A coalition government means, not infrequently, striking and even risky measures. A few dates ago, within the framework of the preparation, which has not yet been negotiated, of the General State Budgets, a pilgrim proposal was slipping: the application of the general VAT rate to private health and education, services that are now exempt in this tax.
From the moment the news broke, there have been all kinds of evaluations and comments on this measure. Surprisingly, what we have not seen is a technical reflection on the viability of the proposal.
We must bear in mind that VAT is a harmonized tax at Community level and any measure taken at national level must be adapted to Community legislation. To understand us, the legislator lacks an all-embracing power to do everything he wants, he must conform to common conditions set, essentially, by the VAT Directive.
The exemption for healthcare is considered in the directive as an obligation for the Member States, which must introduce it as an imperative.
It is true that its application is envisaged by public law entities, in any case; while for private entities it is required that they act “in social conditions comparable” to those of public entities. Until now, those comparable conditions in our Law have been limited to requiring them to act under the authorized or communicated price regime.
It could be thought that this condition provided for in the community regulation opens a door for the proposed measure. But it’s not like that. The Court of Justice of the European Union (CJEU), which guarantees the uniform interpretation of Community regulations, has repeatedly stated that exemptions are Community concepts, which must be interpreted in a uniform manner and that when referring to the legislation of the Member States to define some element of the exemptions, the power that is granted is limited, since it must respect the objectives pursued by the Community regulations. In the case of health exemptions, this objective, as stated by the Court itself, is to reduce the cost of health care; exactly the opposite of what the government coalition in Spain wants, whose purpose is to make certain types of health services more expensive.
That is not all. Particularly in the field of health services, the CJEU attends to interpret the exemption to the nature of the services, for which it has declared that it cannot be conditioned by the legal form of the provider, noting that the clause of “comparable social conditions” to which we refer does not allow to exclude “those who operate a company”.
Bad way, then, we can venture to this first proposal.
The exemption in education is also mandatory for the Member States, which must necessarily transpose it. Again, the community legislator also establishes that this exemption will be applied in any case by public entities; while for private companies it requires that they be “bodies that the Member State in question recognizes as having comparable purposes”.
The same door that opens and closes. Again the Court of Justice; This time, too, it has limited the limits to apply the exemption. Not only must the general principles on exemptions to which we referred before be respected, but in this matter an essential principle in VAT has been stressed: the principle of neutrality. In this framework, the principle of neutrality means that comparable activities, capable of competing with each other, cannot be treated differently in VAT. Exactly that is the objective sought by the Government, which intends to make private education more burdensome than public education.
Anyway, no better path seems to be able to follow this proposal.
What would happen if, despite everything, the government decided to go ahead? The idea of a government acting without respecting the legal order, when the violation of Community law is so clear, should be repugnant, but it would also mean that the income received would be income contrary to Community law and should be returned to those who paid it.
We would have spared a few debates if, before launching these proposals, an expert had been consulted, who, in my opinion, the Government had and still has them, and also within reach. It often happens that, when ideology is put before good sense, the projected results are different from those desired; Fortunately, in this case, the expected result is that the measure will end up as another abandoned occurrence at the bottom of the newspaper archives.
Javier Bas. Doctor of Law. State Treasury Inspector.