KÖGÁZ rt and Others v Zala Megyei Közigazgatási Hivatal Vezetője (C-283/06) and OTP Garancia Biztosító rt v Vas Megyei Közigazgatási Hivatal (C-312/06).
Date: 2007-10-11
26. In order to interpret Article 33 of the Sixth Directive, it must be set against its legislative background. To that end it is useful to recall at the outset the objectives pursued by the introduction of a common system of value added tax (‘VAT’) (Case C‑475/03 Banca Popolare di Cremona  [2006] ECR I‑9373, paragraph 18).
27. According to the preamble to First Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes (OJ, English Special Edition 1967 (I), p. 14), harmonisation of legislation concerning turnover taxes should make it possible to establish a common market within which there is healthy competition and whose characteristics are similar to those of a domestic market, by eliminating tax differences liable to distort competition and hinder trade  (Joined Cases C‑338/97, C‑344/97 and C‑390/97 Pelzl and Others  [1999] ECR I‑3319, paragraph 14, and Banca Popolare di Cremona , paragraph 19).
28. A common system of VAT was introduced by Second Council Directive 67/228/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes – Structure and procedures for application of the common system of value added tax (OJ, English Special Edition 1967 (I), p. 16); and by the Sixth Directive ( Pelzl and Others , paragraph 15, and Banca Popolare di Cremona , paragraph 20).
29. The principle of the common system of VAT, under Article 2 of the First Directive 67/227, involves the application to goods and services, up to and including the retail trade stage, of a general tax on consumption exactly proportional to the price of the 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 (see, inter alia, Case 295/84 Rousseau Wilmot  [1985] ECR 3759, paragraph 15; Case 252/86 Bergandi  [1988] ECR 1343, paragraph 15; Joined Cases 93/88 and 94/88 Wisselink and Others  [1989] ECR 2671, paragraph 18; Pelzl and Others , paragraph 16; and Banca Popolare di Cremona , paragraph 21).
30. However, VAT is chargeable on each transaction only after deduction of the amount of VAT borne directly by the costs of the various price components of the goods and services. The procedure for deduction is so arranged in Article 17(2) of the Sixth Directive that taxable persons are authorised to deduct from the VAT for which they are liable the VAT which the goods or services have already borne and that that tax is charged, at each stage, only on the added value and is finally borne by the ultimate consumer ( Pelzl and Others , paragraph 17, and Banca Popolare di Cremona , paragraph 22).
31. In order to attain the objective of ensuring equal conditions of taxation for the same transaction, no matter in which Member State it is carried out, the common system of VAT was intended, according to the preamble to the Second Directive 67/228, to replace the turnover taxes in force in the various Member States (see, inter alia, Pelzl and Others , paragraph 18, and Banca Popolare di Cremona , paragraph 23).
32. Article 33 of the Sixth Directive accordingly permits a Member State to maintain or introduce taxes, duties or charges on the supply of goods, the provision of services or imports only if they cannot be characterised as turnover taxes (see, inter alia, Pelzl and Others , paragraph 19, and Banca Popolare di Cremona , paragraph 24).
33. However, Community law, as it now stands, does not contain any specific provision excluding or limiting the power of Member States to introduce taxes, duties or charges other than turnover taxes ( Wisselink and Others , paragraph 13, and Case C‑318/96 SPAR  [1998] ECR I‑785, paragraph 21). It is clear even from the terms of Article 33 of the Sixth Directive that Community law permits systems of taxation to exist concurrently with VAT ( Wisselink and Others , paragraph 14;  Case C‑109/90 Giant  [1991] ECR I‑1385, paragraph 9; and SPAR , paragraph 21; see also, to that effect, Case 73/85 Kerrutt  [1986] ECR 2219, paragraph 22).
34. In order to decide whether a tax, duty or charge can be characterised as a turnover tax within the meaning of Article 33 of the Sixth Directive, 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 ( Pelzl and Others , paragraph 20, and Banca Popolare di Cremona , paragraph 25; see also, to that effect, Case C‑437/97 EKW and Wein & Co.  [2000] ECR I‑1157, paragraph 20 and the case-law cited).
35. The Court has stated in this regard that 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 (Case C‑200/90 Dansk Denkavit and Poulsen Trading  [1992] ECR I‑2217, paragraphs 11 and 14; Case C‑308/01 GIL Insurance and Others  [2004] ECR I‑4777, paragraph 32; and Banca Popolare di Cremona , paragraph 26).
36. 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 (Case C‑130/96 Solisnor-Estaleiros Navais  [1997] ECR I‑5053, paragraphs 19 and 20; GIL Insurance and Others , paragraph 34; and Banca Popolare di Cremona , paragraph 27).
37. The Court has established the essential characteristics of VAT. Notwithstanding certain differences of wording, it appears from the case-law that 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 ( Banca Popolare di Cremona , paragraph 28).
39. In this case, as regards first the second essential characteristic of VAT, it must be observed that, 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 ( Banca Popolare di Cremona , paragraph 30), a tax such as the HIPA 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.
40. Since a tax such as the HIPA 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, such that the condition that this amount should be proportional to the price charged by the taxable person is not satisfied (see, to that effect, Pelzl and Others , paragraph 25).
42. In such cases, the basis of assessment for the HIPA is, ostensibly, determined by criteria other than the price paid by clients for the goods or services (see, by analogy, Case C‑347/90 Bozzi  [1992] ECR I‑2947, paragraph 15).
48. In the second place, it is admittedly correct to state that the existence of differences in the method for calculating the deduction of tax already paid cannot exclude a tax from the prohibition laid down in Article 33 of the Sixth Directive if such differences are in fact technical in nature and do not prevent that tax from operating in essentially the same way as VAT ( Banca Popolare di Cremona , paragraph 31).
49. It is also true, as KÖGÁZ and Others and Vodafone have pointed out, that in order for a tax to be characterised as a turnover tax, it is not necessary for the relevant national legislation expressly to provide that that tax may be passed on to the consumer (Joined Cases C‑370/95 to C‑372/95 Careda and Others  [1997] ECR I‑3721, paragraph 18) nor that that tax is indicated separately on the invoice issued to the client  (see, to that effect, Dansk Denkavit and Poulsen Trading , paragraphs 13 and 14, and Careda and Others , paragraphs 23 and 26).
50. On the other hand, a tax levied on production in such a way that it is not certain that it will ultimately be borne, like a tax on consumption such as VAT, by the final consumer, is likely to fall outside the scope of Article 33 of the Sixth Directive ( Banca Popolare di Cremona , paragraph 31).
51. In fact, 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 (see, to that effect, Case C‑317/94 Elida Gibbs  [1996] ECR I‑5339, paragraphs 19, 22 and 23; Case C‑427/98 Commission  v Germany  [2002] ECR I‑8315, paragraph 29; and Banca Popolare di Cremona , paragraph 32), that is not the case with a tax such as the HIPA.
54. Moreover, as the Hungarian Government pointed out, since the HIPA is calculated on the basis of periodic turnover, a taxable person cannot ascertain exactly either the amount of the HIPA already included in the purchase price of goods or services (see, by analogy, Banca Popolare di Cremona , paragraph 33) or what percentage of the HIPA may be being passed on to the client when each sale of goods is effected or each service supplied (see, to that effect, Giant , paragraph 14, and Pelzl and Others , paragraph 25).
55. In addition, as the Hungarian Government also observes, if, in order to pass on the burden of the tax payable in connection with his own business to the following stage in the distribution or consumption process, a taxable person included that burden in his sale price, the basis of assessment for the HIPA would then include the tax itself, with the result that the HIPA would be calculated on an amount based on a sale price incorporating, in anticipation, the tax to be paid (see, by analogy, Banca Popolare di Cremona , paragraph 33).
56. In any event, even on the assumption that a taxable person liable to the HIPA selling to final consumers will take account, in fixing his price, of the amount of the charge included in his general expenses, not all taxable persons have the possibility of thus passing on, or passing on in full, the burden of the tax (see, by analogy, Pelzl and Others , paragraph 24, and Banca Popolare di Cremona , paragraph 34).
58. On that point, a tax such as the HIPA differs from a levy such as that which gave rise to the judgment in Dansk Denkavit and Poulsen Trading , which was declared to be incompatible with the common system of VAT in paragraph 14 of that judgment, inasmuch as that levy was intended to be passed on to the final consumer, as is apparent from paragraph 3 of that judgment. That levy was in addition charged on the same basis of assessment as that used for VAT and was charged alongside VAT, as is apparent from paragraph 8 of that judgment.
59. Consequently, even on the assumption that, as KÖGÁZ and Others and Vodafone have claimed, the HIPA is generally applied in the municipalities which have introduced it, that would not suffice to classify a tax such as the HIPA as a turnover tax within the meaning of Article 33 of the Sixth Directive, inasmuch as it is not levied on transactions in a manner comparable to VAT (see, to that effect, Pelzl and Others , paragraph 27).