JUDGMENT OF THE COURT (Fifth Chamber)

8 June 1999 (1)

(Article 33 of Sixth Directive 77/388/EEC — Turnover taxes — Contributions totourism associations and to a tourism development fund)

In Joined Cases C-338/97, C-344/97 and C-390/97,

REFERENCES to the Court under Article 234 EC (ex Article 177) by theVerwaltungsgerichtshof (Austria) for a preliminary ruling in the proceedingspending before that court between

Erna Pelzl and Others

and

Steiermärkische Landesregierung (C-338/97),

between

Wiener Städtische Allgemeine Versicherungs AG and Others

and

Tiroler Landesregierung (C-344/97),

and between

STUAG Bau-Aktiengesellschaft

and

Kärntner Landesregierung (C-390/97),

on the interpretation of Article 33 of the Sixth Council Directive (77/388/EEC) of17 May 1977 on the harmonisation of the laws of the Member States relating toturnover taxes — Common system of value added tax: uniform basis of assessment(OJ 1977 L 145, p. 1),

THE COURT (Fifth Chamber),

composed of: J.-P. Puissochet (Rapporteur), President of the Chamber, P. Jann,C. Gulmann, D.A.O. Edward and L. Sevón, Judges,

Advocate General: S. Alber,

Registrar: H.A. Rühl, Principal Administrator,

after considering the written observations submitted on behalf of:

—    Mrs Pelzl, Johannes Kovac and Harald Hohenberg, Kovac Schrott GmbHNFG KG, Kovac Management GmbH, P. Kovac & Co. GmbH and KovacEisen Maschinen Metalle GmbH NFG KG, by Harald Hohenberg,Rechtsanwalt, Graz,

—    Wiener Städtische Allgemeine Versicherungs AG, by Kurt Heller and MariaTh. Pflügl, Rechtsanwälte, Vienna,

—    Romed Karl Kleissl, by Christian C. Schwaighofer and Michael Sallinger,Rechtsanwälte, Innsbruck,

—    Streiter KG, Alfred Eiter and Stefan Riml, by Andreas Fink and Peter Kolb,Rechtsanwälte, Imst,

—    Anton Gschwentner GmbH, by Hubertus Schumacher, Rechtsanwalt,Innsbruck,

—    Michael Khuen-Belasi, by Beate Köll-Kirchmeyr, Rechtsanwältin, Schwaz,

—    DM Drogeriemarkt GmbH, by Wolf-Dieter Arnold, Rechtsanwalt, Vienna,

—    STUAG Bau-Aktiengesellschaft, by Alexander Hasch, Rechtsanwalt, Linz,

—    Steiermärkische Landesregierung, by Nikolaus Hermann, Hofrat in theDepartment of Tourism of the Steiermärkische Landesregierung, acting asAgent,

—    Tiroler Landesregierung, by Hansjörg Teissl, 'Chairman‘ of the 'Board ofAppeal established under Section 38 of the 1991 Tyrol Tourism Law at theOffices of the Tiroler Landesregierung‘, acting as Agent,

—    the Austrian Government, by Wolf Okresek, Ministerialrat in theConstitutional Service of the Federal Chancellor's Office, acting as Agent,

—    the Commission of the European Communities, by Viktor Kreuschitz, LegalAdviser, and Enrico Traversa, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of: Mrs Pelzl, Messrs Kovac and Hohenberg,Kovac Schrott GmbH NFG KG, Kovac Management GmbH, P. Kovac & Co.GmbH and Kovac Eisen Maschinen Metalle GmbH NFG KG, represented byHarald Hohenberg; the Wiener Städtische Allgemeine Versicherungs AG andSTUAG Bau-Aktiengesellschaft, represented by Kurt Heller; the SteiermärkischeLandesregierung, represented by Erwin Wanke, Oberregierungsrat in theDepartment of Tourism at the Offices of the Steiermärkische Landesregierung,acting as Agent; the Tiroler Landesregierung, represented by Ansgar Rudisch,Hofrat at the Offices of the Tiroler Landesregierung, acting as Agent; the KärntnerLandesregierung, represented by Professor Markus Achatz, acting as Agent; theAustrian Government, represented by Harald Dossi, Ministerialrat in theConstitutional Service of the Federal Chancellor's Office, acting as Agent; and theCommission, represented by Viktor Kreuschitz and Enrico Traversa, at the hearingon 4 February 1999,

after hearing the Opinion of the Advocate General at the sitting on 18 March 1999,

gives the following

Judgment

1.

    By two orders of 12 August 1997 and an order of 27 October 1997, received at theCourt Registry on 29 September 1997, 2 October 1997 and 17 November 1997respectively, the Verwaltungsgerichtshof (Austrian Administrative Court) referredto the Court for a preliminary ruling under Article 234 EC (ex Article 177) threequestions on the interpretation of Article 33 of the Sixth Council Directive

(77/388/EEC) of 17 May 1977 on the harmonisation of the laws of the MemberStates relating to turnover taxes — Common system of value added tax: uniformbasis of assessment (OJ 1977 L 145, p. 1) ('the Sixth Directive‘).

2.

    Those questions were raised in proceedings between (1) Mrs Pelzl and Others andthe Steiermärkische Landesregierung (Government of the Land of Styria), (2)Wiener Städtische Allgemeine Versicherungs AG and Others and the TirolerLandesregierung (Government of the Land of Tyrol), and (3) STUAG Bau-Aktiengesellschaft and the Kärntner Landesregierung (Government of the Land ofCarinthia) concerning the liability of the plaintiffs in the main proceedings forcharges to promote tourism introduced by the Steiermärkische Tourismusgesetz(Tourism Law of the Land of Styria), the Tiroler Tourismusgesetz (Tourism Lawof the Land of Tyrol), and the Kärntner Fremdenverkehrsabgabegesetz (Law of theLand of Carinthia on the charge to promote tourism).

3.

    Those charges are intended to promote tourism in the federal Länder concerned. In Styria, the charge funds local tourism associations. In the Tyrol, it is paid in partto local tourism associations and in part to a tourism development fund, theTourismusförderungsfonds. In Carinthia, the charge is divided between the Landand the communes.

4.

    Each of those charges is, in principle, payable by all traders having a direct orindirect economic interest in tourism and having their registered office or a placeof business in the Tyrol, Carinthia, or in one of the communes of Styria designatedby the Steiermärkische Tourismusgesetz, which applies to most, but not all, of theterritory of Styria.

5.

    The charge is levied according to different rates, depending on the benefit whichthe taxable person derives from tourism, measured by his classification in aprofessional category, as well as, in Styria and the Tyrol, by the classification of thecommune in which he has his registered office.

6.

    The basis of assessment of the charge is, in principle and subject to certainexemptions, the annual taxable turnover, as defined by the Federal Law onTurnover Tax, achieved in the federal Land concerned.

7.

    Mrs Pelzl and Others, Wiener Städtische Allgemeine Versicherungs AG andOthers, and STUAG Bau-Aktiengesellschaft instituted proceedings before theVerwaltungsgerichtshof challenging the dismissal of their objections against theadministrative decisions imposing on them the charges to promote tourism. Theyargued, in particular, that those contributions were contrary to Article 33(1) of theSixth Directive, which provides that: 'Without prejudice to other Communityprovisions ..., this directive shall not prevent a Member State from maintaining orintroducing taxes on insurance contracts, taxes on betting and gambling, exciseduties, stamp duties and, more generally, any taxes, duties or charges which cannotbe characterised as turnover taxes ...‘.

8.

    The Verwaltungsgerichtshof, which is unsure whether those charges to promotetourism are compatible with Article 33 of the Sixth Directive, decided to stayproceedings and refer the following questions to the Court for a preliminary ruling:

Case C-338/97

'Does Article 33(1) of the Sixth Council Directive of 17 May 1977 on theharmonisation of the laws of the Member States relating to turnover taxes —Common system of value added tax: uniform basis of assessment (77/388/EEC)preclude, on the ground that it is in the nature of a turnover tax, the maintenancein force of a charge which is payable in a Bundesland (federal State) of a MemberState of the European Communities

—    in respect of each calendar year by all undertakings directly or indirectlyinvolved in tourism which have their registered office or a place of businesswithin certain closely defined areas, where the sum of those areas comprisesalmost the whole area of the federal State, and

—    the amount of which is essentially proportional to the turnover achieved bythe undertaking primarily in that federal State within a calendar year, butwhere the rate of contribution varies according to the intensity of tourismin that area and according to the degree of benefit which the legislaturedeems the commercial sector in question (occupational group) to derivefrom tourism, and

—    where no provision is made for the deduction of input tax?‘

Case C-344/97

'Is Article 33(1) of the Sixth Council Directive of 17 May 1977 on theharmonisation of the laws of the Member States relating to turnover taxes(77/388/EEC) to be interpreted with regard to the description ”characterised asturnover taxes” as precluding the imposition on traders by a Member State of atourism charge (contribution) which has the following features:

—    it is payable by traders with a direct or indirect interest in the tourismindustry and therefore by a large number of, but not all, traders;

—    it goes to a local tourism association to finance the development of thetourist industry or to a fund to be used for the whole region (Land);

—    the basis of assessment is the yearly turnover with certain exceptions, inparticular turnover related to services to customers whose place of residence(seat) is outside the area covered by the legislation, in so far as the servicesare not for a business situated within the area covered by the legislation (aBundesland of a Member State composed of federal States) nor services tofinal consumers, and turnover related to other services in so far as they arenot supplied exclusively or primarily within the area covered by thelegislation (the Bundesland of the Member State);

—    the amount of the charge varies according to the benefit deemed by thelegislature to be derived from tourism by the sector to which the taxpayerbelongs;

—    the amount of the charge is higher in tourist areas than in others, and

—    no provision is made for deduction of input tax?‘

    

Case C-390/97

'Does Article 33(1) of the Sixth Council Directive of 17 May 1977 on theharmonisation of the laws of the Member States relating to turnover taxes —Common system of value added tax: uniform basis of assessment (77/388/EEC)preclude, on the ground that it is in the nature of a turnover tax, the maintenancein force of a charge which is payable in a Bundesland (federal State) of a MemberState of the European Communities in respect of each calendar year by allundertakings directly or indirectly involved in tourism which have their registeredoffice or a place of business within that federal State, and the amount of which isessentially proportional to the turnover achieved by the undertaking in that federalState within a calendar year, but where the rate of contribution varies according tothe degree of benefit which the legislature deems the commercial sector in question(occupational group) to derive from tourism, and where no provision is made forthe deduction of input tax?‘

9.

    By order of the President of the Court of 18 November 1997, Cases C-338/97 andC-344/97 were joined for the purposes of the written procedure, the oral procedureand the judgment. By order of the President of the Fifth Chamber of the Courtof 15 December 1998, Joined Cases C-338/97 and C-344/97 were joined with CaseC-390/97 for the purposes of the oral procedure and the judgment.

10.

    By its three questions, which should be examined together, theVerwaltungsgerichtshof is in substance asking whether the Sixth Directive, and inparticular Article 33 thereof, precludes a charge of the kind introduced by theSteiermärkische Tourismusgesetz, the Tiroler Tourismusgesetz and the KärntnerFremdenverkehrsabgabegesetz, which is payable by traders in a federal Land who

have an economic interest in tourism, which is calculated, in principle, on the basisof annual turnover and from which input tax is not deductible.

11.

    The Steiermärkische Landesregierung and the Tiroler Landesregierung, along withthe Austrian Government and the Commission, take the view that the SixthDirective does not preclude such a charge. They argue that it is not a turnover tax,which is prohibited under Article 33 of the Sixth Directive, because it is notcomparable to value added tax ('VAT‘) and does not adversely affect theoperation of the common system of VAT.

12.

    The plaintiffs in the main proceedings, in contrast, take the view that a charge ofthat kind must be treated as a turnover tax adversely affecting the common systemof VAT and prohibited by Article 33 of the Sixth Directive.

13.

    It is necessary in that regard to recall the objectives pursued by the introduction ofa common system of VAT.

14.

    According to the preamble to the First Council Directive (67/227/EEC) of 11 April1967 on the harmonisation of legislation of Member States concerning turnovertaxes (OJ, English Special Edition 1967, p. 14, hereinafter 'the First Directive‘),the harmonisation of legislation concerning turnover taxes is intended to bringabout the establishment of a common market within which competition is notdistorted, and whose characteristics are similar to those of a domestic market, byeliminating differences in the imposition of tax such as to distort competition andimpede trade.

15.

    The introduction of a common system of VAT was achieved by the Second CouncilDirective (67/228/EEC) of 11 April 1967 on the harmonisation of legislation ofMember States concerning turnover taxes — Structure and procedures forapplication of the common system of value added tax (OJ, English Special Edition1967, p. 16, hereinafter 'the Second Directive‘) and by the Sixth Directive.

16.

    The Court has consistently held (see, most recently, Case C-318/96 SPAR vFinanzlandesdirektion für Salzburg [1998] ECR I-785) that the principle of thecommon system of VAT consists, by virtue of Article 2 of the First Directive, in theapplication to goods and services up to the retail stage of a general tax onconsumption which is exactly proportional to the price of the goods and services,irrespective of the number of transactions which take place in the production anddistribution process before the stage at which the tax is charged.

17.

    However, VAT is chargeable on each transaction only after deduction of theamount of VAT borne directly by the costs of the various price components. Theprocedure for deduction is so arranged by Article 17(2) of the Sixth Directive thattaxable persons are authorised to deduct from the VAT for which they are liablethe VAT which the goods or services have already borne and that the tax is

charged, at each stage, only on the added value and is finally borne by the ultimateconsumer.

18.

    In order to attain the objective of ensuring equal conditions of taxation for thesame transaction, no matter in which Member State it is carried out, the commonsystem of VAT was intended, according to the preamble to the Second Directive,to replace the turnover taxes in force in the various Member States.

19.

    Article 33 of the Sixth Directive accordingly permits a Member State to maintainor introduce taxes, duties or charges on the supply of goods, the provision ofservices or imports only if they cannot be characterised as turnover taxes.

20.

    In order to decide whether a tax, duty or charge can be characterised as a turnovertax within the meaning of Article 33 of the Sixth Directive, it is necessary, inparticular, to determine whether it has the effect of jeopardising the functioning ofthe common system of VAT by being levied on the movement of goods andservices and on commercial transactions in a way comparable to VAT. The Courthas stated in this regard that taxes, duties and charges must in any event beregarded as being imposed on the movement of goods and services in a waycomparable to VAT if they exhibit the essential characteristics of VAT (see CaseC-200/90 Dansk Denkavit and Poulsen v Skatteministeriet [1992] ECR I-2217).

21.

    The Court finds in this connection that the essential features of VAT are asfollows: it applies generally to transactions relating to goods or services; it isproportional to the price charged by the taxable person in return for the goods andservices which he has supplied; it is charged at each stage of the production anddistribution process, including that of retail sale, irrespective of the number oftransactions which have previously taken place; the amounts paid during thepreceding stages of the process are deducted from the tax payable by a taxableperson, with the result that the tax applies, at any given stage, only to the valueadded at that stage and the final burden of the tax rests ultimately on the consumer(see, to that effect, Case C-347/90 Bozzi [1992] ECR I-2947).

22.

    A charge of the kind introduced by the Steiermärkische Tourismusgesetz, theTiroler Tourismusgesetz and the Kärntner Fremdenverkehrsabgabegesetz is notlevied on the movement of goods and services or on commercial transactions in away comparable to VAT.

23.

    First, there is no provision for deduction of amounts paid as input tax, with theresult that the charges apply not only to the value added at a particular stage in theproduction and distribution process but also to the overall turnover achieved by thetaxable undertakings.

24.

    Second, the charges are not passed on to the final consumer in a mannercharacteristic of VAT. Even on the assumption that an undertaking selling to finalconsumers will take account, in fixing its price, of the amount of the charge

included in its general expenses, not all undertakings have the possibility of thuspassing on, or passing on in full, the burden of the tax.

25.

    Third, since the charges to promote tourism are calculated, subject to certainexemptions, on the basis of an overall annual turnover, it is not possible todetermine the precise amount of the charge passed on to the customer when eachsale is effected or each service supplied, and the condition that this amount shouldbe proportional to the price charged by the taxable person is thus not satisfiedeither.

26.

    It follows that the charges to promote tourism do not constitute a tax onconsumption the burden of which rests on the final consumer of the product, butare charges on the activities of undertakings involved in tourism.

27.

    Thus, even on the assumption that the charges at issue in the main proceedings aregenerally or almost generally applicable in the federal Länder in question, thatwould not suffice for them to be classified as turnover taxes within the meaning ofArticle 33 of the Sixth Directive, inasmuch as they are not levied on commercialtransactions in a manner comparable to VAT.

28.

    In those circumstances, the answer to the questions submitted must be that theSixth Directive, and in particular Article 33 thereof, does not preclude a charge ofthe kind introduced by the Steiermärkische Tourismusgesetz, the TirolerTourismusgesetz and the Kärntner Fremdenverkehrsabgabegesetz, which is payableby traders in a federal Land who have an economic interest in tourism, which iscalculated, in principle, on the basis of annual turnover and from which input taxis not deductible.

Costs

29.

    The costs incurred by the Austrian Government and by the Commission, whichhave submitted observations to the Court, are not recoverable. Since theseproceedings are, for the parties to the main proceedings, a step in the proceedingspending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT (Fifth Chamber),

in answer to the questions referred to it by the Verwaltungsgerichtshof by ordersof 12 August 1997 and 27 October 1997, hereby rules:

The Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonisationof the laws of the Member States relating to turnover taxes — Common system ofvalue added tax: uniform basis of assessment, and in particular Article 33 thereof,does not preclude a charge of the kind introduced by the SteiermärkischeTourismusgesetz, the Tiroler Tourismusgesetz and the KärntnerFremdenverkehrsabgabegesetz, which is payable by traders in a federal Land whohave an economic interest in tourism, which is calculated, in principle, on thebasis of annual turnover and from which input tax is not deductible.

PuissochetJann Gulmann             Edward                            Sevón

Delivered in open court in Luxembourg on 8 June 1999.

R. Grass

J.-P. Puissochet

Registrar

President of the Fifth Chamber

1: Language of the cases: German.