MyTravel plc v Commissioners of Customs & Excise.
Date: 2005-10-06
13. In those circumstances, the VAT and Duties Tribunal, Manchester, decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1) In what, if any, circumstances is it open to a tour operator, which has completed its [VAT] return for a financial year using the actual cost method which was the only method laid down in national legislation implementing the Directive, subsequently to recalculate its VAT liability partly in accordance with the market value method described in paragraph 46 of [the judgment in Madgett and Baldwin ]?
(a) In particular may such a tour operator use the market value selectively in relation to different financial years, and, if so, in what circumstances?
(b) In a case where the tour operator sells some of the in-house components of its packages to the public on a non-package basis (in this case flights) but does not sell other in-house components of some of its packages to the public on a non-package basis (in this case cruises and campsites) can the tour operator:
– use the market value method in relation to those packages (being the vast majority) where it can determine the value of all its in- house supplies (in this case flights) by reference to sales it has made to the public on a non-package basis;
– in cases where the package includes in-house elements which the tour operator does not sell to the public on a non-package basis (in this case campsites and cruises), can the tour operator use the market value method to determine the value of those in-house supplies that it does sell to the public (in this case the flights) where it has not been possible to establish a market value for other parts of the package?
(c) Must the use of the combination of methods be (a) simpler or (b) significantly simpler or (c) not significantly more complicated?
(d) Must the market value method produce the same, or a very similar, VAT liability as does the cost-based method?
(2) Is it possible in the circumstances of the present case to identify that part of the in-house service relating to flights sold as part of a holiday package by taking either (a) the average cost of an airline seat increased by the average margin achieved by the tour operator on seat-only sales in the financial year in question or (b) the average revenue achieved by the tour operator on seat-only sales in the financial year in question?’
Consideration of the questions
The first question
16. When the Court, in the exercise of the jurisdiction conferred on it by Article 234 EC, interprets a provision of Community law, it defines the meaning and scope of that provision as it ought to have been understood and applied from its entry into force (see, to this effect, Case 61/79 Denkavit italiana  [1980] ECR 1205, paragraph 16; Case C-62/93 BP Supergas  [1995] ECR I-1883, paragraph 39; and Case C-453/00 Kühne & Heitz  [2004] ECR I-837, paragraph 21). The only circumstances where that is not the case are where, exceptionally, the Court limits the temporal effect of that interpretation in its judgment (see, to this effect, Denkavit italiana , cited above, paragraph 17; Case C-366/99 Griesmar  [2001] ECR I-9383, paragraph 74; and, for a recent application of those principles with regard to VAT, Joined Cases C-453/02 and C‑462/02 Linneweber and Akritidis  [2005] ECR I-1131, paragraphs 41 to 45).
17. A judgment delivered on a reference for a preliminary ruling is such as to have effects on legal relationships which arose before its delivery. It follows, in particular, that a rule of Community law so interpreted must be applied by an administrative body within the sphere of its competence even to legal relationships which arose and were formed before delivery of the Court’s judgment ruling on the question referred to it (see, to this effect, Kühne & Heitz , cited above, paragraph 22). In the absence of Community rules on applications for the repayment of taxes, it is for the domestic legal system of each Member State to lay down the conditions under which such applications may be made; those conditions must observe the principles of equivalence and effectiveness, that is to say, they must not be less favourable than those relating to similar claims founded on provisions of domestic law or framed so as to render virtually impossible the exercise of rights conferred by the Community legal order (see, to this effect, Case 199/82 San Giorgio  [1983] ECR 3595, paragraph 12, and Case C-147/01 Weber’s Wine World and Others  [2003] ECR I-11365, paragraph 103).
22. As the Advocate General has observed in point 51 of his Opinion, it is clear from paragraph 45 of the judgment in Madgett and Baldwin  that the reasons why the Court considered that the market value method had the advantage of simplicity did not relate to the particular circumstances of that case.
26. It must be stated that the fact that those two methods result in calculation of a similar tax liability seems, inasmuch as it appears between dashes in paragraph 46 of the judgment in Madgett and Baldwin , to be a superfluous factor.
30. It is to be remembered that the basic principle of VAT is that it is a consumption tax designed to be borne only by the final consumer. VAT is precisely proportional to the price of the goods and services and it is collected by taxable persons at each stage of the production or distribution process on behalf of the tax authorities, to which they are required to pay it. In accordance with the basic principle of that system and the detailed rules for its operation, the VAT to be levied by the tax authorities must be equal to the tax actually collected from the final consumer (see, to this effect, Case C-317/94 Elida Gibbs  [1996] ECR I‑5339, paragraphs 18 to 24). The conditions governing the application of the special scheme established by Article 26 of the Sixth Directive for travel agents and tour operators when the taxable person supplies to the traveller in return for a package price both services bought in from third parties and in-house services should not call into question that basic principle of the VAT system.
39. Moreover, as the Advocate General has observed in point 79 of his Opinion, although the purpose of Article 26 of the Sixth Directive is to adapt the rules applicable in respect of VAT to the specific nature of the work of a travel agent and thus reduce the practical difficulties which might hamper such work, the scheme established by that article, unlike that set up for small undertakings and farmers, is not intended to simplify the accounting requirements entailed by the normal VAT scheme. Thus, Article 26(3) provides that where transactions entrusted by the travel agent to other taxable persons are performed both inside and outside the European Community, only that part of the package price relating to transactions outside the Community is exempted. The implementation of such a provision may also require travel agents to make fairly technical apportionments of their package prices.
43. Under Article 234 EC, the Court has no power to apply rules of Community law to a particular case, but only to rule on the interpretation of the EC Treaty and of acts adopted by Community institutions (see, inter alia, Case 100/63 Van der Veen  [1964] ECR 565, at 572; Case 24/64 Dingemans  [1964] ECR 647, at 652; Joined Cases C-9/97 and C-118/97 Jokela and Pitkäranta [1998] ECR I-6267, paragraph 30; Case C-86/97 Trans-Ex-Import  [1999] ECR I-1041, paragraph 15; Case C‑61/98 De Haan  [1999] ECR I-5003, paragraph 29; and Case C-203/99 Veedfald  [2001] ECR I-3569, paragraph 31). Nevertheless, in the context of interpretation of Article 26 of the Sixth Directive and given the information already produced on the method of apportioning the package price where the taxable person supplies services bought in from third parties and in-house services, an answer should be given to the second question inasmuch as it is designed to ascertain whether it is possible to take average values as a basis for establishing market value.