INTERNATIONAL TAX PLAZA - CJEU rules in Case C-553/13 Statoil Fuel & Retail (Excise duties –Directive 2008/118/EC

(March 5, 2015)

On March 5, 2015 the European Court of Justice (CJEU) ruled in Case C-553/13 Tallinna Ettevõtlusamet versus Statoil Fuel & Retail Eesti AS (ECLI:EU:C:2015:149).

May the funding of the organisation of public transport within the territory of a local authority be regarded as a specific purpose within the meaning of Article 1(2) of Directive [2008/118] if the performance and funding of such a task is an obligation of the local authority?
If the answer to the preceding question is in the affirmative, must Article 1(2) of Directive [2008/118] be interpreted as meaning that making provision in national law for an indirect tax which is charged on the sale of excise goods to the final consumer and is used solely for the organisation of public transport is consistent with that provision, if the organisation of public transport is an obligation of the local authority receiving the tax which must be fulfilled regardless of the existence of such an indirect tax, and the level of funding of the organisation of public transport ultimately does not depend automatically on the amount of tax collected, because the amount of the sum allocated to the organisation of public transport is calculated precisely in such a way that if the indirect tax being collected produces more income, the allocation of other funds by the public authorities to the organisation of public transport is reduced to that extent and, conversely, if the sales tax produces less income, the local authority has to increase other funds to that extent for the organisation of public transport, it being possible, however, in the event of the revenue differing from that forecast to change the amount of expenditure on the organisation of public transport by amending the local authority’s budget?

If the answer to the preceding question is in the affirmative, must Article 1(2) of Directive [2008/118] then be interpreted as meaning that the additional taxation of excise goods by an indirect tax, the particular objective of using which is determined after the time of coming into being of the obligation to pay such an indirect tax, is consistent with that provision?

The dispute in the main proceedings and the questions referred for a preliminary ruling

As indicated by the decision to refer, Statoil’s operations include the retail sale of liquid fuel, a product subject to excise duty. On 20 July 2010, 20 October 2010 and 25 January 2011, it declared the turnover which it had achieved through the sale of goods and services subject to sales tax in the month of June 2010 and in the third and fourth quarters of the same year.

On 22 September 2010, 26 October 2010 and 7 February 2011 respectively, Statoil submitted corrected declarations, deducting from its previously declared turnover its turnover from the sale of products subject to excise duty. On 22 September 2010, 28 October 2010 and 9 February 2011 respectively, Statoil submitted to the Ettevõtlusamet applications for reimbursement.
By decisions of 19 October 2010, 9 November 2010 and 4 March 2011, the Ettevõtlusamet rejected those applications. In addition, by the latter decision, the Ettevõtlusamet ruled that, for the fourth quarter of 2010, an additional sum had to be paid by Statoil.
On 19 November 2010, Statoil lodged with the Tallinna halduskohus (Tallinn Administrative Court) an application seeking, in substance, the annulment of the decisions of the Ettevõtlusamet of 19 October and 9 November 2010 and asking the court to order a review of the applications for reimbursement of 22 September and 28 October 2010 or the immediate reimbursement of the overpayment indicated in those applications for reimbursement. In its application, Statoil submitted in particular that Paragraph 1(2) of Regulation No 45 infringed EU law, because it required payment of a tax on retail sales of goods and services without providing for any exception for sales of excise goods. On 5 April 2011, Statoil lodged a similar application with the same court relating to the decision of the Ettevõtlusamet of 4 March 2011. The Tallinna halduskohus joined those applications.
By decision of 19 October 2011, the Tallinna halduskohus annulled the three aforementioned decisions of the Ettevõtlusamet and ordered it to review the applications for reimbursement at issue. In support of its decision, the Tallinna halduskohus held, in substance, that the sales tax cannot be regarded as having a specific purpose within the meaning of Article 1(2) of Directive 2008/118.
The Ettevõtlusamet lodged an appeal against this decision with the Tallinna ringkonnakohus (Tallinn court of appeal), claiming in particular that the sales tax is collected for a specific purpose, namely to promote public transport and thus reduce the density of road traffic and its adverse impact on the environment; that the city of Tallinn is using the revenue from this tax to improve the quality of public transport, and that the tax is intended both to penalise the consumption of certain goods and services which can cause social costs or produce negative external effects and to fund services in the public interest.
Statoil contends that the appeal should be dismissed, arguing in particular that the purpose stated in the applicable rules is the organisation of public transport, not its promotion, as the Ettevõtlusamet claims.
The Tallinna ringkonnakohus considers that, in order to prove that the tax on excise goods was used in accordance with the specific purpose indicated, the Ettevõtlusamet did not have to adduce any evidence other than what appears from the city budget. It indicates that, in the case at issue, there is no reason to suppose that the revenue derived from the sales tax was not used for this specific purpose.
The Tallinna ringkonnakohus considers that taxes with a specific purpose are usually used to penalise the consumption of certain goods or services which can cause social costs or produce negative external effects (for instance, effects which are harmful to the environment), or to fund services in the public interest (such as the promotion of tourism, sport or culture). That kind of tax is therefore a means which the authorities use to influence the behaviour of consumers, by encouraging them to avoid the use of certain goods by applying such taxes to expenditure of which they do not approve.
However, according to the Tallinna ringkonnakohus, on the date of its decision to refer, the case-law of the Court of Justice did not give a clear answer to the question whether for the purposes of Article 1(2) of Directive 2008/118 an indirect tax has a specific purpose if the tax is collected to fund a specific public service which the local authority is required by law to provide and where such a public service is funded even if the tax with the specific purpose is not collected. In this context, the referring court observes that all the resources obtained from sales tax were allocated to the organisation of public transport, which might be accompanied by a reduction of pollution and increase public well-being.
The referring court wonders whether the charging of this tax was lawful in the period during which no specific purpose for the use of the revenue from the tax was expressly stated in a legal act, and it observes in this context that it was only during the period of taxation which is the subject of the proceedings at issue, that is, with effect from 25 June 2010, that Paragraph 91 was incorporated into Regulation No 45.
In those circumstances the Tallinna ringkonnakohus decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

‘1.   May the funding of the organisation of public transport within the territory of a local authority be regarded as a specific purpose within the meaning of Article 1(2) of Directive [2008/118] if the performance and funding of such a task is an obligation of the local authority?

2.   If the answer to the preceding question is in the affirmative, must Article 1(2) of Directive [2008/118] be interpreted as meaning that making provision in national law for an indirect tax which is charged on the sale of excise goods to the final consumer and is used solely for the organisation of public transport is consistent with that provision, if the organisation of public transport is an obligation of the local authority receiving the tax which must be fulfilled regardless of the existence of such an indirect tax, and the level of funding of the organisation of public transport ultimately does not depend automatically on the amount of tax collected, because the amount of the sum allocated to the organisation of public transport is calculated precisely in such a way that if the indirect tax being collected produces more income, the allocation of other funds by the public authorities to the organisation of public transport is reduced to that extent and, conversely, if the sales tax produces less income, the local authority has to increase other funds to that extent for the organisation of public transport, it being possible, however, in the event of the revenue differing from that forecast to change the amount of expenditure on the organisation of public transport by amending the local authority’s budget?

3.   If the answer to the preceding question is in the affirmative, must Article 1(2) of Directive [2008/118] then be interpreted as meaning that the additional taxation of excise goods by an indirect tax, the particular objective of using which is determined after the time of coming into being of the obligation to pay such an indirect tax, is consistent with that provision?’

The CJEU ruled as follows:

Article 1(2) of Council Directive 2008/118/EC of 16 December 2008 concerning the general arrangements for excise duty and repealing Directive 92/12/EEC must be interpreted as not permitting a tax such as that at issue in the main proceedings, in so far as it is levied on retail sales of liquid fuel subject to excise duty, to be regarded as having a specific purpose within the meaning of that provision where that tax is intended to finance the organisation of public transport within the territory of the authority imposing the tax and where that authority is required to undertake and finance such transport irrespective of the existence of that tax, even if the revenue from that tax has been used solely for the purpose of performing that activity. The provision in question must therefore be interpreted as precluding national rules such as those at issue in the main proceedings instituting such a tax on retail sales of liquid fuel subject to excise duty.

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CJEU rules in Case C-553/13 Statoil Fuel & Retail (Excise duties –Directive 2008/118/EC — Article 1(2))