(Case C-82/12, Judgment of 27 February 2014)

Directive 92/12/EEC established rules relating to excise duties in the EU so as to prevent additional indirect taxes from obstructing trade. This directive covers inter alia petrol, diesel, heavy fuel oil and kerosene.

Nevertheless, the directive provides that mineral oils may be subject to indirect taxation -other than the harmonised excise duty established by the directive- when the tax in question meets the following conditions:

  • It pursues one or more specific purposes.
  • It complies with the tax rules applicable to excise duties or VAT concerning the determination of the tax base and the calculation, chargeability, and monitoring of the tax.

Based on  this,  Spanish  authorities  established a tax on the retail sale of certain hydrocarbons, more concretely petrol, diesel, fuel oil and paraffin, known as the “IVMDH” (from its Spanish initials). This tax, in force from 2002 to 2013, was intended to finance the new competences transferred to the Spanish Autonomous Communities on health and, where relevant, environmental expenditure.

The haulage Catalan company Transportes Jordi Besora S.L., considered that the IVMDH was incompatible with the directive and requested the authorities a refund of 45.632,38 EUR, the amount of IVMDH paid as final consumer between 2005 and 2008.

In this context, the High Court of Justice of Catalonia decided to ask the EU Court of Justice whether the Spanish tax was compatible with EU law.

First, the Court has indicated that the revenue obtained from the IVMDH was allocated to the Autonomous Communities in order to finance certain of their competences. In this sense, the Court  has  considered  that  the  reinforcement of the autonomy of a  regional  authority through the grant of a power to generate tax income constitutes a purely budgetary objective that cannot, on its own, constitute a specific purpose. Even if the revenue from the IVMDH was used to cover health expenditure, this is just a matter of internal organisation of the Spanish budget, and therefore, it is not sufficient to sustain that it had a specific purpose. If any purpose could be regarded as specific, the harmonised excise duty established by the directive would be deprived of all practical effect.

The Court has also stated that, in order to be regarded as pursuing a specific purpose, the IVMDH should have been by itself addressed to protect health and environment (for instance, by reducing the social and environmental costs specifically linked to the consumption of the mineral oils on which that tax is imposed). In this particular case, the Autonomous Communities’ health expenditure in general is not specifically linked to the consumption of the taxed hydrocarbons and such expenditure may be financed by all kinds of taxes.

In addition, the Court has underlined that the Spanish legislation does not provide with any mechanism for the allocation of revenue from the IVMDH to environmental purposes  and  therefore the tax could only be regarded as directed to protecting the environment if its structure was designed in such a way as to dissuade taxpayers from using hydrocarbons or to encourage the use of less contaminating products, which was not the case.

Finally, the Court has analyzed the request from the Generalitat de Catalunya and the Spanish Government to limit in time the effects of the judgment in the event that the IVMDH was declared to be contrary to EU law. In their opinion, the tax has led to abundant litigation and the revenues reached approximately 13 billion EUR between 2002 and 2011. The repayment of such an amount would jeopardise the financing of public health in the Autonomous Communities.

The Court has reminded that limiting the effects of a judgment is very exceptional and can only be awarded if two criteria are met: (i) parties concerned have acted in good faith; and (ii) there is a risk of serious difficulties.

As for the first condition, the  Court  considers that in this case it cannot be accepted that the authorities acted in good faith  in  maintaining the IVMDH in force for more than 10 years. In addition, the Court has indicated that it had already ruled, in 2000, on a tax with analogous features to those of the IVMDH and that a year later, the European Commission had warned Spain that such a tax would be incompatible EU law, warning that actually led to an action for infringement.

In relation to the financial consequences, the Court has concluded that limiting the temporal effects of a judgment solely on this basis would be contrary to the judicial protection of the rights which taxpayers have under the EU tax legislation.