1 IN ACCORDANCE WITH A DECISION OF 5 NOVEMBER 1979 , NOTIFICATION OF WHICH WAS RECEIVED AT THE COURT ON 23 OCTOBER 1980 , THE COMMISSIONERS FOR THE SPECIAL PURPOSES OF THE UNITED KINGDOM INCOME TAX ACTS ( HEREINAFTER REFERRED TO AS THE ' ' SPECIAL COMMISSIONERS ' ' ) REFERRED TO THE COURT FOR A PRELIMINARY RULING UNDER ARTICLE 177 OF THE EEC TREATY AND ARTICLE 30 OF THE TREATY ESTABLISHING A SINGLE COUNCIL AND A SINGLE COMMISSION OF THE EUROPEAN COMMUNITIES A QUESTION ON THE INTERPRETATION OF SEVERAL PROVISIONS OF COMMUNITY LAW , AND IN PARTICULAR ARTICLE 142 OF THE EEC TREATY AND ARTICLE 8 OF THE PROTOCOL ON THE PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES ANNEXED TO THE TREATY ESTABLISHING A SINGLE COUNCIL AND A SINGLE COMMISSION OF THE EUROPEAN COMMUNITIES IN ORDER TO DETERMINE THE COMPATIBILITY WITH COMMUNITY LAW OF THE TAXATION BY NATIONAL REVENUE AUTHORITIES OF TRAVEL AND SUBSISTENCE ALLOWANCES PAID BY THE EUROPEAN PARLIAMENT TO ITS MEMBERS .
2 THAT QUESTION WAS RAISED IN THE COURSE OF APPEAL PROCEEDINGS BROUGHT BY THE RT HON . LORD BRUCE OF DONINGTON , WHO WAS DESIGNATED AS A MEMBER OF THE EUROPEAN PARLIAMENT BY THE HOUSE OF LORDS OF THE UNITED KINGDOM FROM 30 JULY 1975 UNTIL THE ELECTION OF THE PARLIAMENT BY DIRECT UNIVERSAL SUFFRAGE , AGAINST ONE OF HER MAJESTY ' S INSPECTORS OF TAXES , WHO ARE RESPONSIBLE FOR MAKING ASSESSMENTS TO INCOME TAX IN THE UNITED KINGDOM . THE APPEAL WAS BROUGHT AGAINST AN ASSESSMENT TO INCOME TAX MADE IN RESPECT OF TRAVEL AND SUBSISTENCE ALLOWANCES PAID BY THE EUROPEAN PARLIAMENT TO LORD BRUCE DURING THE FISCAL YEAR 1975/76 TO COVER THE EXPENSES RESULTING FROM HIS ATTENDANCE AT MEETINGS AND PARTICIPATION IN THE WORK OF THE PARLIAMENT AND ITS ORGANS AND FOR OTHER JOURNEYS MADE IN THE INTERESTS OF THE PARLIAMENT .
3 THE PARLIAMENT , IN PURSUANCE OF RULES ADOPTED FOR THIS PURPOSE , PAID TO ITS MEMBERS TRAVEL AND SUBSISTENCE ALLOWANCES WHICH WERE CALCULATED APPLYING A KILOMETRE RATE AND A FIXED-RATE DAILY ALLOWANCE AND WERE INCLUDED IN THE COMMUNITY BUDGET . UNDER THE RULES THE MEMBERS OF THE PARLIAMENT WERE NOT BOUND TO PROVE IN RELATION TO THOSE ALLOWANCES THE ACTUAL AMOUNT OF THEIR EXPENDITURE .
4 THE REFERENCE TO THE COURT INDICATES THAT HER MAJESTY ' S INSPECTOR OF TAXES TOOK THE VIEW THAT THE ALLOWANCES WERE EMOLUMENTS FROM AN OFFICE HELD BY LORD BRUCE WITHIN THE MEANING OF THE PROVISIONS OF THE UNITED KINGDOM INCOME AND CORPORATION TAXES ACT 1970 AND ISSUED AN ASSESSMENT CLAIMING THAT LORD BRUCE WAS LIABLE TO INCOME TAX ON THE ALLOWANCES , SUBJECT TO A DEDUCTION IN RESPECT OF EXPENSES INCURRED ' ' WHOLLY , EXCLUSIVELY AND NECESSARILY IN PERFORMANCE OF THE SAID DUTIES ' ' WHICH LORD BRUCE WAS REQUIRED TO SHOW UNDER SECTION 189 ( 1 ) OF THE INCOME AND CORPORATION TAX ACT 1970 .
5 THE SPECIAL COMMISSIONERS , HEARING AN APPEAL AGAINST THAT ASSESSMENT , DECIDED THAT UNDER THE PROVISIONS OF NATIONAL LAW THE ALLOWANCES IN QUESTION WERE IN PRINCIPLE LIABLE TO INCOME TAX . HOWEVER , THEY TOOK THE VIEW THAT THE OUTCOME OF THE APPEAL DEPENDED ON WHETHER THE EMOLUMENTS WERE EXEMPT FROM NATIONAL INCOME TAX BY VIRTUE OF COMMUNITY LAW .
6 CONSEQUENTLY , THE SPECIAL COMMISSIONERS REFERRED A QUESTION OF INTERPRETATION OF COMMUNITY LAW TO THE COURT FOR A PRELIMINARY RULING . IN SUBSTANCE THE QUESTION ASKS WHETHER THERE IS ANY RULE OF COMMUNITY LAW PRECLUDING MEMBER STATES FROM TAXING ANY PART OF THE TRAVEL AND SUBSISTENCE EXPENSES AND ALLOWANCES PAID FROM COMMUNITY FUNDS TO MEMBERS OF THE EUROPEAN PARLIAMENT .
7 THE UNITED KINGDOM GOVERNMENT , THE FRENCH GOVERNMENT AND THE COMMISSION MAINTAINED THAT IN THE ABSENCE OF EXPRESS PROVISIONS IN THE PROTOCOL ON THE PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES CONFERRING EXEMPTION FROM NATIONAL TAXES , THERE IS NOTHING WHICH PRECLUDES A MEMBER STATE FROM CHARGING SUCH PAYMENTS BY THE PARLIAMENT TO NATIONAL TAX , SINCE A TAX EXEMPTION CANNOT BE IMPLIED .
8 LORD BRUCE TAKES THE VIEW THAT BY VIRTUE OF THE PRINCIPLE THAT PARLIAMENT IS SOVEREIGN IN MATTERS OF PROCEDURE AND IN ITS INTERNAL RELATIONS WITH ITS MEMBERS , A PRINCIPLE ENSHRINED IN THE FIRST PARAGRAPH OF ARTICLE 142 OF THE EEC TREATY , AND BY VIRTUE OF THE FIRST PARAGRAPH OF ARTICLE 8 OF THE PROTOCOL ON THE PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES WHICH GUARANTEES THE FREE MOVEMENT OF MEMBERS OF THE ASSEMBLY , THE AUTHORITIES OF THE MEMBER STATES ARE PRECLUDED FROM REVIEWING THE PERFORMANCE BY A MEMBER OF THE EUROPEAN PARLIAMENT OF HIS DUTIES , HIS TRAVEL IN CONNECTION WITH THOSE DUTIES AND HIS RELATED EXPENDITURE . THE MEMBER STATES MAY NOT THEREFORE TAX PAYMENTS MADE BY THE PARLIAMENT IN RESPECT THEREOF . IT WOULD , MOREOVER , BE ILLOGICAL IF INCOME TAX WERE CHARGED ON THESE ALLOWANCES WHILST THOSE PAID TO OFFICIALS AND SERVANTS OF THE COMMUNITIES , INCLUDING THOSE EMPLOYED BY THE PARLIAMENT , ARE EXEMPT PURSUANT TO ARTICLE 13 OF THE PROTOCOL ON THE PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES AND ARTICLE 3 ( 1 ) OF REGULATION NO 260/68 OF THE COUNCIL OF 29 FEBRUARY 1968 LAYING DOWN THE CONDITIONS AND PROCEDURE FOR APPLYING THE TAX FOR THE BENEFIT OF THE EUROPEAN COMMUNITIES ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1968 ( I ), P . 37 ).
9 IT IS CLEAR FROM THE REPLIES GIVEN BY THE EUROPEAN PARLIAMENT TO THE QUESTIONS ASKED BY THE COURT THAT THE PARLIAMENT ' S VIEW IS THAT BY VIRTUE OF THE PRINCIPLE OF THE INDEPENDENCE OF THE EUROPEAN PARLIAMENT WITH REGARD TO PROVISIONS CONCERNING THE INTERNAL FUNCTIONING OF THE INSTITUTION EMBODIED IN THE FIRST PARAGRAPH OF ARTICLE 142 OF THE EEC TREATY , THE FIRST PARAGRAPH OF ARTICLE 112 OF THE EAEC TREATY AND THE FIRST PARAGRAPH OF ARTICLE 25 OF THE ECSC TREATY , AN INDEPENDENCE WHICH THE MEMBER STATES ARE BOUND TO RESPECT UNDER ARTICLE 5 OF THE EEC TREATY , THE NATIONAL TAX PROVISIONS DO NOT APPLY TO COMMUNITY PAYMENTS WHICH ARE NECESSARY FOR THE FUNCTIONING OF THE INSTITUTION . THAT ALSO FOLLOWS FROM THE REQUIREMENT THAT THE PARLIAMENT MUST AVOID TREATING DIFFERENTLY MEMBERS COMING FROM DIFFERENT MEMBER STATES .
10 IN REPLY TO THE QUESTION PUT BY THE NATIONAL TRIBUNAL , IT MUST FIRST BE OBSERVED , AS THE UNITED KINGDOM GOVERNMENT , THE FRENCH GOVERNMENT AND THE COMMISSION RIGHTLY POINTED OUT DURING THE PROCEDURE BEFORE THE COURT , THAT NO PROVISION OF COMMUNITY LAW CONFERS EXEMPTION FROM NATIONAL TAXES ON MEMBERS OF THE EUROPEAN PARLIAMENT .
11 ARTICLE 13 OF THE PROTOCOL ON THE PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES PROVIDES THAT OFFICIALS AND OTHER SERVANTS OF THE COMMUNITIES ' ' SHALL BE EXEMPT FROM NATIONAL TAXES ON SALARIES , WAGES AND EMOLUMENTS PAID BY THE COMMUNITIES ' ' . THAT PROVISION MUST BE READ IN THE LIGHT OF THE FIRST PARAGRAPH OF THAT ARTICLE WHICH STATES THAT THOSE OFFICIALS ' ' SHALL BE LIABLE TO A TAX FOR THE BENEFIT OF THE COMMUNITIES ON SALARIES , WAGES AND EMOLUMENTS PAID TO THEM BY THE COMMUNITIES ' ' . ARTICLE 13 ALSO APPLIES , BY VIRTUE OF ARTICLES 20 AND 21 OF THAT PROTOCOL , TO THE MEMBERS OF THE COMMISSION AND TO THE JUDGES , ADVOCATES GENERAL AND REGISTRAR OF THE COURT , BY VIRTUE OF ARTICLE 22 OF THE PROTOCOL , TO MEMBERS OF THE ORGANS AND STAFF OF THE EUROPEAN INVESTMENT BANK AND TO THE REPRESENTATIVES OF THE MEMBER STATES TAKING PART IN ITS ACTIVITIES AND , BY VIRTUE OF ARTICLE 206 ( 1 ) OF THE EEC TREATY , ARTICLE 180 ( 10 ) OF THE EAEC TREATY AND ARTICLE 78E ( 1 ) OF THE ECSC TREATY , TO THE MEMBERS OF THE COURT OF AUDITORS .
12 NO COMPARABLE PROVISION APPEARS AMONGST THE PRIVILEGES AND IMMUNITIES GRANTED TO MEMBERS OF THE ASSEMBLY IN CHAPTER III OF THE ABOVEMENTIONED PROTOCOL . THE MEMBERS OF THE EUROPEAN PARLIAMENT , WHO AT THE TIME WHEN THE RELEVANT EVENTS OCCURRED WERE DESIGNATED BY THE NATIONAL PARLIAMENTS , RECEIVED NO REMUNERATION FROM THE EUROPEAN PARLIAMENT FOR THEIR ACTIVITIES IN THE EXERCISE OF THEIR MANDATES . AS FAR AS CONCERNS ANY REMUNERATION FOR THEIR ACTIVITIES IN THE EXERCISE OF THEIR MANDATES , THEIR FINANCIAL ARRANGEMENTS WERE , APART FROM THE ALLOWANCES IN QUESTION HERE , GOVERNED BY NATIONAL LAW ALONE . THE COMMUNITY TAX PROVIDED FOR BY THE FIRST PARAGRAPH OF ARTICLE 13 OF THE ABOVEMENTIONED PROTOCOL AND FIXED BY REGULATION NO 260/80 OF THE COUNCIL DID NOT APPLY TO THEM .
13 IN THE ABSENCE OF ANY PROVISION CONFERRING A TAX EXEMPTION ON MEMBERS OF THE EUROPEAN PARLIAMENT , THE MEMBER STATES ARE , IN THE PRESENT STATE OF COMMUNITY LAW , ENTITLED TO TAX ANY EMOLUMENTS DERIVED BY THE MEMBERS OF THE PARLIAMENT FROM THE EXERCISE OF THEIR MANDATE . CONSEQUENTLY , THE VIEW CANNOT BE TAKEN THAT ANY PAYMENT MADE BY THE PARLIAMENT TO ITS MEMBERS FROM COMMUNITY FUNDS IS IPSO FACTO EXEMPT FROM NATIONAL TAXES .
14 COMMUNITY LAW LAYS DOWN CERTAIN LIMITS , HOWEVER , WHICH THE MEMBER STATES MUST OBSERVE IN THE ENACTMENT OF TAXATION LAWS APPLICABLE TO MEMBERS OF THE PARLIAMENT . THOSE LIMITS ARISE IN PARTICULAR FROM ARTICLE 5 OF THE EEC TREATY WHICH PROVIDES THAT THE MEMBER STATES ARE BOUND TO FACILITATE THE ACHIEVEMENT OF THE COMMUNITIES ' TASKS AND ABSTAIN FROM ANY MEASURE WHICH COULD JEOPARDIZE THE ATTAINMENT OF THE OBJECTIVES OF THE TREATY . THAT OBLIGATION INCLUDES THE DUTY NOT TO TAKE MEASURES WHICH ARE LIKELY TO INTERFERE WITH THE INTERNAL FUNCTIONING OF THE INSTITUTIONS OF THE COMMUNITY . FURTHERMORE , THE EFFECT OF THE FIRST PARAGRAPH OF ARTICLE 8 OF THE PROTOCOL ON THE PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES IS TO PROHIBIT MEMBER STATES FROM IMPOSING INTER ALIA BY THEIR PRACTICES IN MATTERS OF TAXATION ADMINISTRATIVE RESTRICTIONS ON THE FREE MOVEMENT OF MEMBERS OF THE PARLIAMENT .
15 IN THIS REGARD IT MUST FIRST BE OBSERVED THAT THE REIMBURSEMENT OF TRAVEL AND SUBSISTENCE EXPENSES INCURRED BY MEMBERS OF THE PARLIAMENT IN THE EXERCISE OF THEIR MANDATES IS A MEASURE OF INTERNAL ORGANIZATION INTENDED TO ENSURE THE PROPER FUNCTIONING OF THE INSTITUTION . IT IS ESSENTIAL THAT EACH MEMBER OF THE PARLIAMENT SHOULD AT ALL TIMES BE ABLE TO ATTEND ALL THE MEETINGS AND PARTICIPATE IN ALL THE ACTIVITIES OF THE PARLIAMENT AND ITS ORGANS WITHOUT SUFFERING FINANCIAL LOSS , REGARDLESS OF THE MEMBER ' S PLACE OF RESIDENCE , THE LOCATION OF HIS CONSTITUENCY AND HIS AVAILABLE FINANCIAL MEANS . RULES SUCH AS THOSE ADOPTED BY THE PARLIAMENT GOVERNING SUBSISTENCE AND TRAVEL EXPENSES AND ALLOWANCES THEREFORE FALL WITHIN THE SCOPE OF MEASURES OF INTERNAL ORGANIZATION WHOSE ADOPTION IS A MATTER FOR THE PARLIAMENT PURSUANT TO THE FIRST PARAGRAPH OF ARTICLE 142 OF THE EEC TREATY , THE FIRST PARAGRAPH OF ARTICLE 112 OF THE EAEC TREATY AND THE FIRST PARAGRAPH OF ARTICLE 25 OF THE ECSC TREATY .
16 IF AND SO FAR AS A NATIONAL TAX ON THE ALLOWANCES RECEIVED BY MEMBERS OF THE PARLIAMENT WERE TO BE CHARGED ON THE WHOLE OF THE SUMS RECEIVED , INCLUDING THE PART WHICH IS IN FACT NEEDED IN ORDER TO COVER THEIR ACTUAL EXPENDITURE , IT WOULD FORM A FINANCIAL OBSTACLE TO THE MOVEMENT OF THE MEMBERS OF THE PARLIAMENT WHO WOULD THEN BE OBLIGED TO BEAR PERSONALLY A PROPORTION OF THEIR TRAVELLING EXPENSES . IT SHOULD BE MENTIONED THAT THE UNITED KINGDOM GOVERNMENT DID NOT MAINTAIN THAT IT WAS POSSIBLE TO TAX THE PROPORTION OF THE ALLOWANCES EQUAL TO THE ACTUAL EXPENDITURE INCURRED .
17 IT IS A MATTER FOR THE PARLIAMENT TO DECIDE WHICH ACTIVITIES AND TRAVEL OF MEMBERS OF THE PARLIAMENT ARE NECESSARY OR USEFUL FOR THE PERFORMANCE OF THEIR DUTIES AND WHICH EXPENSES ARE NECESSARY OR USEFUL IN CONNECTION THEREWITH . THE AUTONOMY GRANTED TO THE PARLIAMENT IN THIS MATTER IN THE INTERESTS OF ITS PROPER FUNCTIONING ALSO IMPLIES THE AUTHORITY TO REFUND TRAVEL AND SUBSISTENCE EXPENSES OF ITS MEMBERS NOT UPON PRODUCTION OF VOUCHERS FOR EACH INDIVIDUAL ITEM OF EXPENDITURE BUT ON THE BASIS OF A SYSTEM OF FIXED LUMP-SUM REIMBURSEMENTS . THE CHOICE OF THIS SYSTEM , AS THE PARLIAMENT INDICATED IN ITS REPLIES TO THE QUESTIONS PUT BY THE COURT , ARISES FROM A CONCERN TO REDUCE THE ADMINISTRATIVE COSTS AND BURDENS INHERENT IN A SYSTEM INVOLVING THE VERIFICATION OF EACH INDIVIDUAL ITEM OF EXPENSE AND THEREFORE REPRESENTS SOUND ADMINISTRATION .
18 THE APPROPRIATIONS AVAILABLE TO THE EUROPEAN PARLIAMENT FOR THE LUMP-SUM REIMBURSEMENT OF THE TRAVEL AND SUBSISTENCE EXPENSES OF ITS MEMBERS APPEAR IN THE ANNUAL COMMUNITY BUDGET AND ARE SUBJECT TO THE BUDGETARY PROCEDURES PROVIDED FOR BY COMMUNITY LAW . IT IS IN THE COURSE OF THOSE PROCEDURES THAT THE AMOUNT OF THE ALLOWANCES MUST BE CONSIDERED IN ACCORDANCE WITH THE APPLICABLE FINANCIAL RULES .
19 IT IS CLEAR FROM THE FOREGOING THAT THE NATIONAL AUTHORITIES ARE BOUND TO RESPECT THE DECISION TAKEN BY THE EUROPEAN PARLIAMENT TO REFUND TRAVEL AND SUBSISTENCE EXPENSES TO ITS MEMBERS ON A LUMP-SUM BASIS . A REVIEW CARRIED OUT IN THIS AREA BY THE NATIONAL REVENUE AUTHORITIES , SUCH AS THE ONE PROVIDED FOR BY THE UNITED KINGDOM LEGISLATION , CONSTITUTES AN INTERFERENCE IN THE INTERNAL FUNCTIONING OF THE PARLIAMENT RESULTING IN A SUBSTITUTION BY THE NATIONAL AUTHORITIES OF THEIR APPRAISAL OF THE SYSTEM OF ALLOWANCES FOR THE ONE UNDERTAKEN BY THE PARLIAMENT IN THE EXERCISE OF ITS POWERS . IT WOULD THEREFORE BE LIKELY TO IMPAIR THE EFFECTIVENESS OF THE ACTION OF THE PARLIAMENT AND BE INCOMPATIBLE WITH ITS AUTONOMY .
20 CONSEQUENTLY , THE REVENUE AUTHORITIES CANNOT DEMAND FROM A MEMBER OF THE EUROPEAN PARLIAMENT RETURNS OR VOUCHERS FOR THE ACTUAL TRAVEL AND SUBSISTENCE EXPENSES INCURRED IN THE INTERESTS OF THE PARLIAMENT AND REIMBURSED BY IT , AS SUCH A DEMAND WOULD BE INCOMPATIBLE WITH THIS METHOD OF LUMP-SUM REIMBURSEMENT .
21 IT MUST , HOWEVER , BE OBSERVED THAT THE ALLOWANCES FIXED IN THAT MANNER MUST NOT EXCEED REASONABLE LIMITS CONSISTENT WITH THE REFUND OF TRAVEL AND SUBSISTENCE EXPENSES . IN SO FAR AS THE LUMP SUM FIXED FOR THE ALLOWANCES IS EXCESSIVE AND IN REALITY CONSTITUTES IN PART DISGUISED REMUNERATION AND NOT REIMBURSEMENT OF EXPENSES , THE MEMBER STATES ARE ENTITLED TO CHARGE SUCH REMUNERATION TO NATIONAL INCOME TAX , GIVEN THAT IN THE PRESENT STATE OF COMMUNITY LAW THE REMUNERATION OF MEMBERS OF THE PARLIAMENT IS A MATTER OF NATIONAL LAW AND IS NOT THE RESPONSIBILITY OF THE INSTITUTIONS OF THE COMMUNITY . HOWEVER , AN ASSESSMENT OF WHETHER THE LUMP SUMS FIXED BY THE PARLIAMENT ARE EXCESSIVE , WHICH IS , MOREOVER , A MATTER OF COMMUNITY LAW ALONE , WAS NOT REQUESTED BY THE NATIONAL TRIBUNAL , BEFORE WHICH IT WAS NOT ALLEGED THAT AT THE TIME THE ALLOWANCES WERE UNREASONABLY HIGH .
22 CONSEQUENTLY , THE REPLY WHICH MUST BE GIVEN TO THE QUESTION PUT BY THE SPECIAL COMMISSIONERS IS THAT COMMUNITY LAW PROHIBITS THE IMPOSITION OF NATIONAL TAX ON LUMP-SUM PAYMENTS MADE BY THE EUROPEAN PARLIAMENT TO ITS MEMBERS FROM COMMUNITY FUNDS BY WAY OF REIMBURSEMENT OF TRAVEL AND SUBSISTENCE EXPENSES , UNLESS IT CAN BE SHOWN IN ACCORDANCE WITH COMMUNITY LAW THAT SUCH LUMP-SUM REIMBURSEMENT CONSTITUTES IN PART REMUNERATION .