Opinion of Advocate General Cosmas delivered on 14 May 1998
Grade B
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Not the law itself: Opinion
Address https://gelex.eu/eli/EU/opinion/61997C0149@1998-05-14/en
sec_1 I —
Introductory remarks
1. In the present case the Court is called upon to rule on a preliminary question referred to it by the VAT and Duties Tribunal, London, concerning the interpretation of Article 13A(1)(1) of the Sixth VAT Directive (hereinafter the Sixth Directive) and the exemption from that tax (hereinafter VAT) in favour of the activities of a non-profitmaking organisation of persons working in the retail motor industry.
sec_2 II —
Legal framework
sec_1 A —
Community law
2. Article 2(1) of the Sixth Directive provides that supplies of goods and services effected for consideration within the territory of the country by a taxable person acting as such are subject to value added tax.
3. Tide X contains the exemptions from VAT for certain activities. Article 13, which is entitled Exemptions within the territory of the country, provides at (A) as follows:
3.
sec_1 A.
Exemptions for certain activities in the public interest
1. Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse: ... ... (emphasis added).
1.
(1) supply of services and goods closely linked thereto for the benefit of their members in return for a subscription fixed in accordance with their rules by non-profitmaking organisations with aims of a political, trade-union, religious, patriotic, philosophical, philanthropic or civic nature, provided that this exemption is not likely to cause distortion of competition;
sec_2 B —
National law
4. Schedule 9 to the Value Added Tax Act 1994 (hereinafter VATA) exempts trade unions and professional bodies from VAT.
5. So far as material, Schedule 9 provides as follows: Notes:
5.
1. The supply to its members of such services and, in connection with those services, of such goods as are both referable only to its aims and available without payment other than a membership subscription by any of the following nonprofit-making organisations —
1.
(a) a trade union or other organisation of persons having as its main object the negotiation on behalf of its members of the terms and conditions of their employment;
(b) a professional association, membership of which is wholly or mainly restricted to individuals who have or are seeking a qualification appropriate to the practice of the profession concerned;
(c) an association, the primary purpose of which is the advancement of a particular branch of knowledge, or the fostering of professional expertise, connected with the past or present professions or employments of its members;
(d) ...;
(1)-(3) ...
4. Paragraph (c) does not apply unless the association restricts its membership wholly or mainly to individuals whose present or previous professions or employments are directly concerned with the purposes of the association.
5. ...
sec_3 III —
Facts
sec_1 A —
Objects of the Institute of the Motor Industry
6. The Institute of the Motor Industry (hereinafter the Institute) was established in 1920 and is a voluntary association of persons working in the retail motor industry.
7. The objects of the Institute and the means at its disposal to achieve them, as set out in its memorandum of association, are described in the order for reference. Specifically, the primary objects of the Institute and its members are to improve the professional standard of its members and career structures in the different sectors of the industry and, consequently, to enhance public perception of the industry and the people working in it. To that end the Institute consciously responds to the industry's requirements for skills for specific personnel (from senior management level to technical levels), validates courses (organised by other institutions) for the teaching of those skills, makes awards to persons completing those courses, grades its members, disseminates information designed to keep its members up to date with developments in the industry, and keeps a job placement register.
8. More specifically, it appears from the order for reference that the Institute's object (Object (h)) is primarily to take steps to improve the status of approved members of the Motor Trade and secure recognition of their position.
9. Object (h) is reflected in the Report of Council of 12 June 1996 attached to the Institute's Annual Report for the year to 31 March 1996. The report states that the principal activity of the Institute during the year was to progress the improvement of professional standards of individuals throughout the industry, that is to say the whole scope of the motor industry but not the manufacturing section. That object has been pursued by two means. The Institute has established the structure and standards of qualifications and grades of membership. Previously, persons engaged in the motor industry had obtained qualifications in a variety of ways, with franchise networks often conducting their own training and certification. The system of joint certification with the Institute as an awarding body has enabled the Institute to establish recognised common standards. The objective is, therefore, the building of a career structure within the industry based on qualifications.
10. The other means of achieving Object (h) is through the Institute's Professional Reassurance Campaign. This involves the issue of a brass plaque to organisations whose management staff are, as to 60 per cent or more, Institute members. The plaque is designed to provide reassurance to customers and to the workforce of the organisation.
11. A further object of the Institute is (Object (c)) to hold examinations from time to time to test the knowledge and proficiency of applicants for membership and of existing members of the Institute in commercial, legal and engineering subjects, and any other sciences, arts and other subjects which in the opinion of the Institute are necessary or desirable to recommend to its members for study and qualification.
12. The Institute pursues this object in various ways. It awards its own vocational engineering qualifications to its members. It awards a certificate of management. It approves higher education automotive courses and programmes. It is an awarding body for NVQs and SVQs. Training for those qualifications is carried out by other bodies and organisations. The Institute provides training for assessors.
13. Another of the Institute's objects (Object (k)) is to take joint action with any such other Company or Association ... by way of propaganda or otherwise which the Company may deem to be to the interest and betterment of the Motor Trade and its members.
14. The VAT and Duties Tribunal relates that, as regards the procedure for attaining its aims, Object (b) of the Institute's memorandum of association is to establish the work of the ... Association as a corporation recognisable by law, and if thought fit, in due course to apply for a Royal Charter or other form of incorporation into which the present corporation may merge.
15. Object (d) of the Institute is then to grade and divide the membership of the Institute into such divisions as may from time to time be deemed to be desirable in pursuit of the objects of the Institute. On 1 July 1996 there were said to be 26121 members.
16. The Institute also pursues its aims by having as its objects to grant prizes and diplomas to members of the motor trade and allied industries (Object (g)), and to organise and hold meetings for the discussion of subjects of interest to the Motor Trade, or for any other purpose in accordance with the objects of the Institute.
17. In addition to the abovementioned aims, Object (i) of the Institute is subject to the laws affecting maintenance and champerty to take up and defend or pursue or prosecute any action at law or legal proceedings which in the opinion of the Institute involves a question of general importance and interest to the members of the Institute.
18. The Institute's final object (Object (v)) is to do all such other things as are incidental or the Institute may think conducive to the attainment of the above objects or any of them. Under this heading the Institute publishes a range of printed materials and publications.
sec_2 B —
Procedure before the VAT and Duties Tribunal
19. By a decision of 15 January 1996 the Commissioners of Customs and Excise ruled that the Institute did not satisfy the conditions for exemption from VAT under Schedule 9 to VATA, so that its supplies of services to its members in return for their annual subscriptions constituted taxable supplies for VAT purposes.
20. The Institute appealed against that decision to the VAT and Duties Tribunal, London.
21. In the order for reference the VAT and Duties Tribunal sets out the reasons why, in its view, the Institute cannot be brought within the purview of Schedule 9 to VATA.
22. First, the Institute cannot be regarded as a professional association for the purposes of Item 1(b) of Group 9 of Schedule 9 to VATA, because its members are drawn from too diverse a range of activities. Professional associations, within the meaning of that provision, consist exclusively of bodies serving the interests of persons who apply particular specialised skills enabling them to offer specialised services, whereas members of the Institute are engaged in a wide range of differing activities, the only thing they have in common being that they are all employed in the retail motor trade.
23. Nor, moreover, can the Institute, in the VAT Tribunal's view, be deemed to be an association within the meaning of Item 1(c) of Group 9, inasmuch as its primordial purpose is not the advancement of a particular branch of knowledge or the fostering of professional expertise of the profession common to all its members.
24. Finally, according to the VAT Tribunal, the Institute does not fall within the scope of Item 1(a) of Group 9 because it is not a trade union whose main object is the negotiation on behalf of its members of the terms and conditions of their employment.
25. Before the VAT Tribunal the Institute submitted that it constitutes a trade union for the purposes of Article 13A(1)(1) of the Sixth Directive. In that connection it was argued on behalf of the Institute that, if the expression aims of a trade-union nature read in the French language version, i. e. organismes ... poursuivant des objectifs de nature ... syndicale ... covers an employers' organisation, then its scope must be much wider than that of trade-union as understood in the English language. If Article 13A(1)(1) is so construed, then the Institute's supplies of goods and services must qualify for exemption from VAT.
26. However, the VAT Tribunal, relying on the ordinary meaning of the term trade union, as used in the English language version of Article 13A(1)(1) of the Sixth Directive, came to the conclusion that the Institute's supplies of goods and services could not enjoy exemption under that provision.
27. Moreover, the VAT Tribunal points out that the term syndicale and its equivalents which are used in certain language versions, including the French version, appear to be used in a broader sense than the term trade-union and its equivalents appearing in other language versions including the English one.
28. Consequently, the VAT Tribunal raises the question whether, in light of the French language version of Article 13A(1)(1) of the Sixth Directive, the Institute constitutes an (organisation with aims of a trade-union nature (organisme poursuivant des objectifs de nature syndicale).
29. Furthermore, the VAT Tribunal did not consider that exemption from VAT for supplies of goods and services by the Institute to its members had the result of distorting competition, as was contended on behalf of the Commissioners.
sec_4 IV —
The preliminary question
30. In the context of the dispute pending before it, the VAT and Duties Tribunal, London, taking the view that a question arose as to the compatibility of the national legislation at issue with the Sixth VAT Directive, referred the following question to the Court for a preliminary ruling: In the light of the findings of fact in paragraphs 3-19 and 21 of the [order for reference] and in circumstances of the sort found in paragraph 21 (which is summarised below), are the services supplied by such an association, being a non-profitmaking organisation, exempt from VAT as falling within the scope of Article 13A. 1(1) of the Sixth Directive by virtue of the following words ... organisations with aims of a... trade-union ... nature ...? Paragraph 21, in summary, states that the [Institute] is a voluntary association of individuals comprising employees in the retail motor industry. The primary purposes of the [Institute and its members] are the improvement of the standards of its members at work, the improvement of career structures within the different sectors of the industry and the consequent enhancement of the public perception of the industry and the persons working within it. The [Institute] seeks to achieve these ends by responding to the requirements of the industry for skills at all levels, by validating courses (run by other institutions) that teach these skills, by making awards on completion of those courses and by grading its members, by disseminating information designed to keep its members up-to-date with developments in the industry and in their skills and by keeping a job placement register.
sec_5 V —
Reply to the preliminary question
31. The Institute and the Commission take the view that the expression organisations with aims of a ... trade-union ... nature in Article 13A(1)(1) of the Sixth Directive covers the Institute, adding that the French language version is wider than the corresponding English one.
32. Conversely, the United Kingdom Government takes the view that the term in question means organisations which are not necessarily trade unions but whose aims in relation to their members are of the same nature as those of a trade union to its members. Accordingly, it concludes that the expression organisations with aims of a trade-union nature covers non-profitmaking organisations which (a) work to defend the collective interests of their members (whether they be employees or self-employed persons) and (b) represent the interests of their members (depending on the case) vis-a-vis employers, government bodies and others. Accordingly, organisations such as the Institute do not fall within the scope of that expression.
33. I should observe, then, that there are evidently discrepancies in the different language versions of the term trade-union used in the English text which has a specifically narrow meaning referring to workers' trade unions and not applying to bodies such as the Institute.
34. Conversely, the French language version refers to organismes sans but lucratif poursuivant des objectifs de nature syndicale. However, the French term syndical has a wider meaning than the English term trade-union. In French it refers to matters relating to a professional organisation or association and those relating to a workers' trade union. The latter meaning corresponds to the English term trade-union. Again, in French, the term syndicat means an organisation whose object is the defence of common interests, such as professional interests.
35. Schematically, it may be said that the terms used in the different official languages of the Community in order to render the term in issue aims of a trade-union nature are couched in either narrow or broad terms.
36. The term aims of a trade-union nature which principally means aims of a workers' union is the narrow rendering. The corresponding terms in the German (gewerkschaftliche), Danish (fagforeningsmæssig), Finnish (ammattijärjestöllisiä) and Greek () also reflect that narrow rendering.
37. Conversely, the term objectifs de nature syndicale, which includes professional associations which are not workers' unions, constitutes the broad rendering. The corresponding terms in Italian (sindacale), Dutch (syndikale), Spanish (sindical), and Portuguese (sindical) have the same meaning.
38. Where there are such linguistic discrepancies, the English version must be interpreted in the light of the other language versions, in order to discover the meaning common to all the language versions.
39. The question of linguistic discrepancies in the rendering of terms or expressions in legislative texts of the Community institutions has already exercised the Court which, for example, in the Stauder case, held that: When a single decision is addressed to all the Member States the necessity for uniform application and accordingly for uniform interpretation makes it impossible to consider one version of the text in isolation but requires that it be interpreted on the basis of both the real intention of its author and the aim he seeks to achieve, and in the light in particular of the versions in all four languages. The Court went on to emphasise that: It cannot, moreover, be accepted that the authors of the decision intended to impose stricter obligations in some Member States than in others.
40. Thus, in resolving this problem, the Court's case-law can be of assistance. In Cricket St. Thomas, the Court held that the formulation in one of the Community's languages (in that case English) cannot serve as the sole basis for the interpretation of that provision, or be made to override the other language versions in this regard. Such an approach would be incompatible with the requirement for the uniform application of Community law. The Court went on to emphasise that in the case of divergence between the language versions the provision in question must be interpreted by reference to the purpose and general scheme of the rules of which it forms a part.
41. Thus, it is necessary in the present case to determine the aim pursued by the Community legislature by means of the provision at issue so that it may be possible by way of a teleological interpretation to arrive at conclusions concerning the meaning of the term under examination.
42. At the outset I would observe that the purpose of the Sixth VAT Directive is the harmonisation of the laws of the Member States relating to turnover taxes by means of the creation of a common system of value added tax and a uniform basis of assessment. It was also stated (11th recital) that a common list of exemptions should be drawn up so that the Communities' own resources may be collected in a uniform manner in all the Member States. It follows from that recital, as moreover the Court has repeatedly emphasised, that the exemptions constitute independent concepts of Community law which ... should be placed in the general context of the common system of VAT introduced by the Sixth Directive.
43. Moreover, I would observe that the basic guiding principle to be inferred from the purpose and general economy of the provisions of the directive is the subjection to VAT, as a matter of principle, of every supply of goods or services effected for valuable consideration (see Article 2). Thus, the Sixth Directive confers on VAT a wide scope of application.
44. The Sixth Directive also provides for exemption from VAT, by way of exception, of certain limitatively enumerated activities of general interest, that is to say activities enumerated therein (Article 13). Consequently, where a general principle is derogated from, the exemption must be strictly interpreted because, as the Court has, moreover, held, any interpretation which would widen the scope of Article 13(A) would be inconsistent with the aim of the provision. Moreover, the Court has clarified that Article 13 of the Sixth Directive does not provide exemption for every activity performed in the public interest, but only for those which are listed and described in great detail. The Court has therefore declined to apply an extensive interpretation of the exemptions permitted under the Directive where there are no interpretative elements to allow extension of the exemption permitted under the relevant provisions and in particular Article 13.
45. Accordingly, a systematic interpretation of the provisions of the Sixth Directive guides us to a construction of the term before the Court which is consistent with the Directive's guiding principle.
46. We come therefore to the issue, under Community law, of the definition of aims of a trade-union nature for the purposes of the Sixth Directive, that is to say, what those aims comprise.
47. I do not consider that any carrying on of an activity or pursuit of an aim which may happen to interest or concern a trade union, or a trade-union or professional organisation, can constitute aims of a trade-union nature. Nor, moreover, can the exercise of any activity on the part of its members suffice for an organisation to be said to constitute a body pursuing aims of a trade-union nature and, consequently, for it to come within the terms of the expression Organisation with aims of a ... trade-union ... nature', in such a way as to be covered rattorte personae by the exemption from VAT provided for in Article 13A(1)(1).
48. Accordingly, the better interpretation, in my view, of the relevant expression in Article 13 is that it refers to the substantive aims of trade-union activity and accordingly covers those non-profitmaking organisations which, irrespective of their legal form, pursue such aims.
49. The fact that Article 13 A(1)(1) lists a whole series of adjectives describing the types of aims which those bodies may pursue (political, trade-union, religious, patriotic, philosophical, philanthropic or civic) does not, in my view, mean that the Community legislature intended in that way to include all organisations set up in the interests of their members provided that they were non-profitmaking and not likely to distort competition, as the Commission maintains. Rather it sought to determine which organisations of a nonprofit making nature and not likely to distort competition qualify for exemption from VAT.
50. In order to identify the demarcation line in law as between aims of a trade-union nature and those of a non-tradeunion nature, for the purposes of the Sixth Directive, I believe that the Court's case-law can be of assistance. In ASTI which concerned a Community provision which was not subject to a narrow interpretation, unlike Article 13 in this case, the Court held that the provision in question constitutes a particular expression of the principle of nondiscrimination in the specific field of workers' participation in trade-union organisations and activities and that its applicability cannot be limited on the basis of considerations relating to the legal form of the body in question. The Court further held that the bodies at issue in that case did not include merely bodies which were not ... in law, trade-union organisations, but also those which perform similar functions as regards the defence and representation of workers' interests.
51. The decision in ASTI may therefore provide two elements relevant to the issue now before the Court which enables us to apply an operational criteria in approaching the term trade union under Community law. Thus, the epithet trade-union is proper to an organisation which, irrespective of its legal form, has as its aim the defence (safeguarding and promoting) of the interests of its members (whether workers, employers of the liberal professions or also generally persons carrying on any economic activity) and their representation. Consequently, it is not sufficient for a non-profitmaking organisation simply to promote the interests of its members where that does not go hand in hand with the defence of those interests and representation of its members in regard to decision-makers affecting it.
52. Consequently, the question to be determined is whether, as a consequence of that legal classification, a distinction is drawn in national legislation between the charging to VAT or exemption therefrom of supplies of goods and services to their members to the detriment of those organisations which, even though they pursue trade-union aims within the meaning of the Sixth Directive, are none the less required to pay the corresponding VAT.
53. Conversely, if that condition of pursuit of trade-union aims is not met, there can be no question of an infringement of the principle of equal treatment in the sense of unequal treatment of equivalent economic activities, as the Institute maintains, according to which there are no differences as to the nature and operation of the economic activities in question when they are carried on by organisations which pursue trade-union aims and when they are carried on by organisations not having those aims, even if they are nonprofit making and there is no risk of a distortion to competition. For in such a case there would be different treatment of different situations and that is not precluded by Community law.
54. Moreover, I believe that the written answer by the Commission to the European Parliament (No 831/82) on the subject of exemption from VAT for organisations of a trade-union nature goes in the same direction as my definition of the expression organisations with aims of a trade-union nature. That reply is as follows: The Commission is indeed aware of the linguistic discrepancies in the wording of Article 13(A)(1)(l) of the Sixth Directive. Terms such as syndical and sindacale, which cover a variety of meanings, are used in some language versions while the terms used in others are very specific (e. g. trade-union and gewerkschaftlich). The Commission feels that these discrepancies should not, in practice, affect non-profitmaking organisations (whether trade, employers' or employees' organisations) whose activity is confined to representing the collective interests of their members. In such cases, these organisations act as the collective emanation of their members whose subscriptions are then a tangible manifestation of their membership of a collective organisation and do not represent a consideration for services rendered. Such organisations should therefore be outside the scope of VAT. Organisations of the kind referred to above whose activity is not confined to representing the collective interests of their members are liable to fall within the scope of the tax where the subscriptions charged by them do, in fact, represent a consideration for individual services supplied to members (emphasis added).
55. Moreover, in my view, where a body acts, in accordance with its objects clause, as a lobbying or pressure group on decision-makers concerning, in the widest possible sense, the sector of activity which it represents, that body cannot be deemed to be excluded from the category of bodies having aims of a trade-union nature within the meaning of the Sixth Directive. Accordingly, it may be eligible for exemption from VAT under Article 13(A)(1 )(l) of the Sixth Directive, where the two criteria mentioned in that provision are satisfied: (a) it is a non-profitmaking organisation and (b) exemption in respect of its activities does not create the risk of a distortion of competition. Thus I consider that it is not sufficient for such an organisation and, more generally, any non-profitmaking professional organisation to be active in providing goods and services in the common interest of its members, but rather it must have as its object the furtherance and defence of the interests of its members and their representation, as stated above.
56. In each case it is thus a question of fact for the national court to determine whether a non-profitmaking organisation has as its object the defence of the interests and representation of its members in order for it to be deemed to be pursuing aims of a trade-union nature within the meaning of Article 13(A)(1)(l) of the Sixth Directive.
57. In the present case, if we examine the aims pursued by the Institute and the means used to attain them, as stated in the order for reference, we see that it seeks to improve the professional standard of its members and to improve career structures in the different sectors of the industry, and consequently to enhance public perception of the industry and the people working in it. To that end the Institute consciously responds to the industry's requirements for skills for specific personnel (from senior management level to technical levels), validates courses (organised by other institutions) for the teaching of specific skills, makes awards to persons completing those courses, grades its members, disseminates information designed to keep its members up to date with developments in the industry, and keeps a job placement register.
58. Since, as we have seen, the term trade union in Community law is proper to an organisation which, irrespective of its legal form, has as its aim the furtherance and defence of the interests of its members (whether workers, employers or the liberal professions) and their representation, it is difficult to accept that the Institute can be included amongst the bodies with aims of a trade-union nature. I would point out that the United Kingdom Government emphasises in its written observations (paragraph 19), and repeated at the hearing in reply to a question in that connection from the Court, that the Institute has never suggested that any of its members have ever turned to it for the defence and representation of their interests vis-a-vis employers or anyone else, and that the members of the Institute would, if necessary, turn to the trade unions of which they are members for that purpose.
59. Accordingly, if it were accepted that a nonprofit making body, such as the Institute, constitutes an Organisation with aims of a trade-union nature', that would be to extend the exemptions from VAT to cases not provided for by the terms of Article 13(A)(1)(1) of the Sixth Directive, which are to be strictly construed. Nor do I believe that it is possible to construe the exemption more extensively than is provided for in the relevant article.
60. Furthermore, if that were to be accepted and the phrase in question were to be construed so widely, that would be likely to open the way to the overturning of the provisions of the Directive since it would offer such organisations a plausible way of gaining exemption from their obligations to pay VAT to the detriment of Community finances.
61. In my view, a professional association such as the Institute cannot be regarded as pursuing aims of a trade-union nature within the meaning of the Directive because the result of unreasonably stretching the limits of that concept would be to water it down. Thus, organisations such as that described by the national court cannot be subsumed under the concept of organisations with aims of a trade-union nature because to do so would be to alter the content of that vague legal concept with the result that it would end up being a concept having nominal value only and being without any binding legal effect and, in the final analysis, without any specific practical usefulness.
62. Finally, an argument in support of the view here advocated may also be drawn from the preparatory document which led to the adoption of the provision of Article 13 under examination, which allows us to discern the intention of the legislature. I would observe that, in the Economic and Social Committee's opinion of 31 January 1974 on the draft Sixth VAT Directive, reference was made for the first time to the exemption of trade unions, professional organisations, churches etc. (emphasis added). Thus, that opinion specifically mentioned trade unions, professional organisations, churches and stated that the same rules should govern other equivalent institutions, which it did not lay down, in so far as their activities are not governed by public law and they are not already exempted from VAT on that ground.
63. It was the Economic and Social Committee's view that exemption from VAT would be possible to the extent to which trade unions and professional organisations did not engage in competitive operations, such as commercial transactions or the giving of advice involving payments separate from the general contributions and varying according to the extent of the services rendered. In the same opinion we see that such exemption was deemed to be particularly appropriate as regards trade-union contributions since otherwise trade unions' income from contributions would be reduced by the amount of the tax without the members being able to deduct this tax, as they themselves are not taxable persons.
64. In light of that opinion by the Economic and Social Committee, I would observe that the text of Article 13(A)(1)(l) determines which bodies are to be exempted, simply mentioning bodies pursuing aims of a trade-union nature and making no mention of professional aims in general. Thus that provision, as it applies, is narrowly drawn. For that reason I am led to the conclusion that only bodies pursuing aims of a trade-union nature, in the manner described above, can qualify for VAT exemption.
sec_6 VI —
Conclusion
65. In light of the foregoing analysis I propose that the Court should give the following reply to the question referred to it by the VAT and Duties Tribunal, London: Article 13(A)(1)(l) of Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, must be construed as meaning that an organisation with the characteristics described in the order for reference cannot be deemed to be pursuing aims of a trade-union nature and, accordingly, the services which it supplies to its members are not exempt from VAT.