Case T-210/02 RENV

British Aggregates Association

v

European Commission

(State aid — Environmental tax on aggregates in the United Kingdom — Commission decision not to raise objections — Advantage — Selective nature)

Summary of the Judgment

1.      State aid — Concept — Selective nature of the measure — Derogation from the general tax system — Justification on the basis of the nature and scheme of the system — Assessment criteria

(Art. 87(1) EC)

2.      State aid — Concept — Selective nature of the measure — Exceptional fiscal burden on a narrowly defined economic sector — No effect on the classification of that measure as State aid

(Art. 87 EC)

3.      State aid — Concept — Selective nature of the measure — Environmental levy on the marketing of aggregates — Differences in the conditions governing liability to taxation not justified by the environmental objectives pursued — Included

(Art. 87(1) EC)

4.      State aid — Concept — Selective nature of the measure — Environmental levy on the marketing of aggregates — Exemption of exports — Not included

(Art. 87(1) EC)

1.      In the field of State aid, in order to assess the selectivity of a State measure, it is necessary to consider whether, under a particular statutory scheme, that measure is such as to favour ‘certain undertakings or the production of certain goods’ within the meaning of Article 87(1) EC in comparison with other undertakings in a comparable legal and factual situation in the light of the objective pursued by the measure concerned.

However, a measure which, although conferring an advantage on its recipient, is justified by the nature or general scheme of the tax system of which it is part does not satisfy that condition of selectivity. For the purposes of that assessment, a distinction must be made between, on the one hand, the objectives attributed to a particular tax regime and which are extrinsic to it and, on the other, the mechanisms inherent in the tax system itself which are necessary for the achievement of such objectives, since, as basic or guiding principles of the tax system in question, those objectives and mechanisms could support such justification, which it is for the Member State to demonstrate.

Furthermore, for the purpose of assessing the selective nature of the advantage conferred by the measure in question, the determination of the reference framework has a particular importance in the case of tax measures, since the very existence of an advantage may be established only when compared with ‘normal’ taxation. Thus, in order to classify a domestic tax measure as ‘selective’, it is necessary to begin by identifying and examining the common or ‘normal’ regime applicable in the Member State concerned. It is in relation to this common or ‘normal’ tax regime that it is necessary, secondly, to assess and determine whether any advantage granted by the tax measure at issue may be selective by demonstrating that the measure derogates from that common regime inasmuch as it differentiates between economic operators who, in the light of the objective assigned to the tax system of the Member State concerned, are in a comparable factual and legal situation.

(see paras 47-49, 84)

2.      In the field of State aid, even if a specific tax system could be described as an exceptional fiscal burden on a narrowly defined economic sector, that in itself does not mean that that fiscal burden falls outside the prohibition laid down in Article 87(1) EC, since the capacity of that system to differentiate within that sector may satisfy the criteria of advantage and selectivity. Furthermore, in accordance with the legal concept of aid, which must be interpreted on the basis of objective factors, the purpose of a State measure, such as the environmental objective or the ‘ecotax’ quality of a specific or sectoral tax system, is not sufficient to exclude that measure outright from classification as ‘aid’ for the purposes of that provision, since such a measure must be assessed in relation to its effects and regardless of its causes or objectives. Consequently, the concept of aid within the meaning of Article 87(1) EC requires consideration to be given to whether a specific or sectoral tax system entails distinctions the effect of which is to favour ‘certain undertakings or the production of certain goods’ within the sector covered by that system, which presupposes that the underlying ‘normal’ taxation is determined.

(see para. 52)

3.      In the field of State aid, in assessing the selective nature of the advantages conferred by a tax system, the question to be determined is whether the measures based on that system are such as to favour ‘certain undertakings or the production of certain goods’ within the meaning of Article 87(1) EC in comparison with other undertakings which are in a legal and factual situation that is comparable in the light of the objective pursued by the measure in question.

A tax system has that selective nature where it introduces a specific tax applicable to the aggregates sector, the objective of which essentially entails the promotion in the construction industry of the use of aggregates which are the by-products of or waste from certain processes (also known as ‘secondary’ aggregates), or of recycled aggregates, thereby reducing the use of quarried aggregates (also known as ‘primary’ aggregates), which are non-renewable natural resources, and thereby limiting the damage to the environment associated with that process of extraction, in so far as there is a potential link in terms of competition or of substitutability between the various aggregates as regards their use or commercial exploitation and, moreover, aggregates from certain materials, such as slate, ball clay, china clay and shale, are exempt from that tax and aggregates from other materials are subject to it, even though, in the light of its environmental objective, the various aggregates are in a comparable situation as regards their use as ‘aggregates’.

In that regard, in determining whether national legislation provides for the more favourable tax treatment of certain undertakings or the production of certain goods in comparison with that of other undertakings or the production of other goods which are in a comparable factual and legal situation, neither the Commission nor the General Court can disregard the environmental objective of that legislation, since the elements which characterise different situations, and hence their comparability, must in particular be determined and assessed in the light of the subject-matter and purpose of the act which makes the distinction in question, as well as the principles and objectives of the field to which that act relates.

Such differentiation cannot be justified by the nature and general scheme of the tax system in question in so far as it clearly derogates from the normal taxation rationale underlying the tax at issue and, moreover, is likely to undermine the environmental objective of that tax.

(see paras 62, 64, 67-68, 72, 75, 87-88)

4.      In the field of State aid, an environmental levy on the marketing of aggregates the territorial scope of which is limited to a Member State, which means that any marketing of aggregates outside that Member State, that is any economic transaction linked to their exportation, is exempt from the levy, does not entail a selective advantage favouring certain undertakings or the production of certain goods, in so far as materials which are marketed in that Member State and those that are exported overseas are in different situations because, once those materials have been exported, it is, as a rule, no longer possible for the national authorities of the exporting State to check the application of the decisive criterion for taxation, namely commercial exploitation as an aggregate.

Those authorities will be unable, or able only with difficulty, to determine whether an exported material is likely to be used and exploited as an aggregate, whether it actually is to be used as such, or whether it is to be used for other purposes, which also depends on the statutory specifications applicable in the country of destination. Even if it were the case that it is particularly easy for those authorities to identify the physico-chemical properties of materials intended to be exported, so as to determine whether or not they are suitable for use in the processes that would ensure their exemption under the tax at issue, classification as an ‘aggregate’ or exempt material does not depend precisely on those properties but, inter alia, on the case-by-case exclusion from the scope of that tax of certain named materials or materials obtained from certain processes. Furthermore, the fact that exported materials and materials marketed in the Member State in question are not in a comparable situation is confirmed in the light of the environmental objective of the tax at issue in so far as, in the case of exports, the legislature and authorities of that State are not in a position to steer demand for aggregates, in accordance with that objective, by means of differentiated taxation.

(see paras 94, 97)