return for payment of the stated amount, and (c) a customer purchases such an item from a retailer, presents the coupon to the manufacturer and is paid the stated amount, the taxable amount is equal to the selling price charged by the manufacturer, less the amount indicated on the coupon and refunded. The same applies if the original supply is made by the manufacturer to a wholesaler rather than directly to a retailer.

Mancini Kakouris Hirsch

Delivered in open court in Luxembourg on 24 October 1996.

R. Grass G. F. Mancini

Registrar President of the Sixth Chamber

OPINION OF ADVOCATE GENERAL FENNELLY

delivered on 27 June 1996 ( *1 )

1Elida Gibbs finances two types of coupon scheme to promote consumer sales of its toiletry products in the United Kingdom. By presenting a ‘money-off’ coupon, the consumer obtains a reduction in the price from the retailer. By sending in a ‘cash-back’ coupon, he obtains a refund directly from Elida Gibbs. Elida Gibbs argues before the Value Added Tax Tribunal, London, that both should be reflected in retroactive adjustment of the taxable amount which fixes its VAT liability on its own prior sales of the products to wholesalers or retailers. The Tribunal has referred two questions of interpretation to the Court.

I — Factual and legal context

A — Legislative background

2Article 2 of 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 ‘the Sixth Directive’) ¹ provides:

‘The following shall be subject to value added tax:

1The supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;

[...].’

Article 11(A)(1)(a) of the Sixth Directive provides:

‘Within the territory of the country

1The taxable amount shall be:

in respect of supplies of goods and services other than those referred to in (b), (c) and (d) below, everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies including subsidies directly linked to the price of such supplies.’

Article 11(A)(2) and (3) define the elements to be included in the taxable amount and those to be excluded. According to Article 11(A)(3)(b), the taxable amount is not to include ‘price discounts and rebates allowed to the customer and accounted for at the time of the supply’.

3Article 11(C)(1) provides, under the heading ‘Miscellaneous provisions’, that:

In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States.

However, in the case of total or partial nonpayment, Member States may derogate from this rule.’ ²

B — Factual background

4Elida Gibbs (hereinafter for brevity ‘Gibbs’) is a manufacturer of toiletries and a subsidiary of the Unilever group of companies. 70% of all its sales are direct to retailers; the rest are to wholesalers and to cash and carry traders from whom retailers may buy Gibbs products. Gibbs promotes the retail sale of its products by operating two types of money-off coupon schemes and a cash-back coupon scheme.

(i) Money-off coupons

5Under its first, basic money-off coupon scheme, Gibbs arranges a general promotion for a limited period. It distributes coupons to consumers, either directly or in the form of cut-out coupons in newspapers and magazines. Each coupon has a nominal value and carries instructions both for potential customers and retailers. Retailers are informed that the full face value of the coupon will be refunded by Gibbs, provided that they can show that the coupon was redeemed against a product on promotion during the currency of that promotion.

6Under the second, the retailer-specific scheme, Gibbs, acting in association with the retailer, arranges a promotion for a particular product or line of products, which also lasts for a certain period of time. With this scheme it is the retailer who prints the coupons and who distributes them to potential customers.

7Regardless of whether the purchaser from Gibbs is a wholesaler or a retailer, an amount inclusive of value added tax (hereinafter ‘VAT’) is charged for the supply of the goods, without reference to any present or future promotion scheme. Normally, it will not be known at the time of purchase whether the goods will subsequently be the subject of a promotion scheme. Sales from wholesaler to retailer take place at wholesale prices and are unaffected by any promotion scheme. The retailer puts the goods on sale at the normal shelf price.

8Under the basic scheme, the consumer may present a coupon in part payment for the particular product. The retailer is not obliged to accept coupons but, where he does, he seeks a reimbursement directly from Gibbs on proof that the coupons represent Gibbs products sold by him. Under the retailer-specific scheme, the retailer is contractually obliged to accept the coupon.

(ii) Cash-back coupons

9Under this scheme, coupons are printed directly on the packaging of Gibbs' products. The coupon offers a specific cash refund of part of the purchase price paid by the retail consumer to the retailer, while also acting as proof of purchase. Any consumer who is able to satisfy the conditions printed on the coupon may send it directly to Gibbs (or its agent) for the promised payment-. These conditions, as appear from the order for reference, require the consumer to send in the cash-back coupon accompanied by two other cartons of Gibbs' products.

(iii) Gibbs' claim

10On 24 August 1992 Unilever, Gibbs' parent company, requested the Commissioners of Customs and Excise (hereinafter ‘the Commissioners’) to repay the UK £883894 allegedly over-declared since 1984 in respect of both the money-off and the cash-back coupons, on the basis that the reimbursement of the face value of the coupons constituted a retrospective discount, thus reducing the taxable amount of the original supply. On 5 May 1993 this request was refused on grounds that the coupons did not effect any price reduction between manufacturer and retailer but were part of the consideration for the supply of the goods by the retailer to the customer, i. e. ‘third-party consideration’ under Article 11(A)(1). The Commissioners later contended, in addition, that there was ‘no direct link between the supply of goods (by the manufacturer to the retailer or wholesaler) and the payment of the “cash-back” (from the manufacturer to the final customer)’.

C — National proceedings

11Gibbs challenged those decisions before the Value Added Tax Tribunal, London (hereinafter ‘the Tribunal'’). Gibbs contended that under Article 11(A)(1)(a) the ‘consideration’ which it received for the supply of the products in question is the amount actually invoiced in respect of such sales less the amount paid out in redemption of the coupons. Alternatively, it submitted that the payments made on redeeming the coupons should be regarded as bringing the transactions involved within Article 11(C)(1).

12The Commissioners argued that the transactions involving the coupons do not result in any reduction in the consideration obtained by Gibbs for VAT purposes, which remains the amount payable to Gibbs by the retailers or wholesalers for the goods which Gibbs has supplied. The redemption by Gibbs of the coupons under both schemes represents third-party consideration for the supply by the retailer to the customer. In the case of money-off coupons, the Commissioners maintained that the retailer obtains two elements of consideration, namely the cash amount from the customer and the monetary value of the coupon from Gibbs. The Commissioners contended that the consideration for the supply to the retailer is the amount which the retailer is obliged to pay to Gibbs or, where the supply is through a wholesaler, the amount the retailer pays to or is invoiced for by the wholesaler. There can be no retrospective adjustment to the consideration either for the supply by Gibbs to the retailer or, a fortiori, to a wholesaler, who is not a party to and is in no way affected by the promotion scheme.

13Under the cash-back coupon scheme, the retailer receives the full retail price from the consumer; the retailer is unaffected by the redemption rights which affect only his customer. The Commissioners argued that, as there was therefore no question of the retailers offering a reduction on the retail price of the goods sold, Gibbs could not be regarded as having obtained a consideration on its earlier sale of those goods less than that which was actually charged to the retailer (or the wholesaler).

14The Tribunal believes that issues of Community law raised by the operation of these schemes were not resolved by the Court's judgment in Boots Company ³ and that an argument of substance can be made that the redemption of coupons by Gibbs on the sale of its products to consumers should be taken into account in determining the ‘taxable amount’ of its earlier sale of those products. The Tribunal, in particular, notes that ‘a wider application’ of the Court's judgment in Glaive ⁴ might support Gibbs' argument. Referring specifically to the need for a uniform interpretation of Community law, the Tribunal decided to refer the following two questions to the Court:

Money-off coupons

What, on the proper construction of Article 11(A)(1)(a) and 11(C)(1), is the “taxable amount” of an original supplier in the situation of Elida Gibbs (as found in paragraph 4 of the Interim Decision), namely where:

the original supplier is a “manufacturer” who procures the issue of a money-off coupon which is redeemable at the “stated amount” (as printed on the coupon) by or at the expense of the manufacturer in favour of the retailer;

the coupon which is distributed to a potential customer in the course of a sales promotion campaign may be accepted by the retailer when the customer purchases a specified item of goods from the retailer;

the manufacturer has sold the specified item of goods at the “original supplier's price” cither direct to the retailer or to a wholesaler; and

the retailer accepts the coupon on sale of the item of goods to the customer, presents it to the manufacturer and is paid the stated amount?

Is the manufacturer's taxable amount the manufacturer's price or that price less the stated amount?

Is the answer to the above question any different if the original supply is made by the manufacturer to a wholesaler rather than directly to a retailer?

2Cash-back coupons

What, on the proper construction of Article 11(A)(1)(a) and 11(C)(1), is the “taxable amount” of an original supplier in the situation of Elida Gibbs (as found in paragraph 5 of the Interim Decision), namely where:

in the course of a promotion scheme the original supplier (“the manufacturer”) sells items of goods at “the manufacturer's price” either direct to a retailer or to a wholesaler;

a cash-back coupon for a “stated amount” is printed on the wrapping of those items of goods entitling the customer, who proves purchase of one of those items of goods and satisfies other conditions printed on the coupon, to present the coupon to the manufacturer in return for payment of the stated amount; and

a customer purchases such an item of goods from a retailer, presents the coupon to the manufacturer and is paid the stated amount?

Is the manufacturer's taxable amount the manufacturer's price or that price less the stated amount?

Is the answer to the above question any different if the original supply is made by the manufacturer to a wholesaler rather than directly to a retailer?’

II — Observations submitted to the Court

15Written observations were submitted by Gibbs, the United Kingdom of Great Britain and Northern Ireland, the French Republic, the Federal Republic of Germany, the Italian Republic and the Commission, while Gibbs, the United Kingdom, France, the Hellenic Republic and the Commission presented oral observations.

III — Consideration of the questions referred to the Court

16I propose to begin with the second question, dealing with the ‘cash-back’ scheme, since I share the view of Germany that an answer to the second question assists an analysis of the first.

A — Cash-back coupons

17By its second question the Tribunal asks essentially whether the taxable amount for the purposes of the Sixth Directive of a transaction involving the supply of goods by the manufacturer of goods to retailers (and in some cases to wholesalers who in turn supply retailers) at a certain specified price can be affected by the subsequent redemption by that manufacturer of cash-back coupons printed on the packaging. In other words, the Court is asked whether the consideration for VAT purposes for the original supply of the goods by the manufacturer is reduced retroactively if it subsequently reimburses part of the retail price paid for those goods to any consumer who sends in a coupon for a cash refund.

18Gibbs lays particular emphasis on the principle that VAT is a tax on turnover, that this should be ‘real actual turnover’ and that this principle is expressed in Article 2 of First Council Directive 67/227/EEC of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes (hereinafter ‘the First Directive’), ⁵ i. c. that VAT ‘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 takes place in the production and distribution process before the stage at which the tax is charged’. ⁶ This real turnover would be the price received from retailers reduced by the cash paid to consumers who send in cash-back coupons. It submits that ‘the economic effect of the “cash-back” is identical to the situation where a discount is given by the manufacturer to the retailer, who in turn passes on the full discount to the customer’. Gibbs contends that, if VAT is to be a tax on consumption, then the tax authorities must receive VAT only on the net amount paid by the final (retail) customer; this, it submits, will not be the case unless the reimbursement made by the manufacturer is deductible from the taxable amount of the original supply in accordance with Article 11(C)(1) of the Sixth Directive. The Commission, in support, contends that, on the redemption of the coupons by Gibbs, the price should be regarded as having been ‘reduced after the sale takes place’ as envisaged by that provision.

19It helps to focus, firstly, on the retail, or consumer price. In transactions such as those involved in the Gibbs cash-back scheme the consideration for the supply by the retailer can, in my view, only be the full retail price. This is the only identifiable consideration which it receives. It is, furthermore, the ‘subjective value’ attributed by the parties to the consideration, as that term is used in Naturally Yours Cosmetics v Commissioners of Customs and Excise. ⁷ Equally, the consideration for the original supply by the manufacturer to the retailer must remain the original invoiced price. ⁸ When the retailer supplies the goods he has no idea whether the customer will, on completing the purchase, be in a position to or will in fact satisfy the conditions required by Gibbs for a refund. More to the point, there is no way of knowing at the time of original supply by Gibbs whether any or all of the cash-back coupons will be presented for redemption.

20Gibbs, however, relies on Article 11(C)(1) of the Sixth Directive, stating that the taxable amount at the final consumer stage should be the price as reduced by the supposed discount granted by it to the consumer. This provision cannot, in my view, apply to a payment made, as in the present case, by a third party. No change in price takes place between the parties to the retail sale. As Germany rightly submits, under Article 11 ‘a change (reduction) of the taxable amount can occur only by means of a process which affects the taxable amount of the transaction between the person making the supply and the recipient’. ⁹ In Boots the Court did not decide that a refund made not to the immediate customer of the taxpayer (namely here the retailer) but, rather, to a third party (here the retail customer) could affect the taxable amount of the original supply.

21Moreover, when a successful redemption application is made to the manufacturer, neither the retailer nor the manufacturer will be in a position to verify whether the goods in respect of which the refund is granted are those which the manufacturer actually supplied to any particular retailer and, yet, on the Gibbs argument, the refund is to be attributed to that original supply. ¹⁰ I do not think that the Glawe case assists Gibbs in overcoming the lack of correlation between the original supply and the goods in respect of which the coupon is subsequently redeemed. The service in that case was concerned with the installation and operation of gaming machines, which were programmed so as to pay out to players a minimum of 60% of the total stakes inserted; it was thus clear that the consideration paid by each player in order to have the opportunity of winning was on average 40% of his stake. However, the case only concerned transactions at one stage of the trading process, namely that between the proprietor or operator of the machine and the players. The Court adopted the only feasible method of applying VAT to what were sui generis gambling transactions. The reasoning adopted in the very specialized circumstances of Glawe cannot be extrapolated so as to create a principle of general import applicable to a more complex series of transactions at different stages of the supply chain. The retailer is a stranger to the transaction between the manufacturer and the retail customer comprised in the cash-back schemes. To attempt, like Gibbs, to maintain that the acceptance by the retail customer of the ‘offer’ printed on the coupon, affecting the retail sale, can alter the agreed price in the earlier transaction involving the supply of goods by the manufacturer to the retailer, would distort commercial realities and introduce an unacceptable and unjustifiable degree of uncertainty into the Community VAT system.

22The United Kingdom submits that the retail customer who secures a refund from Gibbs under the cash-back scheme receives what amounts to a subsidy. Such a subsidy should, it effectively submits, be regarded as ‘directly linked’ to the retail supply under Article 11(A)(1)(a) and, thus, as forming part of the consideration for that retail supply. I do not find this argument convincing. Subsidies must be included in the consideration ‘obtained by the supplier’ in order to fall within the scope of that provision. Here, the payments are made to the purchaser. A strict construction of this provision accords with the need for certainty in the ascertainment of the price and turnover of the retailer.

23Article 11(A)(1)(a) provides that the taxable amount in respect of supplies of goods shall be ‘everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party...’. The Court stated in Boots that ‘Paragraphs 2 and 3 of Article 11(A) enumerate certain items which are to be included in the taxable amount and other amounts which are not to be included [...]. Thus, the items referred to in paragraph 2 of Article 11(A) are treated by the directive itself as constituting the “consideration” and therefore the taxable amount and the items referred to in paragraph 3 arc excluded, likewise ex lege, from that concept of consideration’. ¹¹ To classify a specific item, the Court held that paragraphs 2 and 3 of Article 11 (A) should first be examined to sec whether the item falls within either of those paragraphs, and that ‘reference must be made to the general concept in paragraph 1(a)’ only when such a classification is not possible.

24Gibbs, it is true, docs not invoke any of these paragraphs in its claim for a reduction, by the amount of the cash payments, of the consideration attributed to it and consequent adjustment of its taxable amount. It docs, however, claim that these payments represent ‘discounts granted to the final consumer’. Discounts are allowed as reductions in two situations under Article 11(A)(3). The refund cannot, in my view, be classified as a price discount or rebate within paragraph 3(b) because it is manifestly neither ‘allowed to the customer’ of the manufacturer nor ‘accounted for at the time of supply’. Nor is it a ‘discount for early payment’ as allowed in Article 11(A)(3)(a). In other words, Article 11(A)(3)(b) does not provide for ‘price reductions’, to use the general description adopted by Advocate General Van Gerven in his Opinion in Boots, ¹² which arise indirectly from cash payments made by a third party to the purchaser of goods or services. I do not consider it reasonable to interpret Article 11(A)(1)(a), as Gibbs does, so as implicitly to exclude payments of part of the price effected by third parties from the determination of the taxable amount. That paragraph, as we have seen, makes explicit reference to third-party consideration in terms which are not consistent with the Gibbs argument.

25I do not find the Gibbs argument, supported by the Commission, and based on Article 11(C)(1), that the redemption of the coupon should be regarded as constituting a price reduction allowed after the supply any more plausible. A unilateral payment made to some retail customers cannot be metamorphosed into an ex post facto price reduction for an entirely different and unidentified transaction. The cash-back scheme does not require the consumer claiming the refund to identify the retailer from whom he bought the product. As stated above, the Court has consistently referred, when assessing the amount of consideration paid in accordance with Article 11(A), to the need for a direct link between the goods or services provided and the alleged payment. ¹³ In my view, the taxable amount of a transaction so determined cannot be reduced in accordance with Article 11(C)(1), unless there is a similarly direct link between the alleged subsequent reduction and the relevant taxable transaction. In the present case, there is no such link. In one transaction, Gibbs supplies goods, normally to a retailer, for a specified price, which does not change, and in the other it reimburses a third party some of the price paid for purchasing some of those goods from such a (but not necessarily the same) retailer.

26I am also of the opinion that the exclusion from the taxable amount of part of the agreed price, by reference to a later payment to the purchaser by a third party, would potentially distort the whole scheme of the VAT system. Article 2(1) of the Sixth Directive defines the supplies which are subjected to VAT as the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such. ¹⁴ The Court has defined this consideration as an amount which must be capable of being ‘assessed in money’ and as ‘a subjective value’, namely the money which is ‘actually received’ by the person supplying the goods or services ‘and not a value assessed according to objective criteria’. ¹⁵ The use of the word ‘subjective’ can be confusing but, in my opinion, is intended to exclude any supposed valuation independent of that adopted by the parties to the transaction. ¹⁶ To allow the ‘subjective’amount determined by the parties to the transaction under consideration to be varied as a result of an entirely independent transaction between one of the parties and a third party would, in my view, subvert fundamentally the concept of consideration employed in the Sixth Directive, as it has been interpreted in the case-law of the Court.

27I am also in particular struck by the force of the submission of the United Kingdom, Germany and Greece that to accept the Gibbs and Commission argument that the amount of these retrospective refunds must be subtracted from the taxable amount of the original supply under Article 11(C)(1) would have grave repercussions for the system of input tax deduction under the Sixth Directive. Germany points out that the customer of Gibbs (i. e. typically the retailer) is under no legal or other obligation to adjust (here downwards) the claim to input tax in accordance with the refund made by Gibbs to the third party (i. c. the retail customer). The dilemma was succinctly expressed by the agent for the United Kingdom at the hearing: ‘... by what process does, firstly, the retailer now reduce by [the refund] the amount upon which input tax is claimed and, secondly, the consumer, if he happens to be VAT registered, also reduce his input tax by reference to the amount of the subsidy?’ ¹⁷ In logic Gibbs should refund to the retailer any VAT by which he has supposedly been overcharged in the original price. This would, of course, be impossible since the retailer is not identifiable. The objective of harmonizing the taxable amount of VAT, identified by the Court in Chaussures Bally, ¹⁸ would be undermined if a different method of calculation of consideration were adopted, on the one hand, for the taxable amount of Gibbs (price less cash payments), and, on the other hand, the purchases of the retailer (price without deductions). In Chaussures Bally the Court rejected an argument that the retailer could be taxed on the amount received from credit card companies, net of commission, whereas the consumer had paid the full price, with its inherent VAT, on using his credit card. I do not agree with Gibbs and the Commission that this is merely an invoice or paperwork problem. As Greece correctly pointed out, invoices serve a fundamental purpose in the VAT system.

28At the hearing, the Commission responded to this submission by stating that Article 20(1 )(b), as part of the article devoted to ‘Adjustments of deductions’, expressly provides for the case where a deduction occurs after the return has been made. This is wholly unconvincing. It is quite natural that provision is made for such deductions in so far as they arise in accordance with Article 11(C)(1). However, the mere requirement imposed on Member States to put in place an adjustment mechanism does not, in my opinion, warrant an interpretation of Article 11(C)(1) which flies in the face of Article 11(A). A valid right to have a price reduction taken into account can only arise where it is the supplier who subsequently allows the relevant price reduction in favour of its customer. ¹⁹

29I am therefore satisfied that the Court should answer the second question referred by the Tribunal to the effect that the taxable amount of the manufacturer's original supply to the retailer (or wholesaler) is unaffected by the amount of any refund subsequently made by the manufacturer to the retail customer. It is now necessary to address the Tribunal's first question concerning money-off coupons.

B — Money-off coupons

30Gibbs argues that, in order for the tax to be exactly proportional to the price of the goods, the taxable amount must be calculated on the basis of the amount the supplier actually receives; i. e. , in the present case, net of the amount expended in redeeming the coupons. It suggests that this result can be achieved under Article 11 of the Sixth Directive in either of two ways: namely, by regarding the consideration received for the purposes of Article 11(A)(1)(a) as the net income of the manufacturer or, alternatively, by treating the sums expended in redeeming the coupons as price reductions under Article 11(C)(1) effected after the supply has occurred.

31In respect of the first approach, Gibbs relies in particular on Boots, While it accepts that the Court's judgment in Boots was concerned with a discount scheme operated by a retailer in favour of its customers, Gibbs contends that the same reasoning may be applied to discounts offered by manufacturers to retail customers. In this respect, it refers the Court to the reasoning of the French Conseil d'État in Berthier-Savèco. ²⁰ The Commission supports the second approach. It contends that if a manufacturer operating a discount scheme such as that of Gibbs were to be assessed, as the Commissioners have done, on the full amount of the original supply, this would be equivalent to employing an ‘open-market value’ contrary to Article 11(A)(1)(a) as interpreted by the Court. In its view, the nominal value of redeemed coupons must be deducted from the original price under Article 11(C)(1).

32France also supports the second approach, but only in respect of goods supplied directly by the manufacturer to the retailer. Where there is a direct relationship, the redemption of the coupons may effectively be regarded as a reduction in the price of the original supply. By analogy with Article 11(A)(3)(b), which requires a discount or rebate to be accounted for at t he time of supply, it contends that a post-supply price reduction under Article 11(C)(1) can only arise where the reduction is allowed by the supplier to the purchaser. Thus, where a wholesaler is inserted into the chain of supply, the later redemption by the manufacturer of the coupons constitutes a payment made by a third party to the retailer.

33The United Kingdom, supported on essentially similar grounds by Germany, ²¹ Greece and Italy, contends that the coupons do not constitute a discount on the retail price, capable of being attributed to the original supply, but, rather, form part of the consideration for the retail supply. Since the operation of such an incentive scheme would present obvious practical difficulties for Gibbs, the use of its money-off coupons provides an ideal means of effectively achieving the same result; namely, to benefit the retail customer while simultaneously promoting the sale of Gibbs' products. The United Kingdom does not distinguish between direct and indirect supplies via a wholesaler; the latter, it says, merely further highlight the fallacy of the Gibbs argument which seeks fictitiously to treat several transactions as one. The United Kingdom contends that Boots can be distinguished from the present case; unlike Boots, the retailer in the Gibbs scheme does not undertake through the issue of the coupon to grant a discount and, thus, it would be ‘perverse to treat the retailer as reducing the price of his goods simply because he accepts a coupon issued by a third party with whom he has no economic link and from whom he may not have purchased the goods’.

34It is fundamental to Gibbs' arguments that the position of the retailer should not be adversely affected by any favourable adjustment of Gibbs' own taxable amount. If the VAT liability of retailers were to be increased as a consequence of operating the promotional schemes, it is obvious that they would be unlikely to participate. Gibbs, in the model transaction presented to the Court, treats the retail price as being reduced by the amount of the coupon and omits from the retailer's taxable amount the refund obtained from Gibbs. It is only by making this important, and, in my view, incorrect, assumption that Gibbs succeeds in leaving the retailer's position unaffected by the reduction in taxable amount which it claims for itself. Without that reduction, the redemption of coupons would automatically increase the margin between the retailer's outputs and inputs and, accordingly, the retailer's VAT. In view of the analogy drawn with Boots, it is worth pointing out that this was clearly not the approach adopted by that company in accounting for the proceeds of a similar scheme. Boots included in its gross takings for VAT purposes and thus conceded liability for VAT on any payments received from manufacturers in the reimbursement of coupons. This approach was accepted by all parties to that case and did not have to be addressed by the Court, which in the event was asked to rule only on cases where there was no reimbursement by the manufacturer. ²² Gibbs' argument implies that Boots was wrong to concede that liability. I think that Boots acted on a correct interpretation of Article 11(A)(1)(a).

35The promotional coupons issued by Gibbs appear in newspaper and magazine advertisements or are distributed to members of the public. They are designed to induce consumers to buy named Gibbs' products by promising a price reduction. Their sole function is, therefore, sales promotion. Gibbs offers to pay part of the price, on behalf of the consumer. The retailer is informed by the coupon that, if he accepts it, Gibbs will refund to him the amount by which he has reduced the price to the consumer. The payment made by Gibbs to the retailer is, therefore, part of the retail price of the product. In terms of Article 11(A)(1)(a), it constitutes part of the consideration received by the retailer for the supply of goods. It is not received ‘from the purchaser [or] the customer’ but from ‘a third party for such supplies’. It could equally appropriately be regarded as a subsidy to the consumer ‘directly linked to the price of such supplies’. ²³ A direct link exists between the supply of goods and this element of consideration as required in the Court's constant case-law. ²⁴

36If the refund of the coupon forms part of the consideration for the retail sale, or more simply the retail price, I agree with Germany that it cannot simultaneously represent a partial repayment of the original consideration given by the retailer to the manufacturer. The retailer has already bought and either paid or incurred liability for the goods as they are displayed with their prices marked on his shelves. Just as his quoted sale price is unaffected by the fact that Gibbs steps into the shoes of the consumer to pay part of it, his purchase price is unaffected by the fact that the coupon refund is made by the manufacturer from whom he has bought the product. The United Kingdom, at the hearing, put forward a vivid and convincing comparison depicting the manufacturer's representatives standing at the shop counter and offering to discharge in cash ten pence of the price of named products. Clearly, such payments would leave untouched the price originally charged by the manufacturer to the retailer. Indeed, we know that some 30% of Gibbs' sales are made through wholesalers, in which case there has, in any event, been no earlier relevant sale whose price is to be reduced at the time when the retailer presents his coupons for refund to the manufacturer.

37It follows inexorably from the character of the refund as consideration for the retail sale that its payment does not have the effect that the price charged by Gibbs to the retailer ‘is reduced after the supply takes place’ for the purpose of Article 11(C)(1).

38Berthier-Savéco does not, in my view, assist the Gibbs argument. It should first be noted that the Conseil d'État in Berthier-Savéco was interpreting French VAT law and, secondly, that it was concerned with the situation of a retailer who, at a time when VAT was not payable in France on retail sales but stopped at the stage of wholesale supply, sought a reduction in the amount upon which it was liable to pay tax in respect of certain purchases of soap from a manufacturer who had distributed money-off coupons similar to those of Gibbs. In any event, I consider the analysis of the Commissaire du Gouvernement, M. Schmeltz, more relevant for the interpretation of Article 11(A) of the Sixth Directive. ²⁵

39I am satisfied, therefore, that the money-off coupon scheme should be regarded as a sales promotion financed by Gibbs designed initially to benefit the retail customer so as to promote the commercial reputation and turnover of Gibbs. Unlike in Boots, the scheme docs not involve the grant of any discount or a posteriori price reduction by Gibbs to its customer.

IV — Conclusion

Conclusion

40In the light of the foregoing, I recommend that the Court answer the questions referred by the Value Added Tax Tribunal, London as follows:

Article 11(A)(1)(a) and (C)(1) of 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 should be interpreted as follows:

The taxable amount in respect of the supply of goods to a wholesaler or retailer by a supplier who procures the issue to potential consumers of money-off coupons printed with offers of stated reductions in the price of its specified products is not reduced by payments made by that supplier to retailers corresponding to the price reductions allowed by them to consumers presenting those coupons to purchase those products.

The taxable amount in respect of the supply of goods to a wholesaler or retailer by a supplier who arranges for the printing of cash-back coupons on the said goods containing offers of cash refunds in specific amounts is not reduced by payments made by that supplier to consumers corresponding to the amounts so printed on products purchased by them.

( *1 ) Original language: English.

¹ OJ 1977 L 145. p. 1.

² Emphasis added in view of the central importance of this paragraph.

³ Case C-126/88 [1990] ECR I-1235, hereinafter ‘Boots’.

⁴ Case C-38/93 [1994] ECR I-1679.

⁵ OJ, English Special Edition 1967 (I), p. 14.

⁶ Emphasis of Gibbs.

⁷ Case 230/87 [1988] ECR 6365, paragraphs 16 and 17 of the judgment; hereinafter ‘Naturally Yours’.

⁸ This analysis applies a fortiori where the manufacturer originally supplied a wholesaler.

⁹ Emphasis in original.

¹⁰ The argument becomes even more implausible when there is an intervening transaction between the manufacturer and a wholesaler. At the hearing, however, the agent for Gibbs expressly requested the Court to concentrate on cases where there is no wholesaler. As it is clear from the facts established by the Tribunal that those cases represent the majority and as France alone treats the distinction as significant, I will hereinafter concentrate my analysis on direct supplies to the retailer.

¹¹ Sec paragraph 15 of the judgment.

¹² See paragraph 11 of the Opinion.

¹³ See, for example, Case 154/80 Staatssecretaris Van Financiën v Coöperatieve Aardappelenbewaarplaats [1981] ECR 445, hereinafter ‘Dutch Potatoes’, paragraph 12 of the judgment, and Naturally Yours, paragraph 12.

¹⁴ Quoted initially in paragraph 2 above, emphasis added.

¹⁵ See ‘Dutch Potatoes’, paragraph 13 of the judgment.

¹⁶ See in this respect my Opinion of 27 June 1996 in Case C-288/94 Argos Distributors v Commissioners of Customs and Extise, [1996] ECR I-5311, paragraph 21.

¹⁷ The United Kingdom refers to subsidy in this context when, as stated in paragraph 22 above, the payment constitutes in reality third-party consideration.

¹⁸ Case C-18/92 [1993] ECU I-2871, paragraph 12 of the judgment.

¹⁹ See paragraph 24 above.

²⁰ Judgment of 20 March 1974, Case No 85.681.

²¹ Germany, however, contends that the manufacturer's taxable amount could be reduced but only if certain strict conditions arc satisfied: i. e. if the reduction is made in each transaction in the chain of supply so that the retailer ultimately receives back part of the consideration for the supply which it may pass on to the customer by selling the product more cheaply, and if the manufacturer issues a corrected invoice leading to a corresponding correction by the retailer of the input tax which it deducts. In so far as the Gibbs' scheme is concerned, it contends, by reference to paragraph 22 of the Court's judgment in Boots, that the redemption of the coupons by Gibbs constitutes third-fiarty consideration which cannot affect the consideration or the original supply by the manufacturer.

²² See Boots, Report for the Hearing, [1990] ECR I-1235, pp. 1236 to 1238, paragraphs 5, 7 and 12; Opinion of Advocate General Van Gerven, paragraph 2.

²³ In contrast to payments made under the cash-back scheme, the payments in the money-off schemes take the form of a refund to the retailer of the price reduction which he has been asked to allow to the consumer.

²⁴ See, for example, the passages from ‘Dutch Potatoes’ and Naturally Yours cited in footnote 13 above.

²⁵ ‘In any event, the redemption of coupons by the supplier cannot be regarded as resulting in a genuine discount granted by the latter since the granting of it depends not on the will of the supplier but on that of the consumer and it is granted not on the basis of the purchases made by his retail customer but according to the number of articles sold by the latter in specified circumstances’; conclusions reported in Drotr fiscal 1974, p. 37. The judgment of the Conseil d'État is also criticized by the Droil Fiscal annotator who stated that in order to have a ‘discount’ in the proper sense of the term, the reduction in the selling price for the benefit of the purchaser must be supported by the vendor, which was not the case in Berthier-Savéco where it was credited by the manufacturer with the relevant amount; p. 34.