Hola! As yesterday’s readers will know, I am currently in Madrid working from Olswang’s new Spanish office, soI thought it appropriate to give today’s post something of a Spanish slant as Spain has been attracting Neelie Kroes‘ (Europe’s Digital Agenda Commissioner) ire this week.
On 14 March she referred Spain (and France) to the European Court of Justice on the basis that their imposition of turnover related levies which were then directed towards funding broadcasters. The Commission press release notes that: ‘A law on financing the Spanish public broadcaster RTVE entered into force in September 2009 and imposed a charge of 0.9% on the gross revenues of telecoms operators to make up for the loss of revenue from paid advertising this broadcaster. In October 2010, telecoms operators made the first payments to CMT, the national telecoms regulator. The charge was expected to generate revenue of around €230 million in 2010.’ and goes on to explain that the basis of the reference: the levy is incompatible with EU telecoms rules and in particular Article 12 of the telecoms Authorisation Directive (2002/20/CE), which provides that charges can be levied on telecoms operators only to cover certain administrative and regulatory costs (mainly authorisations and regulatory functions) and should be objective, transparent and proportionate.
On the same day, she requested Spain (and this time Hungary as well) get on with ensuring that the necessary national implementation rules are in place to permit refarming of existing 900 MHz GSM spectrum by the 9 May deadline. Whilst the request has no legal force, the Commission is clearly concerned at the apparent lack of progress and failure to respond may well lead to further infringement action against Spain.
The European Commission referral to the European Court of Justice regarding the taxes imposed to telecom operators for financing the Spanish public broadcaster RTVE coincides with two preliminary rulings issued at the end of 2010 by the Spanish Supreme Court regarding local taxes levied “for privative use and special benefit constituted on, over or under local public domain in favour of companies providing mobile services”.
Thus, in two independent judicial procedures the Supreme Court has decided to issue identical preliminary rulings asking the EC Court of Justice a series of questions about the compatibility with EU law of certain provisions contained in local regulations. More concretely:
(a) In first place, if establishing a fee for rights to install resources on local public domain to operators using the network for the provision of mobile telephony services but that are not the holders thereof, is in accordance with Article 13 of the Authorisation Directive. The Supreme Court states that both, the literal interpretation of Article 13 and a systematic interpretation of the 2002 Electronic Communications Directives, lead to consider that it would only be possible to levy this type of fee on operators that are the holders of the networks, of the installed resources, and not to those that use them to provide mobile services but that are not the holders of such, and that only benefit from rights of use, access or interconnection with regard to them.
(b) Secondly, whether the conditions in which the fee is demanded observe the principles of objectivity, proportionality and non-discrimination required by the above-mentioned Article 13 of the Authorization Directive, and allows ensuring an optimal use of the resources. The Supreme Court believes that the regime established in the local regulations would go against the principle of proportionality because it imposes a tax of the same amount and intensity to all operators, being or not the holders of the resources installed in local public domain. The Supreme Court states that a higher tax effort should be required to those occupying said public domain more intensely, as the situation of the holders of the installed networks is not the same as the situation of those who simply use them on an access or interconnection basis. In this sense, the Supreme Court also brings the principle of non-discrimination up, considering that the same tax regime is established for all operators without taking into account their condition or the characteristics of the occupation. It also states that, for these purposes, it will be revealing (i) if the amount of the tax assessment is the same independently of if the operator to which the tax is imposed on has its own network installed, or if it has rights of use regarding third parties´ networks or it just receives interconnection services; and (ii) the amount of the tax is the same, both if the operator has the network installed in local public domain and if the operator has no installations therein. Finally, it states that basing the tax quantification on the volume of income obtained by the mobile operators in the municipality would infringe the principle of objectivity.
(c) Thirdly, if Article 13 of the Authorization Directive meets the conditions required by case law to have a direct effect, so that not having been implemented into internal Law in time or if its implementation has been defectively carried out, it may be invoked before the national courts although there is any internal disposition contradicting it.
The infringements reported in these proceedings concern numerous municipal ordinances (around 1393) which have been approved by Spanish City Councils in recent years in order to tax mobile operators for the occupation of local public domain or for receiving interconnection services from other operators that make this occupation. Should the EU Court of Justice finally confirm the Spanish Supreme Court opinion, this would mean the local taxes being void. Although the proceedings refer to the tax imposed to operators providing mobile services (which is subject to a slightly different local tax regime), the legal basis put forward by the Supreme Court would also be suitable to challenge the tax imposed on fixed operator. With more than 8000 municipalities in Spain, the financial relieve of not network holder operators would be substantial.
Blanca
Thank you for explaining the detail behind the headline. The sheer number of different local ordinances would impose a substantial compliance costs and burden over and above the cost of the tax itself. Look forward to hearing more from you and the team on Spanish telecoms developments.
Rob