4.

Let us begin at the beginning. The first two directives dealing with fiscal matters (67/227/EEC and 67/228/EEC of 11 April 1967, Official Journal, English Special Edition 1967, p. 14 et seq.) were adopted to harmonize the national legislation concerning turnover taxes. It was thus intended to eliminate factors which, like the levies in question, were capable of either falsifying the conditions of competition or impeding the free movement of goods and services in the Common Market. The Member States were thus required to enact legislation to replace, within a specified time-limit, their systems of turnover taxes by a common system of value-added tax (Article 1 of the First Directive). Moreover, from the entry into force of the legislation adopted for that purpose, the Member States could no longer maintain or introduce any measure providing for flatrate equalization of turnover taxes on importation or exportation in intra-Community trade. It can therefore be said that once the two directives had been implemented by the original six Member States (1 January 1973), a Community turnover tax had come into existence, namely VAT. That represented a considerable progress. While it is true that the Member States retained (and still retain) the power to determine many aspects of the rules governing value-added tax, it is also true that the turnover taxes which they levy have to a large extent lost their character of national taxation and become part of a system which, if not entirely uniform, is certainly ‘common’ (see the Opinion of Advocate General Rozès in Case 15/82, Schul v Inspecteur der Invoerrechten en Accijnzen [1982] ECR 1437, at p. 1441). What does that system involve? Article 2 of the First Directive states that it involves ‘the application to goods and services of a general tax on consumption exactly proportional to the price of goods and services, whatever the number of transactions which take place in the production and distribution process before the stage at which tax is charged’. As well as establishing that machinery, the second directive also lays down definitions and rules intended to ensure uniform implementation of the system by the national legislatures. For example, Article 2 provides, that the following are to be subject to value-added tax: ‘(a) The supply of goods and the provision of services within the territory of the country by a taxable person against payment; (b) the importation of goods’. ‘Taxable person’ means ‘any person who independently and habitually engages in transactions pertaining to the activities of producers, traders or persons providing services, whether or not for gain’ (Article 4). Finally, the basis of assessment is the consideration for the supply of the goods or the provision of the services (Article 8). It is already possible from that outline to identify the particular characteristics which distinguish value-added tax from other forms of indirect taxation. It is: (a) A general tax because it covers all stages of the production and distribution of goods and the provision of services (see Article 2 of the First Directive) ; (b) A neutral tax because the tax burden is the same for identical or similar products. Neutrality also means that the tax is not part of the cost of the goods. That makes it possible to calculate its exact effect at all stages of the production and distribution chain and thus facilitates the verifications carried out on importation and exportation (see the eighth recital in the preamble to the First Directive) ; (c) A transparent tax because, since it is distinct from the cost of the product, it permits traders to determine the amount of the tax burden at any time and to establish the true price of the product in the light of competition (see the abovementioned eighth recital). Let us now take a step forward. In May 1977, that is to say ten years after its first intervention, the Council adopted the Sixth Directive, which may be regarded as the codified version of the Community rules on value-added tax. The experience of those years showed clearly that the replacement of national turnover taxes by a common system stimulated the process of economic and commercial integration between the Member States. It was therefore necessary to continue in the same direction and to make the initial rules governing that matter as precise and as complete as possible (third recital). From that point of view particular importance attaches to Article 33 of the Sixth Directive, which is intended to clarify situations (such as the one in this case) in which legislative power is, in regard to certain sectors, divided between institutions of the Community and the national authorities. In particular, the Community legislature made it clear that the existence of a common system of turnover tax does not prevent the Member States from maintaining or introducing other forms of indirect taxation such as, for example, stamp duties or taxes on betting and gambling. They may not, however, maintain or introduce charges which can be characterized as turnover taxes, because the rules relating to such charges would ultimately affect a matter which now falls within the exclusive competence of the Community. That is the significance of the prohibition contained in Article 33; the legislature wished to avoid a situation in which goods and services were taxed twice on the same basis, once under the common system and once under the national system, with consequences which are both inequitable and of such a nature as to distort competition within the common market.