Keywords

Summary



Keywords

1. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Prohibition on the levying of other domestic taxes which can be characterised as turnover taxes

(Council Directive 77/388, Art. 33(1))

2. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Prohibition on the levying of other domestic taxes which can be characterised as turnover taxes

(Council Directive 77/388, Arts 17(2) and 33(1))

Summary

1. In order to decide whether a tax, duty or charge can be characterised as a turnover tax within the meaning of Article 33 of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directive 91/680, it is necessary, in particular, to determine whether it has the effect of jeopardising the functioning of the common system of VAT by being levied on the movement of goods and services and on commercial transactions in a way comparable to VAT.

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 if they exhibit the essential characteristics of VAT, even if they are not identical to it in every way.

Article 33 of the Sixth Directive does not, on the other hand, preclude the maintenance or introduction of a tax which does not display one of the essential characteristics of VAT.

There are four such characteristics: VAT applies generally to transactions relating to goods or services; it is proportional to the price charged by the taxable person in return for the goods and services which he has supplied; that tax is charged at each stage of the production and distribution process, including that of retail sale, irrespective of the number of transactions which have previously taken place; the amounts paid during the preceding stages of the production and distribution process are deducted from the VAT payable by a taxable person, with the result that that tax applies, at any given stage, only to the value added at that stage and the final burden of that tax rests ultimately on the consumer.

(see paras 34-37)

2. Article 33(1) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directive 91/680, must be interpreted as not precluding the maintenance of a charge to tax with characteristics such as those of the Hungarian local business tax. Such a tax differs from VAT in such a way that it cannot be deemed to be a tax which can be characterised as a turnover tax for the purposes of Article 33(1) of the Sixth Directive.

Whereas VAT is levied on individual transactions at the marketing stage and its amount is proportional to the price of the goods or services supplied, a tax such as the one at issue here is, by contrast, based on the difference, calculated under accounting legislation, between the turnover linked to the goods sold or the services supplied during a fiscal period, on the one hand, and the purchase price of the goods sold, the value of the intermediary services and the costs of the materials, on the other. Since such a tax is therefore calculated on the basis of periodic turnover, it is not possible to determine the precise amount of that charge which may be being passed on to the client when each sale is effected or each service supplied, with the result that such a tax cannot be regarded as proportional to the price of the goods or services supplied.

Next, whereas under Article 17(2) of the Sixth Directive the taxable person is entitled to deduct from the VAT which he is liable to pay the VAT due or paid in respect of any goods or services used for the purposes of his taxed transactions, in the case of the general scheme of the tax at issue here, the deduction, which is made at the stage when the basis of assessment of the tax is established, is limited to the purchase price of the goods sold, the value of the intermediary services and the costs of the materials. The basis of assessment for the tax at issue here is therefore not limited to the value added at a particular stage in the production and distribution process, but concerns the overall turnover of the taxable person, minus only the said elements.

Whereas, through the mechanism of the deduction of tax laid down by Articles 17 to 20 of the Sixth Directive, VAT taxes only the final consumer and is completely neutral as regards the taxable persons involved in the production and distribution process prior to the stage of final taxation, regardless of the number of transactions involved, that is not the case with a tax such as the one at issue here. There is no certainty that the burden of that tax is ultimately passed on to the final consumer in a way characteristic of a tax on consumption such as VAT.

(see paras 39-40, 44-45, 47, 51-52, 60-61, operative part)