W Emmett & Son Ltd (No. 2)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 07 October 1991 |
| Date | 07 October 1991 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Amsterdam Bulb BV v Produktschap voor Siergewassen (Case No. 50/76) [1977] ECR 137; CMR §8391
Becker v Finanzamt Münster-Innenstadt (Case No. 8/81) [1982] ECR 53
Bulmer v BollingerUNK [1974] 2 All ER 1226
Council of Civil Service Unions v Minister for the Civil ServiceELR [1985] AC 374
Drexl, Re [1988] ECR 1213
Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (Case No. 11/70) [1970] ECR 1125; CMR §8126
R v Secretary of State for Home Department, ex parte BrindWLR[1991] 2 WLR 588
Serious misdeclaration penalty - Whether penalty provisions offended against European Community law - Doctrine of proportionality - Whether imposition of a penalty unrelated to conduct offended against doctrine - Whether appellant could rely on doctrine as ground of appeal against penalty - Finance Act 1985 section 14Finance Act 1985, sec. 14; Sixth Directive 77/388 of 17 May 1977, eu-directive 77/388 article 22 art. 22 (OJ 1977 L145/1).
The issue was whether the appellant company was entitled to rely on the Community law doctrine of proportionality as a ground of appeal against an assessment for a serious misdeclaration penalty.
Following on from the decision arising out of a previous hearing ((LON/90/1316) No. 5459; (1990) 5 BVC 1434) as to whether the appellant had a reasonable excuse for its conduct giving rise to the imposition of a penalty or had made voluntary disclosure of the inaccuracy concerned, the case was relisted for hearing of the issue of proportionality.
At the hearing the appellant contended (1) a penalty unrelated to the culpability of conduct breached the doctrine of proportionality, such a penalty not being strictly necessary for the purposes of the public interest; (2) the penalty provision contravened Community law because it infringed the taxpayer's basic right to freedom to enjoy his property.
The commissioners accepted that there was a doctrine of proportionality but contended that it did not apply in the instant case.
Held, dismissing the company's appeal:
1. There was House of Lords authority for the proposition that the doctrine of proportionality was not part of the law of the UK.
2. A taxpayer could attack a national law which provided for penalties that were intended to enforce a directly effective provision of a directive but which breached the principle of proportionality.
3. Parliament was entrusted with the task of implementing the sixth directive and to interfere beyond limits permissible under UK law would be an abuse of the supervisory jurisdiction of a court or tribunal.
4. To determine whether the doctrine of proportionality had been breached by the penalty provisions would necessitate a detailed enquiry into administrative matters which the tribunal was not in a position to undertake.
5. The question of infringement of the freedom to enjoy property rights came down essentially to the issue of proportionality, which issue the tribunal had decided against the appellant.
6. The tribunal refused to refer that issue to the European Court of Justice for a preliminary ruling as, important though the question was, the delay involved might cause considerable administrative difficulties for the respondents.
[The tribunal set out the facts summarised above and continued as follows.]
Before we consider the arguments that were put before us it may, we think, be helpful to set out certain features of the historical background to the legislation with which we are concerned, namely the Finance Act 1985. The Treaty of Rome which established the European Economic Community provided by eu-treaty treaty article 2art. 2 that the Community should:
have as its task, by establishing a common market and progressively approximating economic policies of Member States, to promote throughout the Community a harmonious development of economic activities …
eu-treaty treaty article 3Article 3 of the Treaty indicated various activities that the Community was to carry out in order to achieve the purpose set out above. Included amongst these specific activities was:
the approximation of the laws of Member States to the extent required for the proper functioning of the Common Market
(See eu-treaty treaty article 3(h) art. 3(h)).
These provisions made it clear that the method to be adopted was the bringing closer together or "approximation" of economic policies and the laws of the member states. Later this approach was taken a stage further when eu-treaty treaty article 8(a)art. 8(a) was added to the Treaty and provided that the community should adopt measures with the aim of progressively establishing by the end of 1991 the internal market, that is an area without internal frontiers and in which the free movement of goods, persons, services and capital was to be assured. This was to be achieved, inter alia, in accordance with the provisions ofeu-treaty treaty article 99art. 99 of the Treaty which, so far as relevant was in these terms:
The council … shall adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market …
So once again it was by harmonising the tax laws of the member states that the progress towards the internal market was to be achieved. It was the pursuance of these objectives that the first and second and later sixth directive of the EEC were issued. When one reads the various articles of sixth directive it becomes clear that though certain fundamental features of the law such as, e.g. its scope (eu-directive 77/388 article 2art. 2), its territorial application (eu-directive 77/388 article 3art. 3) are laid down in categorical terms many of its provisions relating to the detailed application of the tax leave the member state some discretion as to how the provisions are to be implemented.
This method of moving towards the internal market is in line with the well known proposition that council directives are to be binding as to the results to be achieved but the precise method of achieving the results laid down is left to the member states. In other words the tax laws of all the member states are not to be made precisely the same but are required by their own chosen methods to achieve the same ends.
In this appeal we are concerned with the provisions ofeu-directive 77/388 article 22art. 22 which appears in Title XIII which is entitled " Obligations of Persons Liable for Payment". eu-directive 77/388 article 22Article 22 is itself headed "Obligations Under...
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