Brussels, 28/02/2014 (Agence Europe) - In case C-82/12 on 27 February, the European Court of Justice ruled that a Spanish tax on retail sales of diesel and petrol (IVMDH) that was applied from 2002 to 2013 is contrary to EU law. The tax was levied to raise money for the autonomous regions of Spain to cover spending on health and the environment. The Court of Justice says the tax breaches one of the conditions laid down in the excise duty directive (92/12/EEC), which states that mineral oils may be subject to indirect taxation other than the harmonised excise duty established by the directive as long as two conditions are both satisfied. First, the tax must pursue one or more specific purposes. Secondly, that tax must comply with the tax rules applicable to excise duty or VAT so far as concerns the determination of the tax base and the calculation, chargeability and monitoring of the tax.
The Court of Justice was asked by a high court in Catalonia whether the tax complies with the EU Directive. The Spanish court is investigating a case brought by a transport company that is demanding reimbursement of the tax paid in the 2005 to 2008 tax years.
The European judges say that the IVMDH is contrary to the Excise Duty Directive because it does not have a specific purpose within the meaning of the Excise Duty Directive, because in order to be “specific,” a purpose must not be purely budgetary. In this case, the revenue from the IVMDH was allocated to the Autonomous Communities in order to finance the exercise by them of certain of their competences. However, the reinforcement of the autonomy of a regional or local authority through the granting of a power to generate tax income constitutes a purely budgetary objective that cannot, on its own, constitute a specific purpose. Moreover, the fact that the revenue from the IVMDH had to be allocated, in accordance with national legislation, to covering health expenditure is merely a matter of internal organisation of the budget of Spain and is, therefore, not sufficient for the tax to be regarded having a specific purpose. Otherwise, any purpose could be regarded as specific, which would deprive the harmonised excise duty established by the directive of all practical effect. According to the Court, in order to be regarded as pursuing a specific purpose, the IVMDH would have itself to be directed at reducing the social and environmental costs specifically linked to the consumption of the mineral oils on which that tax is imposed, so that there is a direct link between the use of the revenue and the purpose of the tax in question. However, the revenue from the IVMDH has been allocated by the Autonomous Communities to health expenditure in general and not to health expenditure which is specifically linked to the consumption of the taxed hydrocarbons.
The Catalan and Spanish authorities requested that the temporal effects of the Court of Justice ruling should be limited because the IVMDH has given rise to abundant litigation and refunding the proceeds (totalling some €13 billion between 2002 and 2011) would jeopardise the financing of public health in the Spanish autonomous communities. The Court of Justice ruled that the authorities failed to act in good faith because they kept the IVMDH in force for more than ten years. In 2001, the Commission had informed the Spanish authorities that the introduction of such a tax would be contrary to EU law. Moreover, as early as 2003 (the year after the IVMDH came into force), the Commission had initiated an infringement procedure against the Kingdom of Spain concerning that tax. (FG)