In a judgment rendered on 27 June 2013, the European Court of Justice ruled against the Commission’s claim of failure to fulfill obligations against the French State for a new tax it had levied in violation of Directive 2002/20/EC (the “Authorization Directive”). The directive harmonized the authorization conditions for the provision of electronic communications services in the territories of the Member States and provided that charges levied for such authorizations should be limited to covering the actual administrative costs for those activities.
In the Albacom case (Judgment of 18 September 2003, Case C-292/01), the Court of Justice held that the directive limited the fiscal autonomy of the Member States by prohibiting them from introducing charges due by reason of the holding of a license, since “the common framework of general authorizations and individual licenses for telecommunications services […] would be rendered redundant if Member States were free to establish the financial charges to be borne by undertakings in the sector”. The Court therefore held that a turnover tax imposed by the Italian State on all undertakings holding individual authorizations for the provision of telecommunications services was contrary to the directive..
The telecoms tax, introduced in France to offset the loss of revenue related to the public channels ceasing to broadcast advertisements after 8 p.m., is broadly comparable to the Italian tax in that it is imposed on all companies holding a general authorization (i.e. those having made a preliminary declaration to the telecom regulator ARCEP), and that it is based on turnover.
But on 27 June 2013 and against all expectations, the Court of Justice set aside the Albacom ruling on the grounds that, contrary to the Italian legislation, the French law provides for some exemptions and abatements (e.g. the tax is not payable where turnover is less than EUR 5 million) and the trigger for the charge is not the holding of an authorization but relates to the activity of providing electronic communications services to users in France. The Court thus ruled that the tax falls outside the scope of application of the directive.
This outcome is highly debatable. The setting aside of the Albacom case law, which related to a similar tax, and the distinction made by the Court between a tax due because of the holding of an authorization and a tax due because of the exercise of telecom activities appear artificial and baseless. With the harmonization of conditions for issuing authorizations and for taxes imposed for such activities, the objective of the directive is clearly to ensure that telecom operators can freely exercise their activity through the removal of obstacles, particularly financial ones, to the provision of those services. The interpretation of the Court of Justice disregards that objective and makes it very easy for Member States to circumvent the prohibition on introducing a charge (not intended to cover administrative costs) related to the holding of an authorization to provide telecommunications services.