Brussels, 18/09/2008 (Agence Europe) - Public authorities' commercial activities can be exempt from VAT only when they come under public service activities, decided the European Court of Justice on 16 September 2008 in a case between the Isle of Wight Council (a regional authority) and the UK national government over the running of offstreet parking, income on which the Council did not levy VAT. The Court recognised the option of public authorities not having to pay VAT if application of VAT would cause a notable distortion of competition but pointed out that such an analysis must focus on the market in question in the light of not only current but also potential competition. Moreover, the Court pointed out that even if this criterion were satisfied, the derogation for public authorities can only be applied to activity carried out by the public authorities as part of their public service. The ruling notes that it is for the national courts to decide whether car parking management comes under its authority. (C.D.)