Keywords
Summary

Keywords

1. Tax provisions - Harmonisation of laws - Turnover taxes - Common system of value added tax - Deduction of input tax - Introduction of special derogating measures - Measures to combat tax evasion or avoidance - Decision 89/487 - Exclusion of the right to deduct tax on certain expenditure in respect of accommodation, food, hospitality and entertainment - Breach of the principle of proportionality - Unlawful

(Council Directive 77/388, Art. 27; Council Decision 89/487)

2. Community law - Principle of the protection of legitimate expectations - Reliance on the principle by a Member State to avoid the consequences of a decision of the Court declaring a Community measure invalid - Not permissible

Summary

1. Council Decision 89/487, adopted on the basis of Article 27 of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, which provides that a Member State may be authorised to introduce special measures for derogation from the Sixth Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance, and authorising the French Republic to apply a measure derogating from the second subparagraph of Article 17(6) of the Sixth Directive, is invalid under the general principle of proportionality, in so far as it authorises that State to deny traders the right to deduct the value added tax on expenditure which they are able to show to be of a strictly business nature.

Since the measure excludes as a matter of principle all expenditure in respect of accommodation, hospitality, food and entertainment from the right to deduct value added tax, which is a fundamental principle of the value added tax system established by the Sixth Directive, although appropriate means less detrimental to that principle than the exclusion of the right of deduction in the case of certain expenditure can be contemplated or already exist in the national legal order, it is not a means proportionate to that objective and has a disproportionate effect on the objectives and principles of the Sixth Directive.

( see paras 35, 57, 61-62 and operative part )

2. The principle of the protection of legitimate expectations, which is the corollary of the principle of legal certainty and which is generally relied upon by individuals (traders) in a situation where they have legitimate expectations created by the public authorities, cannot be relied on by a Member State in order to avoid the consequences of a decision of the Court declaring a Community provision invalid, since it would jeopardise the possibility for individuals to be protected against conduct of the public authorities based on unlawful rules.

( see para. 67 )