Opinion of the Advocate-General
A - Introduction
I - Nature of the problem
1 In this reference for a preliminary ruling, the Verwaltungsgerichtshof (Higher Administrative Court), Vienna, raises questions concerning the compatibility of the Austrian levy towards the functioning of chambers of commerce (Kammerumlage) with the common system of value added tax (hereinafter `VAT'), as governed by the Sixth Council Directive (77/388/EEC) on the harmonisation of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment (1) (hereinafter `the Sixth Directive').
2 The national proceedings turn in particular on the following two questions:
- is the Kammerumlage I a duty in the nature of a turnover tax, with the result that it is unlawful under Article 33 of the Sixth Directive (second question), and
- does the Kammerumlage I restrict, in a manner contrary to Community law, the right to deduction under Article 17 of the Sixth Directive (first question), because the basis of assessment applied is the amount of input tax paid, which it has the effect of reducing?
II - Nature and calculation of the Kammerumlage
3 The Kammerumlage is a levy towards the financing of the tasks entrusted to chambers of commerce which involve, in particular, representing the interests of all the members. Paragraph 3(2) of the Handelskammergesetz (Austrian Law on Chambers of Commerce, hereinafter `the HKG') defines members of chambers of commerce as `all natural or legal persons and all limited partnerships and registered profit-making associations entitled independently to pursue craft, industrial or commercial activities in the finance, credit, insurance, transport or tourism sectors.' By law the chamber of commerce is an association, membership of which is compulsory.
4 According to the national court, chambers of commerce have the task, in addition to representing the common interests of their members, of carrying out ancillary activities on behalf of the State. A major part of the tasks entrusted to them by law is to participate in the three functions of the State.
5 Paragraph 57(1) to (6) of the HKG requires chamber members to pay the so-called `Kammerumlage I' (hereinafter `the KU I'). It provides as follows:
`(1) In order to cover the expenditure of the regional chambers and the Federal Chamber, which are provided for in the approved annual estimates and which are not covered by other income, the members of the chambers may be charged a levy according to the principle of proportionality by reference to use; proportionality shall also be measured by reference to the ratio between the levy amounts and the difference between purchase and selling prices. ... The levy shall be calculated from the amounts which,
(a) are payable as turnover tax on the basis of supplies of goods or other services provided by other traders to the chamber member for the purposes of his business, except on the basis of the sale of a business,
(b) are payable by the chamber member as turnover tax on the basis of the importation of goods or the purchases effected within the Community for the purposes of his business.
The levy shall be fixed by the assembly of the Federal Chamber at a rate of units per thousand of the basis of assessment laid down in (a) and (b) above. The rate shall be not more than 4.3$.
(2) By way of exception to subparagraph (1), the basis of assessment for certain categories of chamber members shall be determined as follows:
1. in the case of credit institutions ... the sum total of gross commission and the sum total of net interest yields ....
2. in the case of insurers operating in the finance, credit and insurance sector, the premium volume is to be taken.
(3) The assembly of the Federal Chamber may decide to leave certain parts of the bases of assessment out of account, where to take them into account in certain sectors would impose a disproportionate burden on chamber members. ...
...
(5) The levy described in subparagraphs (1) and (2) shall be collected by the Federal tax authorities in accordance with the following provisions:
1. The tax provisions relating to turnover tax shall, with the exception of Paragraph 20(1), fourth sentence, and Paragraph 21 of the Umsatzsteuergesetz (Turnover Tax Act) 1994, be applied by analogy.
2. The amount of the levy payable shall be calculated on a quarterly basis by the chamber member and shall be paid not later than fourteen days after the end of the second calendar month following the relevant quarter...
3. Where the official form for the turnover tax return provides for the annual amount of the levy to be shown, that amount shall be entered in the said return.
4. The levy shall not be charged on chamber members whose annual turnover ... does not exceed two million Austrian schillings.
5. The President of the regional chamber shall adjudicate on appeals contesting the basis or amount of the levy. ...
(6) The levy described in subparagraphs (1) and (2) shall be made over to the Federal Chamber by the Federal tax authorities. It shall be divided in the ratio 12:13 between the regional chambers and the Federal Chamber. ... 75% of the Federal Chamber's share shall be used for the purposes of promoting foreign trade.
...'
6 By a regulation of 1 January 1995, the Presidency of the Federal Economic Chamber of Austria fixed the levy at 3.9$ of the basis of assessment.
7 In order to cover its expenditure, the Federal Economic Chamber (regional chambers) may set an additional levy calculated on a payroll basis, known as the `Kammerumlage II' (hereinafter `the KU II'). (2) It is clear from the information provided by the Austrian Government that that levy is in fact collected by the Federal Economic Chamber and by all the regional chambers.
III - Main proceedings and questions referred for a preliminary ruling
8 The applicant in the main proceedings, SPAR Österreichische Warenhandels AG, is a joint-stock trading company. Under the HKG it is by law a member of the Federal Chamber of Commerce (Bundeskammer) and of the corresponding regional chamber (Landeskammer). The dispute arose because the undertaking declared its KU I for 1995 in the amount of ÖS 0. The Finanzamt (Tax Office) subsequently imposed different amounts. As a result of proceedings brought against those decisions, the case came before the Verwaltungsgerichtshof.
9 That court is querying the compatibility of Paragraph 57(1) to (6), relating to the KU I, with Article 17 of the Sixth Directive. In particular, it states as follows:
`The Austrian Law on Turnover Tax ... in principle grants a right to full deduction of input tax. However, in practice Paragraph 57(1) of the HKG has the result that the traders concerned are not granted a 100% deduction of input tax, but only a lesser amount. The amount which may be claimed as input tax is referred to in Paragraph 57(1) of the HKG as the basis of assessment for a levy similar to a tax. Therefore, on the one hand, ... the right to deduct input tax is granted but, on the other, part of that amount of input tax is clawed back from a large group of traders by the Finanzamt. The way in which this happens is that the total sum of turnover tax for supplies ... to the trader ... forms the basis of assessment for the KU I. Consequently, that basis of assessment is made up of the amount which the trader is entitled to deduct as input tax.' (3)
The national court goes on to state:
`The Verwaltungsgerichtshof also considers that there is reasonable doubt as to whether the KU I regime is contrary to the prohibition of taxes which can be characterised as turnover taxes, laid down by Article 33 of the Sixth Directive.' (4)
10 In view of its doubts as to the compatibility of the KU I with the two abovementioned provisions of the Sixth Directive, the Verwaltungsgerichtshof submitted the following questions to the Court for a preliminary ruling:
`1. Does Article 17 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, prohibit a Member State from charging a levy assessed at a fixed rate on the basis of:
(a) the turnover tax payable on supplies or other services provided by other traders to the person subject to the levy for the purposes of his business, with the exception of that payable on sales of businesses, and
(b) the turnover tax payable by the person subject to the levy on imports of goods for the purposes of his business or on purchases effected within the Community for the purposes of his business?
2. Does Article 33 of the Sixth Directive prohibit the charging of a levy such as that described in Question 1?'
IV - Relevant provisions of Community law
11 Article 17(2) of the Sixth Directive provides:
`In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:
(a) VAT due or paid in respect of goods or services supplied or to be supplied to him by another taxable person;
(b) VAT due or paid in respect of imported goods.'
12 Article 33 of the Sixth Directive, as amended by Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of VAT and amending Directive 77/388/EEC with a view to the abolition of fiscal frontiers, (5) provides that:
`1. Without prejudice to other Community provisions, in particular those laid down in the Community provisions in force relating to the general arrangements for the holding, movement and monitoring of products subject to excise duty, 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 characterised as turnover taxes, provided however that those taxes, duties or charges do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.'
B - Opinion
I - Compatibility of the KU I with Article 33 of the Sixth Directive (second question)
13 Contrary to the sequence of the questions but in line with the manner of proceeding of the Italian Government and the Commission, it is appropriate to begin by examining Article 33 on the ground that it draws the general demarcation line between national taxation and the common system of VAT and thus also between the competences of the Member States and those of the Community in the sphere of VAT. According to the wording of Article 33, a Member State is not precluded from maintaining or introducing taxes, duties and charges which cannot be characterised as turnover taxes.
1. Is the Kammerumlage a membership levy?
14 At the outset, it should be observed that the Austrian Government's contention that, as a membership levy, the Kammerumlage in no way comes within the purview of Article 33 but is still lawful, cannot be accepted. Certainly, given the intention behind it, the Kammerumlage may constitute a form of membership levy. However, a membership levy does not vary to the same extent as the Kammerumlage but is limited to a few differences in scale. Nor is a membership levy dependent on the use made of the relevant body. However, the Kammerumlage is levied as consideration for services, if only notional, rendered by the chamber. Therefore, it is more comparable to a charge under Article 33. The decisive factor is not the designation of, or the intention behind, the levy but its effect. (6)
15 Certain factors - the fact that the KU I is not paid into the public budget, but is earmarked for specific use, that it is paid in consideration of a service, even if only a notional one, that the amount thereof is set by the assembly of the chamber (and not the legislature), that it is levied quarterly and not annually, that the basis of assessment and the amount are determined by the undertaking itself and that other rights of action are provided for (see, for details, Paragraph 57 of the HKG) - are all irrelevant because they are concerned only with distinguishing the nature of the taxation imposed - tax, duty or charge - and not with defining the nature of the levy, which alone is decisive.
16 Conversely, the fact that Paragraph 57(5)(1) of the HKG refers to the application by analogy of the provisions applicable to turnover tax does not have the effect of automatically equating, as the Commission asserts, the KU I with a duty comparable to turnover tax, because those provisions do not determine the nature of the duty but serve principally to determine the technical method of calculation and the administrative process.
2. Possibility of examining the KU I in isolation
17 The KU I must thus be tested for compatibility with the system of VAT on the basis of Article 33. In that connection, the Austrian Government and the Finanzlandesdirektion, Salzburg, have submitted that the KU I may not be examined in isolation. Instead, the whole system of financing the chambers must be considered, which also includes the KU II calculated on a payroll basis. In their view, the KU I forms only a minor part of that whole system; that is why the KU I which may affect input tax paid cannot be considered in isolation under Article 33.
18 That reasoning cannot in my view be upheld because this case concerns not the financing of the chambers in general but the calculation of the KU I on the basis of input transactions. If that method of calculation should turn out to be incompatible with the common system of VAT, the existence of a further levy, the KU II, though calculated differently, would be of no consequence, particularly as those two levies are independent of each other in the sense that they are not necessarily levied together on all the members, as was stated at the hearing. It follows that the KU I may be assessed in isolation under Article 33.
3. Examination of the essential features of VAT
19 As the Court has consistently held (for example, in its judgments in Kerrutt, Wisselink and Giant), Article 33 does not preclude systems of taxation from existing concurrently with VAT. (7) Member States may therefore introduce taxes whose collection overlaps with VAT on the same transaction where such taxation is not in the nature of turnover tax. (8) Duties capable of being replaced by an increase in VAT are likewise or a fortiori deemed to be unlawful. (9)
20 The demarcation criteria, just like the formulation of Article 33 as a whole, must be considered in the context of the harmonised system of turnover tax in the form of the common system of VAT. (10) Under Article 2 of the first Council Directive (67/227/EEC), (11) the principle underlying the common system is that a general tax on consumption should be applied to goods and services which is exactly proportional to their price - until the retail stage - regardless of the number of transactions carried out in the production and distribution process before the stage at which tax is charged. However, on each transaction VAT is payable only after deduction of the amount of VAT directly borne by the various cost components.
21 Article 33 of the Sixth Directive is intended to prevent the operation of the common system of VAT from being jeopardised by fiscal measures imposed by Member States on the movement of goods and services and affecting commercial transactions in a manner comparable to VAT. (12) Thus, the Court has not focused primarily on the question whether or not charges are in the nature of turnover taxes, but has always examined as a matter of priority whether the duties exhibit the essential characteristics of VAT, since, according to settled case-law (see, for example, the judgments in Bozzi and Dansk Denkavit), taxes, duties and charges which exhibit the essential characteristics of VAT must in any event be deemed to affect the movement of goods and services in a manner comparable to VAT. Accordingly, taxes, duties and charges which do not have these essential characteristics are not precluded by Article 33. (13) As to the essential characteristics of VAT, the Court has repeatedly held that:
- VAT applies generally to all transactions concerning goods and services;
- it is in proportion to the price of such goods and services;
- it is levied at each stage of the production and distribution process;
- it applies to the value added to goods and services, the tax payable on a transaction being calculated after deduction of the tax paid on the previous transaction; (14)
- finally, VAT may be passed on in the price of goods and services and thus is ultimately borne by the consumer. (15)
3.1 General application of the KU I
22 I now turn to the question whether the KU I at issue in these proceedings exhibits the essential characteristics of VAT. For the purposes of the first (twofold) criterion, it must therefore be examined whether the KU I is applied generally to transactions involving goods or services. In the Commission's view, the criterion of general application is satisfied. In that connection, it refers to the order for reference and the statements of the national court explaining that every trader engaged in industrial, craft or commercial activities is subject to the levy. Reference is also made to Paragraph 3(2) of the HKG. Under that provision, all natural and legal persons, limited partnerships and registered profit-making associations which are entitled independently to pursue craft, industrial or commercial activities, together with undertakings in the finance, credit, insurance, transport and tourism sectors, are members of chambers of commerce. The fact that the KU I applies to transactions follows, in the Commission's view, from Paragraph 57(1) of the HKG under which the levy is determined on the basis of the amounts payable by the other trader by way of turnover tax on supplies or other services provided to the chamber member. In other words, the levy relates to the turnover tax payable by the supplier in respect of his supplies, and thus to his transactions.
23 On the other hand, the Italian and German Governments contend that the KU I is not of general application. The Italian Government points out in that connection that liberal professions and undertakings whose turnover does not exceed ÖS 2 million are not subject to it. None the less, the Commission considers that this exemption does not alter the general nature of the KU I since the Sixth Directive itself lays down specific schemes for small enterprises, agricultural producers and liberal professions, which in no way detracts from the general nature of VAT.
24 However, the Austrian Government submits that the KU I is not always calculated on the basis of input transactions, that is to say on the basis of supplies to the chamber member. Thus Paragraph 57(2) of the HKG lays down other bases of assessment for credit institutions and insurance companies. It observes that, under Paragraph 57(3), the assembly of the Federal Chamber may decide to exclude certain parts of the bases of assessment from the calculation of the Kammerumlage where some trade and professional sectors are required to make a disproportionate contribution, and that this provision has been applied in certain sectors. Accordingly, there are exemptions from the calculation of the KU I under Paragraph 57(2) of the HKG for credit institutions, financial establishments, insurance companies, retirement pensions, building companies, the petroleum industry, traders in fuel and oil, buying organisations in the food trade, freight forwarders and undertakings engaged in the transportation of goods, as well as petrol stations. Thus, it is submitted, consideration of input transactions is only one method of calculation amongst others.
25 At the hearing, the Finanzlandesdirektion für Salzburg explained the significance of the Kammerumlage as regards the persons subject to it. Apparently, only about one-half of chamber members are subject to the KU I, that is to say around 11 000 members. Furthermore, there are only very few chamber members who have to pay only the KU I. This means that the KU I applies in the vast majority of cases in conjunction with the KU II. Persons liable to pay only the KU I amount to a few thousand only. Finally, it was stated at the hearing that the KU II is levied in around 6 000 cases in isolation from the KU I which is calculated on the basis of input transactions. Accordingly, it is submitted, the KU I which applies to input transactions is only one method of calculation amongst others and may not be regarded as being of general application. It has already been indicated that the link between the KU I and the KU II is not relevant to the question to be resolved in these proceedings.
26 The Italian Government emphasises, finally, that the KU I does not apply to all members' transactions but only to those in respect of which they have received supplies and have therefore had to pay turnover tax. The representative of the Finanzlandesdirektion für Salzburg gave an example of this at the hearing. He considered the situation where the undertaking liable to pay the Kammerumlage itself manufactured the entire article supplied by it, without any input from third parties. In that case, the KU I would not be payable. According to the Austrian Government, the Kammerumlage is generally calculated according to the undertaking's inputs, that is to say on supplies received by the undertaking. Since the overriding principle in the levying of the KU I is the relative use made of the chambers, it is necessary to determine in each case how that principle may best be observed. For that reason, inputs are calculated partly on the basis of salaries but also partly on the basis of supplies and, in the case of insurance companies, for example, by other methods.
27 However, as has already been stated, that is of no importance since it is a matter of examining whether calculation of the Kammerumlage on the basis of input transactions is compatible with the system of VAT. In that connection, it is appropriate to examine whether the levying of the KU I on the basis of input transactions must be deemed to be a general tax or duty for the purposes of VAT. That question depends primarily on the definition of the term `general', which is why it cannot be ruled out ab initio that one method of calculation amongst others may also be deemed to be of general application for the purposes of VAT.
28 It is clear from the parties' submissions that their respective arguments are based on different conceptions of the term `general'. The Court's case-law contains no clear definition of this term. It is therefore necessary to consider individual judgments on the question of the general application of a tax in order to elicit a possible demarcation criterion. Thus, a specific consumption tax on passenger vehicles was held not to be of general application where the tax was levied either on delivery or on importation. The Court decided this was not a general tax because it applied only to two specific groups of products, namely passenger vehicles and motor cycles. (16)
29 To the same effect was the Court's ruling with regard to a tax introduced by a municipality under which any person regularly or occasionally organising within the municipality shows or public entertainments for which it charged an admission fee was liable to tax on the gross amount of receipts. The Court deemed it not to be a general tax because it applied only to a limited category of goods and services. (17)
30 Finally, the Court held that a supplementary contribution paid to the Cassa Nazionale di Previdenza (National Provident Fund), to which all lawyers regularly practising in Italy are required to be affiliated, was not of general application. All admitted lawyers had to apply a certain percentage increase to all fees making up their annual turnover for VAT purposes and pay that amount to the Fund. Once again, the Court held that the supplementary contribution did not constitute a levy of general application. It based its ruling on the ground that the contribution concerned only lawyers and, moreover, did not apply to all fees but only to those in respect of court activities. (18)
31 It clearly follows that a tax will not be held to be of general application where it applies only to certain goods, activities or categories of persons. In the present case, the view could be taken that, as in the last-mentioned case, only a certain category of persons, namely chamber members, is caught by the levy which cannot therefore be regarded as being of general application.
32 However, that reasoning is not free from doubt. It is true, as the parties have submitted, that certain undertakings are not subject to the KU I (for example, if their annual turnover does not exceed ÖS 2 million). But this does not mean that only certain categories of persons, and thus certain activities and transactions, are caught by it. On the contrary, undertakings in all economic sectors continue to be subject to the KU I. This is in keeping with the meaning and purpose of the HKG, which is to ensure that all possible users of chambers of commerce assist in financing them. The category of persons is drawn so widely in Paragraphs 1(1), 3(2) and 3(3) of the HKG that the Austrian Government's assertion that only some undertakings are caught by the KU I cannot automatically be regarded as correct. The exceptions mentioned by the Austrian Government could instead be regarded as confirmation of the rule that the KU I is generally applicable.
33 If, however, regard is had to the rules applicable to credit institutions and insurance companies, to which a method of calculation other than that of input transactions applies, the result could be different. However, even this exception simply means that certain categories of undertakings and activities are excluded from the scope of the KU I calculated on the basis of input transactions. In order to hold that the tax or levy is not of general application, it would be necessary for it to apply only to specific categories of persons, goods or activities. Yet the levy none the less governs a broad swathe of economic life or economic activities. For that reason, the KU I cannot be said not to be of general application for the purposes of the Sixth Directive.
3.2 Specific purpose of the KU I
34 In what follows, it is appropriate to examine whether the KU I, although applying to transactions generally, is to be excluded from the category of duties in the nature of turnover taxes within the meaning of Article 33 on the ground that it was specially created in order to finance chambers of commerce. In that connection, reference should be made to the judgment in Rousseau Wilmot in which the Court had to rule on a solidarity levy for financing social funds. The duties in question were specifically introduced in order to finance social funds. They were based on the activity of undertakings, or of certain categories of undertakings, and were calculated on the basis of the overall annual turnover without directly affecting the price of goods and services. (19) There too, the Court referred to the function of Article 33, which is to prevent the operation of the common system of VAT from being jeopardised. The purpose of Article 33, the Court went on, `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.' (20)
35 From that, it could be inferred that a `membership levy' for the financing of an autonomous organisation cannot be deemed to be a tax or duty within the meaning of Article 33 either. However, it should be observed in that connection that Article 33 was inapplicable not only because the levy was created in order to finance social funds but also because the essential characteristics of VAT were not present. Once again, therefore, the reasoning was based on the essential characteristics of VAT.
36 Thus the KU I must also be examined on the basis of those essential characteristics. As has already been established, the first of those characteristics is indeed present because the KU I refers to transactions generally.
3.3 Designation of the transactions subject to the KU I
37 In this connection, however, it may be important to determine the transactions to which the levy relates. The point must be examined because the question as to fulfilment of the second criterion, that of proportionality, must be answered differently depending on which transactions are taken as a basis. As already mentioned, under Article 2 of the First VAT Directive, the common system of VAT is based on the principle that a general consumption tax is to be applied to goods and services. Under Article 2 of the Sixth Directive, the following are to be subject to VAT:
1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;
2. the importation of goods.
Any person who independently carries on in any place any economic activity, whatever the purpose or results of that activity, is a taxable person for the purposes of the Sixth Directive. (21) Therefore, the Sixth Directive focuses on the economic activity of the taxable person. Supplies of goods and services, that is to say transactions entered into by him, are subject to VAT. This is also laid down in Article 11(A)(1)(a) which governs the basis of taxation. In the case of the supply of goods and services, the basis of taxation is everything which constitutes the consideration obtained by the supplier of goods and services in respect of those transactions. This means that the person entering into the taxable transactions is also a taxable person for the purpose of the Sixth Directive.
38 In the case of the KU I, however, it is not in fact the transactions of the person liable to the membership levy which form the basis for calculating the levy and are thus directly affected by it. The relevant basis is the VAT paid by the chamber member in the price charged by his suppliers. It is therefore the transactions of the supplier which form the basis for calculating the Kammerumlage. In the Austrian Government's view, it follows that the KU I is not a turnover tax within the meaning of Article 33.
39 The transactions of the undertaking liable to the Kammerumlage could be said to be affected only in so far as that undertaking is likely to pass on the cost of the levy to be paid by it in the prices charged by it for its goods or services at the next stage of consumption. However, there is no direct link between the KU I paid and the chamber member's transaction. As the representative of the Finanzlandesdirektion für Salzburg stated by way of example at the hearing, liability to the KU I is not incurred on every transaction carried out by the person liable to pay the levy. If, for example, the undertaking liable to pay the Kammerumlage itself entirely manufactured the goods supplied, without inputs from third parties, there would be no liability to the KU I. It is therefore not included in the price of the goods, even as a factor in calculating the costs.
40 Conversely, even if it were possible to establish that, whenever liability to the KU I arises, there is a corresponding transaction by the chamber member, the necessary connection between the imposition of the tax and the relevant transaction which is required under the system of VAT would still not be present. This becomes clear on examining the next criterion to be considered. According to that criterion, the tax or duty must be exactly proportionate to the price of the goods and services.
3.4 Proportionality of the KU I
41 The Commission asserts that the levy is proportionate. It refers to the terms in which Paragraph 57 of the HKG is couched, under which the levy is charged in proportion to the use made of facilities and indeed in such a way that under Paragraph 57 proportionality is `also [to] be measured by reference to the ratio between the levy amounts and the difference between purchase and selling prices.' That wording is too vague to serve as a basis for proportionality. When the KU I is in fact proportionate to the use made of facilities is therefore a question of interpretation, since proportionality is `also' to be assessed, that is to say `inter alia', by reference to the ratio between the levy amounts and the difference between purchase and selling prices - in other words, the profit. Moreover, as was stated at the hearing, proportionality is regarded merely as an overriding principle and programme, adhered to by individual undertakings using different methods of calculation, one of which is to have regard to input transactions. That does not, however, prove that the latter method of calculation actually results in a charge which is exactly proportionate to the price of goods and services.
42 As evidence of proportionality, the Commission adds that the KU I is `to be calculated on the basis of the turnover tax' (22) and `thereby reflects the proportionality of the latter'. In that connection, the tax paid by the chamber member in the price and forming the basis of the calculation of the KU I relates to the transactions of the supplier, that is to say, the input transactions. That tax is exactly proportionate to the price of the goods made available by the supplier. Since the KU I is calculated in units per thousand of that turnover tax, it may be assumed that it is also exactly proportionate to the price of the goods or services supplied. However, the relevant transactions for present purposes are not the input transactions but, as demonstrated above, those carried out by the chamber member himself. It is questionable whether there is also exact proportionality in relation to the price charged in respect of those transactions.
43 Even if it may be assumed that the undertaking liable to pay the levy passes on the KU I paid by it in the price of goods and services supplied by it, the amount of the Kammerumlage cannot be assumed to be exactly proportionate to the price of the goods and services. The amount of the KU I depends on the supplies required by the undertaking subject to the levy for the purposes of its transactions. The price of the goods and services supplied by it subsequently is not, however, determined according to the volume of those supplies alone but also according to that of its own services. These may be variable and may therefore be reflected to a varying extent in the price of the final product. Thus, at the hearing, the representative of the Finanzlandesdirektion für Salzburg pointed out that the value added varies from one economic sector to another, and even within a particular sector, depending on whether or not the undertaking succeeds in making the best possible use of its resources. One economic sector with a strong performance is, for example, that of credit institutions and insurance companies. In that sector, only small amounts of VAT are payable on supplies made by other undertakings or in respect of other services. In other words, in spite of relatively strong performance, there is only a relatively small charge to KU I. That is, moreover, the reason why the legislature made special provision for that sector in Paragraph 57(2) of the HKG, according to which the KU I is not to be calculated on the basis of input transactions.
44 For those reasons, it is not apparent that the KU I is always exactly proportionate to the price of goods. This means that the KU I, as was contended for by amongst others the Austrian and German Governments, is basically only a cost component which, like other cost components, affects the price of the end product and cannot be deemed to constitute VAT.
45 The KU I should therefore be held not to affect the turnover of chamber members in a manner comparable to VAT, nor is it exactly proportionate to the price of goods or services supplied by them.
46 In what follows, it is appropriate to examine whether the result arrived at is any different if the transactions of the chamber member's supplier are taken into account. Thus, at the hearing, the Commission also pointed out that receipt of a service is always balanced under the system of VAT by the supply of a service.
47 In that connection, it could be argued that the only decisive factor for the purposes of Article 33 is that transactions, irrespective of which kind, are taxed in a manner comparable to VAT. If the transactions of the chamber member's supplier were taken as a basis, they could be said to be affected since the KU I is calculated on the basis of those transactions. As has already been demonstrated, the KU I is also proportionate to the price of the goods and services supplied by way of those input transactions. However, it should be pointed out that it is not the supplier (that is to say, the person performing the transactions) who has to pay the KU I but the recipient of the goods or services.
48 This does not necessarily mean that the imposition of the KU I cannot be regarded as comparable to VAT since, even under the system of VAT, it is essentially the recipient of the service who pays the VAT together with the price to the supplier who then accounts for it to the competent tax authority (less the VAT paid by him on his input transactions). Under the VAT system, the tax is passed on to the next stage of production. In the case of the KU I, it is also the recipient of goods and services who pays the Kammerumlage. In contrast to VAT, he does not pay the Kammerumlage to the supplier but accounts for it himself.
49 Strictly as a matter of principle, the KU I could be deemed to affect transactions in a manner comparable to VAT. None the less, the question arises whether, on that view of the matter, the other VAT criteria are also fulfilled.
3.5 Possibility of passing on the charge to KU I to the final consumer
50 As the Court has held, in order to be characterised as a turnover tax within the meaning of Article 33, a charge must be capable of being passed on to the consumer. (23) This also means that when the item reaches the final consumer who is not subject to tax, it continues to be affected by an amount of VAT proportionate to the price paid by that consumer to his supplier. (24) Under the system of VAT, until the item or service reaches the final consumer, VAT is always paid by the recipient to the supplier who accounts for the tax, less the tax paid by him as the recipient of other services. In that process, the VAT is always exactly proportionate to the price of the goods and services supplied. That is true also of the VAT to be paid by the final consumer.
51 However, in the case of the KU I, it is the supply to the chamber member which constitutes the chargeable transaction. The Kammerumlage is paid by the recipient and therefore is not applicable to the supply to the final consumer who is not a member of the chamber. It is charged at the previous stage on the supply to the last trader, who is also the one who pays it. Even on the assumption that the last trader in the production chain passes on the charge to the final consumer, that does not constitute the imposition of tax on the final consumer provided for in the Sixth Directive. It does not constitute the direct passing on of the tax to the beneficiary of the transaction affected, but is a charge based on a price calculation at a subsequent stage. Moreover, as has already been demonstrated, the KU I is not exactly proportionate to the price to be paid by the final consumer.
3.6 Levying of the KU I at each stage of the production and distribution process
52 Hence the third criterion laid down by the Court is not satisfied either. The KU I is not levied at every production and distribution stage (up to and including the retail stage). In this case the last stage, that is to say the proportionate passing on of the levy to the consumer, is missing.
53 That conclusion might be different if regard were none the less had to the transactions effected by the chamber member. Since undertakings operating at all stages of the production and distribution process are chamber members, it could be said that the KU I is as a matter of principle levied at every production and distribution stage. It should, however, be borne in mind that - on this view of the matter - the KU I is not proportionate.
3.7 The KU I by reference to the value added
54 As regards the fourth criterion, which requires the charge to be applied to the value added to goods and services, it is undisputed that the KU I is not imposed on the value added to goods because it is calculated only on the basis of the input tax payable, that is to say the VAT payable on supplies to the chamber member. On the other hand, there is some dispute as to whether a tax or duty within the meaning of Article 33 must satisfy that criterion unconditionally. It is clear from an analysis of the Court's case-law that on several occasions a tax or duty has been held not to be comparable to VAT, particularly on the ground that it did not apply to the value added to goods. (25) The Commission views the matter differently. It refers in that connection to the judgment in Dansk Denkavit and Poulsen Trading, in which the Court held that a tax was not required to resemble VAT in every respect in order for it to be characterised as a turnover tax. (26) None the less, the Court went on to add that `it is sufficient for it to exhibit the essential characteristics of VAT'. (27) However, applicability to the value added to goods and services has been held by the Court to be one of those essential characteristics. Hence it would be essential for a tax or duty which, according to Article 33, is not compatible with the system of VAT to apply to the value added to goods and services.
55 As the Court has repeatedly stated, however, taxes, duties and charges must `in any event' be regarded as being imposed on the movement of goods and services in a way comparable to VAT where they exhibit the essential characteristics of VAT. (28) It cannot be inferred from that, however, that a charge contrary to Article 33 cannot be imposed where one of the criteria in question is not fulfilled, in particular application by reference to the value added. That is clear from the wording of Article 33 itself, which simply states in general terms that any taxes, duties and charges which cannot be characterised as turnover taxes may be maintained in force. A turnover tax not based on the valued added to goods and services might therefore also be deemed under Article 33 to be incompatible with the system of VAT. In such a case, it would then be necessary to examine whether, notwithstanding the absence of that characteristic, the tax or duty affects the functioning of the common system of VAT in a manner comparable to VAT. But since it has been established in this case that the charge in question is not comparable to VAT on other grounds (lack of proportionality and no possibility of passing on the charge to the final consumer), the absence of a further essential criterion, namely application by reference to the value added, cannot but reinforce that conclusion, namely that the system of VAT is not compromised.
56 The KU I at issue in this case must therefore be deemed not to constitute a duty comparable to turnover tax for the purposes of Article 33 of the Sixth Directive. Instead it is a cost component capable of affecting the price of goods and serving to finance an autonomous body. Thus, even if the KU I affects transactions in that way, it does not do so in a manner contrary to Article 33 because it is not additional to VAT but is a specific levy which only takes the amount of input tax as a basis of assessment for accounting purposes.
57 The answer to the second question should therefore be that Article 33 of the Sixth Directive does not preclude the levying of the KU I.
II - Examination of Article 17(2) of the Sixth Directive (first question)
58 The national court also asks the Court, in its first question, to rule on the compatibility of the KU I with Article 17 of the Sixth Directive. That provision governs the deductions of input tax by virtue of which VAT applies only to the value added to goods and services. The Commission considers that there is an infringement of Article 17 because calculating the Kammerumlage on the basis of input transactions, which also determine the amount of input tax to be deducted, has the effect of reducing the amount of such deductions. The other parties to these proceedings take a different view of the matter. The Austrian and German Governments, for example, claim that the amount of input tax to be deducted is reduced - if at all - only for accounting purposes.
59 It does not seem necessary to test the KU I against the yardstick of Article 17 of the Sixth Directive as well. Once it has been established that, although affecting transactions, the KU I is compatible under Article 33 with the system of VAT, a further examination would render the analysis made on the basis of that provision superfluous. Article 33 serves as the demarcation line between taxes and duties which the Member States are still authorised to levy and the system of VAT. It is only on the basis of that provision, therefore, that it is appropriate to determine which taxes and duties may be maintained in force alongside VAT. Once it has been established that, on the basis of its objective characteristics, a duty is on the whole compatible with the common system of VAT, its compatibility can no longer be tested anew in regard to specific points. Thus, where a duty is lawful under Article 33 of the Sixth Directive, the specific (national) rules provided for in that connection apply, and not the provisions of the Sixth Directive as such. If it were otherwise, national competences would be curtailed and that would run counter to the principle of subsidiarity. Taxes and duties which are lawful under Article 33 may thus be viewed in isolation, that is to say independently of the Sixth Directive. Even an `infringement' of specific provisions of the Sixth Directive is therefore irrelevant because those provisions only apply to duties falling within the system of VAT. Accordingly, an examination on the basis of Article 17 of the Sixth Directive is possible only in the context of the system of VAT itself.
60 This also follows from an analysis of the Court's case-law on Article 17. In that connection, the provisions examined in the light of Article 17 concerned either derogations from the Sixth Directive, (29) or a modified basis of assessment for VAT, (30) or else different payment periods for VAT on domestic transactions and turnover tax on imports. (31) All those cases were therefore concerned with provisions governing the levying of VAT under the Sixth Directive. Even where a newly introduced tax was not an independent tax in relation to VAT, it was assessed in the light of Article 33 and not Article 17. (32)
61 Even if an examination is conducted into the question whether there has been an infringement of Article 17, the result is that a reduction in the amount of input tax can only be of an accounting nature. There is no direct link between the possibility of claiming a deduction in respect of input tax and the levying of the KU I. Thus, the KU I is also levied where the chamber member is unable to set off input transactions against deductions.
III - Infringement of Article 5 of the EC Treaty?
62 At the hearing, the Commission also stated that the KU I could be regarded as indirectly compromising the system of VAT, in breach of Article 5 of the Treaty. The judgments which it cited (33) in that connection relate, on the one hand, to direct taxation, and thus not to VAT, and on the other, to the issue of infringement of freedom of movement for workers or the prohibition of discrimination as a result of the levying of VAT or collection of charges. In such situations, that is to say where there has been a breach of a fundamental freedom or of the principle of non-discrimination, the Court has had recourse to Article 5 where the Member States retained competence. In the present case, however, neither infringement of a fundamental freedom nor breach of the principle of non-discrimination has been asserted. Nor does recourse to Article 5 appear necessary because there is a special demarcation rule, namely Article 33, and no gap in the legislation can be discerned.
63 Moreover, Article 5 chiefly concerns principles of a general nature; it is highly dubious whether provisions governing VAT form part of those principles. General principles for these purposes, as is apparent from the preamble to the Sixth Directive, (34) are rather those concerning free trade, the prevention of distortions of competition and the elimination of formalities on the crossing of frontiers. It is also a matter of creating a uniform basis for the Community's own resources. That basis would be curtailed if taxes and duties were separated from the system of VAT and levied separately from VAT or in addition to it. As none of those considerations applies to the KU I, it does not affect the free movement of goods and services from that point of view either.
Even if a different view were taken, it should be borne in mind that, because the amount levied is so small, the KU I cannot give rise to distortions, particularly since the legislature allows for much wider bands in the VAT rates themselves.
IV - Summary
64 In sum, it may be said that the KU I is not a levy which exhibits the essential characteristics of VAT. Nor does it jeopardise the system of VAT by affecting the movement of goods and services. The KU I is therefore lawful under Article 33.
65 The KU I is not intended either to circumvent VAT or to correct it, nor can it be essentially equated with it. Its sole purpose is to provide financing by chamber members for the lawful representation of their interests. The amount of input tax paid, which was adopted as an indicator of the ability of chamber members to make a financial contribution, was perhaps unfortunate but was no doubt chosen as the basis of assessment on purely practical grounds because that amount can readily be ascertained and checked from data available elsewhere.
V - Ancillary examination of the temporal effect of the judgment to be given
66 In the event of the Court deciding not to follow that proposal and arriving at the conclusion that the KU I is not compatible with the system of VAT, the question as to the limitation of the effects of the judgment in time, raised in the alternative by the Austrian Government, must be examined.
67 It is not for the Court to rule in principle on the general validity of the KU I. That is a matter for the national courts. The Court's task is merely to examine whether the method of calculating the KU I, namely by reference to input transactions, is compatible with the common system of VAT. If that question is answered in the negative, it does not mean that the KU I may no longer be levied. It would simply be necessary to find another method of calculation which would be compatible with the system of VAT. For that reason it would be useful to limit the temporal effects of the judgment since, as regards the past, there can be no question of reimbursements but merely of recalculating a Kammerumlage whose amount would not be significantly different.
68 Furthermore, even if the Court were to find there to have been an infringement, it would not have been readily discernible owing to the complexity of the problem. The situation was different in Dansk Denkavit and Poulsen Trading, where the Commission alerted the Danish Government, only a matter of weeks after the introduction of the duty in question, to the problems to which that duty could give rise under Article 33. In those circumstances, the Court did not consider it expedient to limit the effects of its judgment in time. (35) But since in the present case it would not have been so easy to discern the existence of a possible infringement of Article 33, the Court could limit the effects of its judgment in time.
C - Conclusion
69 Accordingly, I propose that the Court should reply as follows to the questions referred for a preliminary ruling:
Article 33 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes - Common system of VAT: uniform basis of assessment, does not prohibit a Member State from charging a levy assessed at a fixed rate on the basis of:
(a) the turnover tax payable on supplies or other services provided by other traders to the person subject to the levy for the purposes of his business, with the exception of that payable on sales of businesses, and
(b) the turnover tax payable by the person subject to the levy on imports of goods for the purposes of his business or on purchases effected within the Community for the purposes of his business.
That being so, there is no need to examine Article 17 of the Sixth Directive.
(1) - OJ 1977 L 145, p. 1.
(2) - Paragraph 57(7) and (8) of the HKG.
(3) - Pages 6 and 7 of the order for reference.
(4) - Page 8 of the order for reference.
(5) - OJ 1991 L 376, p. 1.
(6) - Judgment in Joined Cases 93/88 and 94/88 Wisselink and Others [1989] ECR 2671, paragraphs 10 and 12.
(7) - Judgments in Case 73/85 Kerrutt [1986] ECR 2219, paragraph 22, Wisselink and Others (cited above at footnote 6, paragraph 14), and Case C-109/90 Giant [1991] ECR I-1385, paragraph 9.
(8) - Judgments in Kerrutt (cited above at footnote 7, paragraph 22) and Wisselink and Others (cited above at footnote 6, paragraph 14).
(9) - Opinion in Case C-200/90 Dansk Denkavit and Poulson Trading [1992] ECR I-2217, especially at I-2235.
(10) - Judgment in Case 295/84 Rousseau Wilmot [1985] ECR 3759, paragraph 14.
(11) - Council Directive of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes (OJ, English Special Edition 1967, p. 14, hereinafter `the First VAT Directive').
(12) - Judgment in Rousseau Wilmot (cited above at footnote 10, paragraph 16).
(13) - Judgments in Cases C-347/90 Bozzi [1992] ECR I-2947, paragraphs 9 and 10, and Dansk Denkavit and Poulsen Trading (cited above at footnote 9, paragraph 11).
(14) - Judgments in Bozzi (cited above at footnote 13, paragraph 12), Case 252/86 Bergandi [1988] ECR 1343, paragraph 15, Wisselink and Others (cited above at footnote 6, paragraph 18), Giant (cited above at footnote 7, paragraphs 11 and 12), and Dansk Denkavit and Poulsen Trading (cited above at footnote 9, paragraph 11).
(15) - Judgments in Bergandi (cited above at footnote 14, paragraph 8) and Joined Cases C-370/95, C-371/95 and C-372/95 Careda and Others [1997] ECR I-3721, paragraph 15.
(16) - Judgment in Joined Cases 93/88 and 94/88, loc. cit., cited at footnote 6, paragraph 20.
(17) - Judgment in Giant (cited above at footnote 7, paragraph 14).
(18) - Judgment in Bozzi (cited above at footnote 13, paragraph 14).
(19) - Judgment in Case 295/84, cited at footnote 10, paragraph 16.
(20) - See footnote 19.
(21) - Article 4(1) of the Sixth Directive. The economic activities referred to there comprise, according to Article 4(2), all activities of producers, traders and persons supplying services, including mining and agricultural activities and activities of the professions. The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis is also considered an economic activity.
(22) - That is to say, the turnover tax paid by the chamber member in the price.
(23) - Judgment in Careda and Others, cited above at footnote 15, paragraph 15.
(24) - Judgment in Case 391/85 Commission v Belgium [1988] ECR 579, paragraph 23.
(25) - Judgments in Giant, cited above at footnote 7, paragraph 14; Bozzi, cited above at footnote 13, paragraph 16, and Case C-208/91 Beaulande [1992] ECR I-6709, paragraph 17.
(26) - Judgment in Case C-200/90, cited above at footnote 9, paragraph 14.
(27) - See footnote 26.
(28) - Judgment in Bozzi (cited above at footnote 13, paragraph 9); Case C-130/96 Solisnor Estaleiros Navais [1997] ECR I-0000, paragraph 14, and Case C-28/96 Fricarnes [1997] ECR I-0000, paragraph 37.
(29) - Judgment in Case 50/87 Commission v France [1988] ECR 4797.
(30) - Judgment in Case C-62/93 BP Soupergaz [1995] ECR I-1883.
(31) - Judgment in Case 42/83 Dansk Denkavit [1984] ECR 2649.
(32) - Judgment in Commission v Belgium, cited above at footnote 24.
(33) - Judgment in Case 44/84 Hurd [1986] ECR 29, Case 127/86 Ledoux [1988] ECR 3741 and Case C-47/93 Commission v Belgium [1994] ECR I-1593.
(34) - Second, third and fourth recitals in the preamble to the Sixth Directive and Opinion of the European Parliament on the proposal from the Commission of the European Communities to the Council for a Sixth Directive on the harmonisation of the legislation of Member States concerning turnover taxes - common system of value added tax: Uniform basis of assessment (OJ 1974 C 40, p. 34).
(35) - Judgment cited above in footnote 13, paragraphs 20 to 23.
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