Luxembourg, 04/04/2001 (Agence Europe) - France has been sentenced in two cases concerning the application of the sixth VAT directive and the health regulation on bathing water. The Advocate General presented his conclusions in the case of Portuguese beef
Inclusive tips for service and VAT. Mysterious Annex I
The fifth chamber of the Court of Justice, presided over by Antonio La Pergola, has sentenced France for not having subjected inclusive tips on prices paid by customers, mainly in cafes, restaurants and hairdressing salons, to VAT. The European judges have taken on board what Advocate General Jean Mischo had stressed, that the "total sum demanded of a customer or appearing on the invoice presented to him or her is, in its entirety, the counterpart to the service provided". France had correctly transposed the European directive into French law but had continued to apply an administrative tolerance of 1923, confirmed in 1976 by the government of the time, by which the inclusive tip was excluded from the VAT.
The European Commission stipulated that its case against France did not concern tips granted spontaneously and freely by a customer to a friendly employee but only the service tax, which the customer is obliged to pay and which is predetermined. The spontaneous tip paid "in appreciation" to a road musician, for example, is exonerated of VAT as the Court stated in 1994, thereby defending a Dutch organ-player of whom the taxman was demanding VAT payments on his revenue.
In his conclusions, Advocate General Mischo did, however, speak of the inconsistency of the French Government which was fighting not to have VAT imposed on tips that appeared on the invoice and impose it on tips that did not. Mr. Mischo alluded to the first annex of the statement of defence of the French government in which it explained the special system of "service not included": when a tip is left in appreciation by a customer and is reserved for the staff according to the "in-the-pocket" formula or in a "common pool", it is included in the "reconstituted income" that serves as basis for the VAT. "Fortunately, it is not up to us to elucidate the mystery that constitutes the production of this annex", the Advocate General concluded.
Bathing water in France
Another condemnation of France by the sixth chamber of Claus Gulman resides in the fact that France has not respected the provisions of the 1975 European directive on the quality of bathing water. The Commission accused it of undertaking inadequate bathing water sampling operations between 1995 and 1997 and not undertaking sampling for the "total coliiformes" parameter (bacteria of faecal origin). The French Government acknowledged abandoning this parameter had not enabled it to respect all the directive's standards, but stipulated that since 7 June 2000 it had ordered the resumption of this screening.
Veritable "indictment" by Advocate General Mischo against Portugal
Not only was Portugal part of high BSE incidence but it hushed up a report on the hygiene of its abattoirs for the same period, Advocate General Jean Mischo told the Court. Portugal attacked the Commission in order to have a 1999 decision extending by 6 months (1 August 1999 to 1 February 2000) banning the export of Portuguese beef annulled.
Portugal based itself on incorrect premises when it claimed that according to the criteria of the International Office of Epizooties (OIE) it was in an area of low outbreaks of BSE in 1998 and 1999. Jean Mischo pointed out that in 1998 the OIE's zoo-sanitary code did not yet contain definitions of areas low incidence, no more than it did for those of high incidences, the definitions being studied at the time. And in 1999, "with an observed number of 211 cases per million animals (Portugal) could not be considered an area of low incidence". Jean Mischo also accused Portugal of hushing up a report by the mission of the EU Food and Veterinary Office undertaken in Portugal from 19 to 23 April 1999. This report emphasised "serious shortcomings" in the identification of animals and culling hygiene. In two abattoirs, notably, the experts observed entrails and other offal on dirty or non-disinfected floors and contamination by "splashing" due to the high-pressure water cleaning of carcasses and excrement in the context of dirty hands and non-sterilized cutting instruments casually washed in water. Shortcomings so serious that the authors of the report had recommended that the Commission initiate a procedure against Portugal. Jean Mischo acknowledges that the report of the following June no longer refers to such serious shortcomings but that it is too soon to assess whether the measures adopted had had "the expected effect". "Let there be no misunderstanding, in no way do we wish to denigrate the action of the Portuguese authorities", the Advocate General stipulated, concluding that Portugal's appeal had to be rejected.
This affair is one of the rare cases where the European Commission has unable to present its defence because it failed to lodge its statement in time.