CELEX: 61982CC0297
Language: en
Date: 1983-10-05
Title: Opinion of Mr Advocate General VerLoren van Themaat delivered on 5 October 1983. # De Samvirkende Danske Landboforeninger v Ministry of Fiscal Affairs. # Reference for a preliminary ruling: Østre Landsret - Denmark. # State land tax in respect of agricultural property - Validity under Community law. # Case 297/82.

OPINION OF MR ADVOCATE GENERAL
      VERLOREN VAN THEMAAT
      DELIVERED ON 5 OCTOBER 1983 (
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         )
      
         Mr President,
      
      
         Members of the Court,
      
      1. The question, its background and the problems which it raises
      1.1. Initial approach to the question submitted
      The Østre Landsret [Eastern Division of the High Court], in its order dated 19 November 1982, referred the following question to the Court for a preliminary ruling:
      “Must the EEC Treaty, in particular Part Two, Title II, ‘Agriculture’, especially Articles 39 and 40 and the measures adopted in pursuance of the Treaty, be interpreted as preventing a Member State from effecting a temporary increase in taxation based on the value of agricultural property when that increase is directly linked to a devaluation of the Member State's ‘green currency’ effected by the Council and when the purpose of the increase in taxation is to appropriate for the benefit of the Treasury a considerable portion of the increase in income which the devaluation brings to agricultural producers as part of a general plan for the economy which affects most sectors of the population?”
      At first sight, the answer to that question seems plain in the light of the Court's judgment of 10 March 1981 in Joined Cases 36 and 71/80, Irish Creamery Milk Suppliers Association v Ireland and Others, [1981] ECR 735. However, closer study of the various aspects of the question and the written and oral observations made in the course of the proceedings shows that the question submitted to the Court involves a problem of considerable scope. It is true that that problem also played a part in Irish Creamery, but in that case it was ultimately possible for it to remain in the background. I refer here to the problem of the division of powers between the Community and the Member States in relation to the make-up of the income of agricultural producers. In the Irish case it was possible for that problem to be left in the background, because the case was concerned with an indirect tax on domestic agricultural products for which the market price of the products was taken as the chargeable value. Consequently the Court was able to place the main emphasis in its judgment on the effects of the contested Irish tax on the formation of market prices and on market supply. I refer in that regard to paragraphs 15 to 20 of the decision and to paragraphs 3 and 4 of the operative part of the judgment.
      In this case, the plaintiffs, the three governments which have submitted observations and the Commission all agree that the land tax at issue has no effect on the formation of prices, the free movement of goods or the market supply of agricultural products but does affect the income of agricultural producers. The main emphasis in the reply to the question referred to the Court will therefore have to be put on the compatibility of national measures implementing an incomes policy such as those concerned here with the common agricultural policy in general and with the Council's decision to devalue the green Danish krone in particular. It is striking that only the Italian Government has suggested in its written and oral observations a reply based simply on the final sentence of paragraph 13 of the Court's judgment in the Irish case. That sentence reads as follows:
      “Moreover, the fixing of common prices within the framework of the common organization of markets does not serve to guarantee to agricultural producers a net price independently of any taxation imposed by the national authorities, and the very wording of Article 39 (1) (b) shows that the increase in individual earnings of persons engaged in agriculture is envisaged as being primarily the result of the structural measures described in subparagraph (a).”
      If that proposition is extended to all measures on the organization of the market in the framework of the common agricultural policy, including agrimonetary measures such as those concerned in this case, the Court's reply might in fact be based primarily upon it. As I shall explain in more detail, there are indeed strong legal arguments in favour of such a reply, which would also be consonant with economic reality. On the other hand, such a direct reply would raise certain problems in the political reality of the common agricultural policy, which I shall also examine. Before considering either point further, however, I think it advisable first to give a brief summary of the background to the reference.
      1.2. The background to the question
      According to the order of the Østre Landsret, the reference concerns the question whether Law No 541 of 28 December 1979 concerning the land tax payable to the State in respect of agricultural property is valid or whether it is incompatible with the Community provisions in question to which the reference relates. The Law provided for the introduction for a period of one year of a land tax in respect of agricultural property of 0.7% of the value of the land, determined in accordance with the Law on the Assessment of Real Property. As the land tax payable to the State could not be deducted from the taxable income, the land tax and ordinary income tax would according to the original draft law together yield an amount which, for the agricultural sector as a whole, would on average correspond to the increase in income resulting from the devaluation of the “green” Danish krone. During the debate in the Folketing [Danish Parliament] the percentage of 1.1. originally proposed was reduced to 0.7. At the same time, however, a proposal for a subsidy to agriculture of some DKR 200000000 was withdrawn, so that the total effect of the reduction in the proposed land tax was offset. The proceeds of the tax were paid into the Treasury and were not assigned to any specific purpose.
      Whilst that information is apparent from the order for reference, it further appeared during the proceedings in relation to the contested land tax that, in the assessment of property, account is taken neither of the value of the agricultural products produced on it nor of structural improvements in the agricultural property in question. It also became clear that whilst it was true that the land tax was collected from the owners of the land, 85% of agricultural land in Denmerk, according to the plaintiff's estimate, is worked not by tenant farmers but by farmers who themselves own the land. In so far as the land is not worked by the owners themselves, the land tax is then apparently passed on to the tenants in certain cases. Therefore it may be accepted that in general the tax affected the income of farmers.
      The order for reference shows that the land tax was temporarily introduced in the framework of a “long-term comprehensive programme” as part of the economic policy, described in a statement by the Danish Government on 3 December 1979. In that connection a series of measures was to be introduced, with the objective inter alia of checking the growth in income for all sectors of society and in order to ensure that the burdens thereby imposed upon the population were fairly apportioned. The measure concerned in this case was connected with the devaluation in the “green” rate of the Danish krone effected on 3 December 1979 at the request of the Danish Government by means of Council Regulation (EEC) No 2717/79 (Official Journal, L 309, p. 1). It was intended in particular to skim off roughly half of the expected increase in the net income in agriculture in 1980 (DKR 800000000) brought about by the devaluation. It is expressly stated in the recitals in the preamble to the Council regulation that the regulation was intended to avoid the introduction of monetary compensatory amounts in Denmark which would have been the normal result of the change in the central rate of the Danish krone within the European Monetary System with effect from 30 November 1979. Such an aim is naturally consonant with the principle of the free movement of goods which also applies to agricultural products.
      It is therefore established that the tax measure in question was adopted in the framework of an incomes policy of the Danish Government affecting all sectors of the population, which was in its turn connected with the devaluation of the Danish krone.
      1.3. Problems raised by the question referred to the Court
      It also seems to be established that the said change in the “green” rate of the Danish krone, contrary to the view adopted by the plaintiffs in the main action as appears from the order for reference, was by no means intended to increase the income of Danish farmers. Thus the Danish tax measure for the partial skimming off of that Increase in income could not itself be incompatible with the Council regulation referred to. Moreover, the order for reference states that it is common ground between the parties (in contrast to the position in Irish Creamery, I might add) “that the tax does not affect price formation, the free movement of goods or the supply of goods on the market and that it does not constitute a customs duty or a charge having equivalent effect”. Thus in this respect also there is no dispute.
      Unfortunately, however, I cannot conclude my opinion with such a straightforward conclusion.
      First of all, the accuracy of an answer to the question submitted to the Court based on such findings of fact would be doubtful, since the Council in determining the common agricultural policy in general and the “green rates” in particular would be bound also to take account of the consequences as regards incomes policy of the measures adopted for agricultural producers. It is generally known and the plaintiff in the main action correctly pointed out during the proceedings that the Council, at least in fixing “green rates” in the framework of the annual fixing of the agricultural prices policy, takes full account of the consequences which agrimonetary measures of that kind will have in relation to incomes policy.
      The formulation of the Court's reply to the question submitted will, if it is not to have unintended consequences for other cases, have to take account of that political reality. In so far as the view is taken that under Article 39 of the EEC Treaty the Council is obliged to take into account the effects of its decisions on agricultural incomes, it may be assumed that the Council by implication did so in this case. It will therefore also be necessary to devote further attention to the interpretation of Article 39 of the EEC Treaty.
      Then it is clear from the case-law of the Court (inter alia from paragraph 3 of the operative part of the judgment in Irish Creamery), that the Court does not consider that only national measures which interfere with the objectives of the common agricultural policy may be incompatible with Community law. On the contrary, the Court always takes the view that the decisive criterion for the acceptability of the national measures under examination is whether they affect the functioning of the common agricultural policy. In this case it is established that the aim and result of the contested tax measure was to neutralize roughly half of the effect on incomes policy of the measure adopted by the Council in relation to the “green rate” of the Danish krone. In Irish Creamery there was no comparable direct connection with a specific measure of Community law which affected agricultural incomes. Even the Commission expressly concedes in the final paragraph on page 14 of its written observations that strong arguments may be put forward for the view that the Danish tax measure is incompatible with the said decision on devaluation. The course which it then adopts on page 15 of its observations in order to conclude that the tax is compatible is correctly described by the Danish Government as “tortuous”. As well as being “tortuous”, it is also in my opinion unconvincing, because here the Commission without further discussion adopts the very proposition of the compatibility of national direct taxation with the common agricultural policy which in the last paragraph of page 14 of its observations it had rejected in relation to this very case. The proposition on page 15 that agrimonetary measures such as these are not intended to protect the interests of farmers (in this case, net prices) to any greater degree than the organization of the market itself and that those agrimonetary measures are merely intended to ensure the proper functioning of the actual organization of the market might be seen as an attempt to transfer the argument to the question of the compatibility of the Danish measure with the Community policy on markets and prices, which is not disputed by the plaintiff.
      At the end of its observations the Commission correctly observes that the Danish tax measure in this case must also be examined in the light of the common agricultural policy in relation to its structural effects. If it had been applied over a period of more than a year, it might certainly have led to changes in production structure which might have conflicted with the objectives of the common agricultural policy. The Court's reply will in my opinion also have to pay attention to that aspect.
      2. Reply to the question
      The first part of the Court's reply may be connected with the view shared by all the parties that the Member States' sovereignty as regards taxation is not in principle affected by the EEC Treaty. The exceptions to that principle referred to by the Commission are mainly related to indirect taxation and therefore not of decisive importance for this case. The judgments on which the plaintiff in the main action relies are no more important in that regard, in so far as they concern charges which related directly to specified products or services or to dealings in or the price formation of agricultural products (Cases 2/73, Geddo; 51/74, van der Hulst; 77/76, Cucchi and 177/78, McCarren). The judgments referred to in support by the plaintiff in the main action, in Cases 31/74, Galli, 154/77, Dechmann, 223/78, Grosoli and 5/79, Denkavit, are also of no relevance to this problem, as they concern non-fiscal measures for the organization of the market which do not directly interfere in the price mechanisms of the agricultural organizations of the market in question. As stated above, the parties are agreed that there is no question of that in this case. Also the judgments cited by the plaintiff, in Cases 39/72 Commission v Italy, 42/82, Commission v United Kingdom, 261/81, Rau, and 5/79, Buys, concerned matters which were quite different from that concerned here. Finally, the reference made by the plaintiff to the judgment in REWE-Zentrale (the “Cassis de Dijon” case) must fail because that judgment relates to the quite different problem of Articles 30 to 36 of the EEC Treaty, whilst this case involves an examination in the light of the common agricultural policy.
      The second part of the Court's reply might, as stated above, have regard to the principle expressed in the final sentence, cited above, of paragraph 13 of the Court's judgment in Irish Creamery, which has rightly been so frequently referred to in this case. Article 39 (1) (b) of the EEC Treaty in fact provides that one of the objectives of the common agricultural policy shall “thus” (that is to say by increasing agricultural productivity and therefore not by measures for the organization of the market) be “to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture”. The programme “Agriculture 1980” drawn up by the Commission of 18 December 1968 provided, as the Court is aware, for a large number of structural measures in pursuance of that objective, including income supplements for hill-farmers amongst others. A number of those structural measures have since been adopted. On the other hand for the actual policy for the organization of the market Article 39 provides for the objectives only of stabilizing markets, ensuring the availability of supplies and ensuring that supplies reach consumers at reasonable prices, but does not include a fair income for farmers (Article 39 (1) (c), (d) and (e)). The Italian Government too places great emphasis in its written observations (pages 4 and 5) on that argument derived from Article 39.
      Economic reality seems to me to confirm that those arguments derived from Article 39 are accurate in so far as it is generally known that the common organization of agricultural markets has resulted in very great variations — even in relation to the same products — in the income of farmers in the different Member States. Thus the organization of agricultural markets clearly is not able to ensure an equal development of agricultural incomes throughout the Community, in spite of efforts in that direction. The development of agricultural incomes is obviously mainly dependent upon the production structure, differences in climate and character of the soil and upon the general economic, social, fiscal and monetary situation in the various Member States. So far as the last-mentioned aspect is concerned, it has rightly been pointed out by various parties in this case that Article 39 (2) (c) expressly requires the Community institutions to take account of “the fact that in the Member States agriculture constitutes a sector closely linked with the economy as a whole”. I may add that under Article 104 of the EEC Treaty the Member States are primarly responsible for ensuring the equilibrium of their balance of payments, confidence in their currency, a high level of employment and a stable level of prices. As the Court will recognize, a comprehensive incomes policy such as that followed by the Danish Government in this case may constitute an important element in the pursuit of those aims. Thus there are in fact persuasive legal and economic grounds for arguing in favour of the position supported by the Italian Government that, for farmers, objectives relating to an incomes policy may best be served by the structural part of the common agricultural policy, but not by the actual market policy to which the agrimonetary policy also belongs. Incomes policy in general and also in relation to agriculture is otherwise a matter for the Member States. The answer to the question submitted to the Court in this case then becomes plain. If the policy for the organization of agricultural markets cannot pursue objectives relating to incomes policies, national measures relating to an incomes policy also cannot conflict with that part of the common agricultural policy.
      As stated above, however, political reality unfortunately departs to some extent from what the position should be on the basis of the legal and economic arguments referred to. (
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         ) In practice account will also be taken of considerations relating to incomes policy in formulating the actual market policy and subsequently in relation to agrimonetary measures. If the Court wishes to infer from the wording of Article 39, together with political practice, that the latter is not in fact an obligation for the Community institutions but is rather a power which is not expressly ruled out, the answer will have to take account of that possibility, The last sentence of paragraph 13 of the Court's judgment in Irish Creamery does not in fact in my opinion rule out such an interpretation, but might, if transposed to the Court's judgment in this case, be set out more clearly in that sense. Then it is also important in this case that the Council in this instance clearly did not make use of such a power in relation to the devaluation of the green Danish krone.
      Finally account may, as the Commission has suggested, be taken of the structural aspects of the Danish tax measure to which it has referred.
      3. Conclusion
      I propose on the basis of the foregoing considerations that the question submitted to the Court in this case should be answered as follows :
      “The EEC Treaty, in particular Part 2, Title II, especially Articles 39 to 41 and the measures adopted in pursuance of the Treaty, must be interpreted as not preventing a Member State from effecting a temporary increase in taxation based on the value of agricultural property, when that increase is directly linked to a devaluation of the Member State's “green currency” decided upon by the Council and when the purpose of the increase in taxation is to skim off for the benefit of the Treasury a considerable portion of the increase in income which the devaluation brings to agricultural producers as part of a general plan for the economy which affects most sectors of the population. That is certainly the case in so far as such a devaluation does not expressly pursue objectives of economic policy and on the further condition that such a tax measure neither leads to interference with the functioning of the machinery established by the common organization of the markets for the formation of Community prices and the regulation of supply and demand, nor — in particular in the case of application over a period of more than a year — to change in the production structure of agriculture which would lead to distortions on the markets for agricultural products or to interference with the functioning of Community structural measures.”
      By way of explanation of that proposed answer, I should merely like to make the following remarks in order to supplement my previous argument:
      
               (a)
            
            
               Unlike the Commission, I consider it essential to mention also the connection with a general incomes policy, because in the case of a tax measure restricted to agriculture the question might arise as to whether or not it is a measure which might cause distortion within the meaning of Articles 101 and 102 of the EEC Treaty. However, I do not regard the addition of that element from the question as strictly necessary, as according to the case-law of the Court those articles of the Treaty do not have direct effect.
            
         
               (b)
            
            
               I have added to the reservation put forward by the Commission that the tax measure must also not impede the functioning of Community measures of structural policy. I consider that addition to be important because, as stated above, there can be no doubt that Community measures of structural policy may in fact pursue objectives relating to incomes policy. In that connection a reference to Article 41 of the Treaty also seems to me to be desirable.
            
         
               (c)
            
            
               Finally it seems to me to be of some importance to observe that without these “skimming-off” tax measures the danger of impeding the functioning of the machinery for the common organization of the market would not be diminished but would in fact be much greater than upon the adoption of those measures. If net prices expressed in Danish kroner had remained the same or even increased to some extent, Danish farmers would have been able to export more products to other Member and non-member States. Conversely imports from other Member States would then have been at a competitive disadvantage, in so far as they would have had to compete with potentially lower Danish agricultural prices. As the Court will remember, in those dangers are to be found the reasons for the principle that monetary compensatory amounts should be introduced after a devaluation of a “green currency”, but the Council refrained from introducing them in this case at the request of the Danish Government in order to prevent further obstructions to intra-Community trade, which arise upon the introduction of monetary compensatory amounts because of their nature.
            
         (
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         )	Translated from the Dutch.
      (
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         )	In pp. 97 to 110 and 300 to 305 of his study which appeared in 1982 entitled “Aufbaujahrc der Europäischen Gemeinschaft” and which is well worth reading, the former Member of the Commission, Mr von der Grocben, sets out in detail how the ideas of the Commission, conforming to the Treaty in the sense mentioned, arc undermined in political practice. From the information which he provides, it is also clear that the Commission was aware at the outset that the use of intervention prices in order to achieve objectives of incomes policy might well endanger the prescribed objective of the stabilization of the market and might lead to over-production. The reference made by the Commission during the oral procedure to Article 41 of the Treaty in order to justify a different, interpretation of Article 39 must for that very reason fail, because that article relates precisely to measures of structural policy. It is equally impossible to base an argument in favour of a different interpretation on Article 40 (2) and (3), because it is clear from the reference to Article 39 in that article itself that it docs not amend Article 39.