Commission of the European Communities v French Republic.
Date: 2001-05-03
21 According to Article 28(2)(a) of the Sixth Directive, the maintenance of reduced rates of VAT lower than the minimum rate laid down in Article 12(3)(a) of that directive must be consistent with Community legislation. It follows that the introduction and maintenance of a rate of 2.1% for reimbursable medicinal products, whereas the supply of non-reimbursable medicinal products is subject to a rate of 5.5%, are permissible only in so far as they are consistent with the principle of fiscal neutrality inherent in the common system of VAT and in compliance with which the Member States are required to transpose the Sixth Directive (see, to that effect, Case C-216/97 Gregg [1999] ECR I-4947, paragraph 19).
22 That principle in particular precludes treating similar goods, which are thus in competition with each other, differently for VAT purposes (see, to this effect, the eighth recital in the preamble to the First Directive and paragraphs 21 and 27 of the judgment in Case C-283/95 Fischer [1998] ECR I-3369). It follows that those products must be subject to a uniform rate. The principle of fiscal neutrality for that reason also includes the other two principles invoked by the Commission, namely the principles of VAT uniformity and of elimination of distortion in competition.
23 The Commission submits that all medicinal products are defined by curative or preventive properties and are, for that reason, similar products. The classification of medicinal products into two categories according to whether or not they are reimbursable does not refer to intrinsically different products, which would be the only argument capable of justifying different rates of VAT. This classification in itself distorts competition in favour of reimbursable medicinal products, and that distortion is further aggravated by the lower tax rate applied to the latter.
27 Next, it must be noted that the effect of this classification is that the two categories of medicinal products are not similar products in competition with each other. Once included on the list of reimbursable products, a medicinal product will, vis-à-vis a non-reimbursable medicinal product, have a decisive advantage for the final consumer. This is why the consumer, as the Advocate General notes in point 66 of his Opinion, seeks in preference medicinal products coming within the category of those that are reimbursable, and consequently it is not the lower rate of VAT which provides the reason for his decision to purchase. The reduced rate of VAT on reimbursable medicinal products does not have the effect of favouring the sale of such products over the sale of medicinal products that are not reimbursable. The two categories of medicinal products are thus not in a situation of competition in which the difference in the rates of VAT could be relevant.
30 It must consequently be held that the Commission has failed to establish that, by introducing and maintaining in force different rates of VAT for reimbursable medicinal products and for non-reimbursable medicinal products, the French Republic infringed the principle of fiscal neutrality inherent in the common system of VAT.
The purpose served by the reduced rate of VAT