On 9 September 2021, the ECJ issued the AG Opinion in the case C-213/19 (Commission v United Kingdom). This is not a VAT case, though refers to and has impact on VAT aspects and the so-called ”Own resources accruing from VAT”.
Context: (Failure of a Member State to fulfil obligations – Article 4(3) TEU – Article 310(6) and Article 325 TFEU – Action to counter fraud – Requirement of effectiveness – Obligation to make own resources available to the EU budget – Financial liability of Member States – Customs union – Council Regulation (EEC) No 2913/92 – Community Customs Code – Regulation (EU) No 952/2013 – Union Customs Code – Customs duties – Imports of textiles and footwear from China – Widespread systemic fraud – Organised crime – Missing importers – Customs value – Undervaluation – Customs controls based on risk analysis – Pre-release controls – Lodging of security – Lack of controls – Articles 16 and 17 of the Charter of Fundamental Rights of the European Union – Own resources of the European Union – Council Decisions 2007/436/EC and 2014/335/EU – Council Regulations (EC, Euratom) No 1150/2000 and No 609/2014 – Establishment of a customs debt – Obligation to make own resources available to the European Union – Estimate of loss of traditional own resources – Statistical method based on the cleaned average price and the lowest acceptable price – Value added tax (VAT) – Council Directive 2006/112/EC – Taxable amount for VAT – Own resources accruing from VAT
Article in the EU VAT Directive
Articles 2(1)(b) and (d), 83, 85-87 and 143(1)(d) and (2) of Council Directive 2006/112/EC
Article 83 (Taxable Amount – Intra-Community Acquisition of Goods)
In respect of the intra-Community acquisition of goods, the taxable amount shall be established on the basis of the same factors as are used in accordance with Chapter 1 to determine the taxable amount for the supply of the same goods within the territory of the Member State concerned. In the case of the transactions, to be treated as intra-Community acquisitions of goods, referred to in Articles 21 and 22, the taxable amount shall be the purchase price of the goods or of similar goods or, in the absence of a purchase price, the cost price, determined at the time of the supply.
Article 85 (Taxable Amount – Importation of Goods)
In respect of the importation of goods, the taxable amount shall be the value for customs purposes, determined in accordance with the Community provisions in force.
Article 86
1. The taxable amount shall include the following factors, in so far as they are not already included:
(a) taxes, duties, levies and other charges due outside the Member State of importation, and those due by reason of importation, excluding the VAT to be levied;
(b) incidental expenses, such as commission, packing, transport and insurance costs, incurred up to the first place of destination within the territory of the Member State of importation as well as those resulting from transport to another place of destination within the Community, if that other place is known when the chargeable event occurs.
2. For the purposes of point (b) of paragraph 1, “first place of destination” shall mean the place mentioned on the consignment note or on any other document under which the goods are imported into the Member State of importation. If no such mention is made, the first place of destination shall be deemed to be the place of the first transfer of cargo in the ember
State of importation.
Article 87
The taxable amount shall not include the following factors:
(a) price reductions by way of discount for early payment;
(b) price discounts and rebates granted to the customer and obtained by him at the time of importation.
Article 143 (Exemption – Importation)
1. Member States shall exempt the following transactions:
(d) the importation of goods dispatched or transported from a third territory or a third country into a Member State other than that in which the dispatch or transport of the goods ends, where the supply of such goods by the importer designated or recognised under Article 201 as liable for payment of VAT is exempt under Article 138;
Facts & Questions
The Commission started a procedure against the United Kingdom for not applying the EU Customs rules correctly.
Despite repeated warnings about the risk of fraud by OLAF and the Commission, the United Kingdom failed to put in place risk-based approaches in customs control to prevent the release into free circulation of undervalued goods into the Union (specifically, footwear and textiles exported from the People’s Republic of China) until 12 October 2017.
As a result of that inaction in the face of repeated warnings, the United Kingdom failed to take the risk-based measures required under the Union’s customs and own resources legislation. That failure to take appropriate action also affected the correct application of the Union’s VAT rules.
There have been exceptionally high losses to the Union budget caused by the United Kingdom’s breach of Union law and the resulting levels of imports of undervalued goods to that Member State.
Because the United Kingdom did not follow the Commission’s recommendations, in contrast to other Member States, the United Kingdom attracted more undervalued trade. Those exceptionally high losses also affected drastically fair burden-sharing among Member States, as they had to be compensated by correspondingly higher GNI contributions by the other Member States to the Union.
The Commission therefore asks the European Court to declare that:
- by failing to enter into the accounts the correct amounts of customs duties and to make available the correct amount of traditional own resources and VAT-based own resources in respect of certain imports of textiles and footwear from the People’s Republic of China, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations
AG Opinion
For the reasons set out in this Opinion, I propose that the Court should:
(1) declare that, by failing to take measures during the infringement period to protect the financial interests of the European Union and by failing to enter in the accounts the correct amounts of customs duty relating to certain imports of textiles and footwear from China, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 325 TFEU, Article 13 and Article 220(1) of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, as amended by Regulation (EC) No 648/2005 of the European Parliament and of the Council of 1 April 2005, Articles 3, 46 and Article 105(3) of Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code, Article 248(1) of Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Regulation No 2913/92, as amended by Commission Regulation (EC) No 1335/2003 of 25 July 2003, and Article 244 of Commission Implementing Regulation (EU) 2015/2447 of 24 November 2015 laying down detailed rules for implementing certain provisions of Regulation (EU) No 952/2013 of the European Parliament and of the Council laying down the Union Customs Code;
(2) declare that, by failing to make available to the European Union the correct amount of traditional own resources relating to those imports, the United Kingdom has failed to fulfil its obligations under Articles 2 and 8 of Council Decision 2014/335/EU, Euratom of 26 May 2014 on the system of own resources of the European Union and Council Decision 2007/436/EC, Euratom of 7 June 2007 on the system of the European Communities’ own resources, Articles 2, 6, 9, 10, 12 and 13 of Council Regulation (EU, Euratom) No 609/2014 of 26 May 2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements, and Articles 2, 6, 9, 10, 11 and 17 of Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000 implementing Decision 94/728;
(3) declare that, by failing to disclose to the European Commission the legal assessment of the legal service of Her Majesty’s Revenue and Customs and all the information necessary to determine the amounts of own resources lost as a result of the post-clearance payment notices issued in the context of Operation Snake, the United Kingdom has failed to fulfil its obligations under the principle of sincere cooperation, as enshrined in Article 4(3) TEU;
(4) dismiss the action as to the remainder;
(5) order the United Kingdom to bear its own costs and to pay four fifths of the costs of the European Commission;
(6) order the European Commission to bear one fifth of its costs;
(7) order the Kingdom of Belgium, the Republic of Estonia, the Hellenic Republic, the Republic of Latvia, the Portuguese Republic and the Slovak Republic to bear their own costs.
Decision
Summary
Source
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