Important legal notice

61998C0276

European Court reports 2001 Page I-01699

Opinion of the Advocate-General

The relevant legislative provisions

Community provisions

4. By way of exception, Article 28(2) of the Sixth Directive, again as amended by Directive 92/77, provides that: Notwithstanding Article 12(3), the following provisions shall apply during the transitional period referred to in Article 28 l.

5. Article 4(5) of the Sixth Directive contains rules on goods and services provided by public authorities. It reads as follows: States, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with these activities or transactions. However, when they engage in such activities or transactions, they shall be considered taxable persons in respect of these activities or transactions where treatment as non-taxable persons would lead to significant distortions of competition. In any case, these bodies shall be considered taxable persons in relation to the activities listed in Annex D, provided they are not carried out on such a small scale as to be negligible. Member States may consider activities of these bodies which are exempt under Article 13 or 28 as activities which they engage in as public authorities.

National provisions

Procedure

10. Having found the Portuguese replies unsatisfactory, the Commission issued, on 10 June 1997, a reasoned opinion pursuant to Article 169(1) of the EC Treaty (now Article 226(1) EC) calling on Portugal to take the necessary measures to comply within a period of two months. The Portuguese Government replied to that opinion by two letters dated 14 August 1997 and 10 March 1998. In its replies, the Portuguese Government assured the Commission of its intention to seek to increase the rate of VAT in the next budgetary law, but it added that the political situation might impede the adoption of that measure and that the VAT rate applicable to wine was in fact likely to remain unchanged.

11. In the light of those replies, the Commission lodged this application with the Court on 20 July 1998.

Analysis

The rate of VAT on certain goods

13. The Commission points out that at 1 January 1991 the transactions listed in points 1.8, 2.11, and 3.8 were subject to a reduced rate of VAT. Portugal is therefore entitled to apply a reduced rate of VAT to those transactions under Article 12(3)(a) and Article 28(2) of the Sixth Directive. However, it follows from those provisions that the reduced rate may not be less than 12%. By applying a rate of only 5%, Portugal has acted contrary to Article 12(3)(a) and Article 28(2) of the Sixth Directive and failed to fulfil its obligations under the Treaty.

14. The Portuguese Government does not deny that Article 18 of the VAT Code is contrary to the Sixth Directive in so far as it applies a VAT rate of 5% rather than 12% to the transactions in points 1.8, 2.11 and 3.8. However, it states that it will soon take steps to resolve the problem and that its failure to comply with the Directive is due to the absence of a parliamentary majority in favour of raising the rate of VAT as required by the Sixth Directive.

15. It is settled case-law that the Court of Justice cannot in infringement proceedings take into account action taken by a Member State after the expiry of the time-limit laid down in the reasoned opinion, and that a Member State cannot rely on provisions, practices or circumstances related to its own internal legal order as an excuse for its failure to implement a directive within the prescribed time-limit.

16. The Commission's claim should therefore be upheld in relation to points 1.8, 2.11 and 3.8 of List I.

The rate of VAT on the toll charged on passage of the Tagus Bridge

17. The lawfulness of the rate of VAT applied to the Tagus Bridge toll falls to be considered in the light of Article 4(5) of the Sixth Directive and the recent judgments of the Court of Justice in a group of cases concerning that provision.

18. In those cases, the Court of Justice held that the first subparagraph of Article 4(5) applies to tolls charged on the use of infrastructure installations such as roads and bridges if two conditions are fulfilled. First, the provision of the installation must be an activity carried out by a body governed by public law. Secondly, the body must be acting as a public authority when providing that activity. As regards the first condition, the Court held that an activity carried on by a private individual is not excluded from the scope of VAT merely because it consists in the performance of acts falling within the prerogatives of the public authority. As regards the second condition, the Court held that activities pursued as public authorities are those which are engaged in by bodies governed by public law under the special legal regime which is applicable to them and do not include activities pursued by them under the same legal conditions as those that apply to private traders.

19. At the hearing, the Commission and the Portuguese Government appeared to accept that the body which is responsible for providing access to the Tagus Bridge is a body subject to public law acting in this context as a public authority within the meaning of Article 4(5), but to consider that that provision was an optional exception to the general principle that all supplies of goods and services are subject to VAT.

21. The only exception to that rule, apart from the transactions listed in Annex D which are not in point here, is where treatment of the public authority as a non-taxable person would lead to significant distortions of competition. There is however no evidence that the treatment of the body responsible for providing access to the Tagus Bridge as a non-taxable person would entail significant distortions of competition. According to the Portuguese Government's statements at the hearing, there are two road bridges over the river Tagus. The access to both of those bridges is provided by public bodies. The toll and the rate of VAT applied to the toll on the two bridges is the same. Neither the toll nor the rate of VAT is determined freely by the bodies responsible for providing access. The rate of VAT is determined by law; the toll is determined by the Portuguese Government in the context of a contract which grants the relevant public body a concession to handle, manage, and maintain the Tagus bridge. On the basis of those statements, the correctness of which was not contested by the Commission at the hearing, it appears that there is no significant competition between the bodies responsible for providing access to the two bridges over the Tagus in Lisbon.

22. It follows, in my view, that Point 2.19 of List I, annexed to the Portuguese VAT Code, is contrary to Article 4(5) of the Sixth Directive in so far as it applies a VAT rate of 5% to the tolls charged on passage of the Tagus Bridge.

24. The Commission's claim should therefore, in my opinion, be rejected in relation to point 2.19 of List I.

Costs

25. Under Article 69 of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. The Commission has succeeded in most of its claims, and has applied for costs. I therefore consider that Portugal should be ordered to pay the Commission's costs.

Conclusion

26. In the light of the foregoing observations, I am of the opinion that the Court should: (1) declare that by introducing or maintaining in force a reduced rate of 5% applicable to the products listed in points 1.8, 2.11 and 3.8 of List I annexed to the Portuguese VAT Code, including respectively wine, machinery and equipment for alternative energy research, and agricultural tools and equipment, the Portuguese Republic has infringed Articles 12 and 28(2) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes Common system of value added tax: uniform basis of assessment as amended by Council Directive 92/77/EEC of 19 October 1992 supplementing the common system of value added tax and amending Directive 77/388/EEC; (2) for the rest, dismiss the application; (3) order the Portuguese Republic to bear the costs.