JUDGMENT OF 27. 11. 1980 — JOINED CASES 81, 82 AND 146/79 SORASIO v COMMISSION

In Joined Cases 81, 82 and 146/79

THE COURT (First Chamber) composed of: T. Koopmans, President of Chamber, A. O'Keeffe and G. Bosco, Judges, Advocate General: H. Mayras Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

I — Facts and written procedure

A — The rules applicable

B — The facts

C — Procedure

II — Conclusions of the parties

III — Submissions and arguments of the parties

1. Submission of infringement of the second subparagraph of Article 3 (4) of Regulation No 260/68, infringement of the first subparagraph of Article 2 (2) and of Article 2 (6) of Annex VII to the Staff Regulations and o/ultra vires acts

2. Submission of breaches of legal principles and rules, in particular the principles of equality, distributive justice, equity and the principle that a wrongful act or omission of the administration makes it liable and confers a right to compensation, which may be in kind for the damage suffered.

Decision

Costs

I —. Facts and written procedure

A —. The rules applicable

1. The second paragraph of Article 3 (4) of Regulation (EEC, Euratom, ECSC) No 260/68 of the Council of 29 February 1968 laying down the conditions and procedure for applying the tax for the benefit of the European Communities (Official Journal, English Special Edition 1968 (I), p. 37 provides that:

2. Article 2 of Annex VII to the Staff Regulations provides that:

B —. The facts

1. Denise Sorasio-Allo, the applicant in Case 81/79, is an official of the defendant in Grade A 5. Her husband, Jean-Pierre Alio, the applicant in Case 146/79, is also an official of the Commission and is in Grade A 6. Cecilia Aimo-Campogrande, the applicant in Case 82/79, is also an official of the defendant and is in Grade A 6. Her husband, Gianluigi Campogrande, is also an official of the Commission.

2. When Mrs Aimo-Campogrande received her salary statement for October 1978 following her advancement to step 5 of Grade A 7 (on 1 October 1978) she felt that the tax deducted was higher than it should have been on the basis of Regulation No 260/68 and asked the administration for an explanation. She was informed that when the basic taxable amount was being calculated the additional abatement for a dependent child had not been applied.

3. As far as Mrs Sorasio-Allo was concerned she sent a note on 15 September 1978 to Mr Pratley, head of the Individual Rights and Privileges Division, asking him to tell her whether, when the taxable amount of her remuneration was calculated, account was taken of the tax abatement for dependent children provided for by Regulation No 260/68 and requesting that, if necessary, the requisite corrections be made for the past as well as for the future.

4. From the date when Mr Alio entered the service until May 1979 the additional abatement in respect of his two dependent children was always applied to the taxable amount of his remuneration. In May 1979 Mr Alio discovered that the additional tax abatements had been disallowed. An explanation obtained from the relevant division indicated that the disallowance of the said tax abatements was due not to a change in Mr Allo's personal situation but to the fact that his wife had been promoted to Grade A 5 and that from then on she and not he would receive the household, dependent-child and education allowances. In June 1979 an amount equivalent to the said allowances, paid in April, and to an increase in tax for the same month was deducted from Mr Allo's remuneration, since his wife's promotion had taken effect from 1 April 1979.

5. On 30 October 1978 Mrs Aimo-Campogrande submitted a complaint relating to the calculation of the taxable amount of her remuneration in her new step without the additional tax abatement's being made and asking for the taxable amount of her remuneration in the past to be corrected if necessary.

C —. Procedure

II —. Conclusions of the parties

1. Declare the applications admissible and well-founded;

2. Consequently

3. Order the defendant to pay the costs

III —. Submissions and arguments of the parties

1. Submission of infringement of the second subparagraph of Article 3 (4) of Regulation No 260/68, infringement of the first subparagraph of Article 2 (2) and of Article 2 (6) of Annex VII to the Staff Regulations and o/ultra vires acts

2. Submission of breaches of legal principles and rules, in particular the principles of equality, distributive justice, equity and the principle that a wrongful act or omission of the administration makes it liable and confers a right to compensation, which may be in kind for the damage suffered.

1. By applications lodged at the Court Registry on 22 May 1979, 23 May 1979 and 20 September 1979 the applicants, officials of the Commission, ask in substance for a declaration that they are entitled to the additional tax abatement equivalent to twice the amount of the allowance for a dependent child.

2. The second subparagraph of Article 3 (4) of Regulation (EEC, Euratom, ECSC) No 260/68 of the Council of 29 February 1968 laying down the conditions and procedure for applying the tax for the benefit of the European Communities (Official Journal, English Special Edition 1968 (I), p. 37) provides that:

3. Article 2 of Annex VII to the Staff Regulations provides that:

4. Mr and Mrs Alio have two children, born in 1967 and 1974. Mr and Mrs Campogrande have three children, born in 1966, 1967 and 1968.

5. On 24 October 1978 Mrs Sorasio-Allo submitted a complaint against the failure to take into consideration her circumstances as to dependants in the calculation of the taxable amount for the assessment of the tax payable by her. Mrs Aimo-Campogrande submitted a similar complaint on 30 October 1978. It is unfortunate that there were no replies to these complaints.

6. From the date when Mr Alio took up duty until May 1979 the additional abatement in respect of his two dependent children has always been applied to the taxable amount of his remuneration. In consequence of the promotion of his wife to Grade A 5 she and not Mr Alio has since then been allowed the abatement. On 16 May 1979 Mr Alio submitted a complaint against the decision to disallow the additional abatements in respect of his dependent children, to which there was also no reply.

7. The applicants' first submission is that the Commission, by refusing to allow them the additional tax abatement, has infringed the second subparagraph of Article 3 (4) of Regulation No 260/68. They allege that the only condition attached to entitlement to the abatement in question is that the recipient must have at least one dependent child, whilst the first subparagraph of Article 2 (2) of Annex VII to the Staff Regulations lays down that inter alios a legitimate child who is actually being maintained by the official is regarded as a dependent child. Article 2 (6) of Annex VII to the Staff Regulations which lays down that not more than one dependent-child allowance shall be paid in respect of any one child, even where the parents are in the service of two different institutions of the Communities, is not in any way connected with the concept of a dependent child or the calculation of taxable remuneration.

8. The Commission, for its part, submits that the tax abatement is in reality an allowance for a dependent child supplemental to that provided for by Article 67 (1) of the Staff Regulations. This abatement, which technically is granted to the official in receipt of the remuneration, ought in fact to benefit the dependent child. It necessarily follows from the nature and the function of the abatement that it can be allowed only once in respect of each dependent child even if both his parents are in the service of the European Communities.

9. The applicants in a second submission assert that the Commission is in breach of certain legal principles and rules, in particular of the principles of equality, distributive justice and equity. The Commission systematically allows the additional abatement in the case of an official who has at least one dependent child and whose spouse works outside the Community institutions, that is to say even if that spouse also receives dependent-child allowances which are deducted from those granted to the official and which may even reduce them to zero, and without taking into account the tax abatements which the spouse is allowed also in respect of the dependent child under his or her national tax rules.

10. Therefore not to allow this abatement in the case of an official who has at least one dependent child but whose spouse is also an official and where it is the latter spouse who, because of the rule against overlapping of Article 2 (6) of Annex VII to the Staff Regulations, receives the dependent-child allowance, would be to disregard the principles of equal treatment, equity and distributive justice.

11. In fact the consequences of the contested practice are that, all other things being moreover equal, two salaries are taxed differently simply because one includes the payment in respect of the dependent child and the other does not, and that one official, merely because his or her spouse is also an official, pays much more tax than a colleague in receipt of the same remuneration and being in the same circumstances as to dependants as that official but whose spouse works outside the Community institutions.

12. The Commission replies that it is not a question in this case of comparing the applicants' situation with that of an imaginary official in a comparable situation but whose spouse works outside the Community institutions. The requirement of equal treatment is met as soon as compliance therewith is ensured in the rules adopted by the Community legislature, without its being necessary or moreover possible to take into consideration factors outside these rules such as the place where the official spends his remuneration or the national tax rules governing the salary of this official's spouse.

13. The applicants criticize the Commission's argument by stressing that, as far as concerns the dependent-child allowance, the Community rules impose the obligation on officials to declare allowances of the same kind paid elsewhere, such allowances being deducted from those paid pursuant to Articles 1, 2 and 3 of Annex VII to the Staff Regulations. On the other hand, there is no such rule with regard to the tax abatement which the spouse of an official is allowed elsewhere and consequently the tax abatement which the spouse of an official working outside the Community institutions is allowed is not deducted from that of the official. This treatment is discriminatory and therefore illegal.

14. The Commission does not accept the applicants' argument. The dependent-child allowance is granted each month just like the family allowances granted in the different Member States and the application of the Community rule against overlapping does not encounter any practical difficulties. On the other hand, the Community tax abatement is allowed each month, although the tax abatement in respect of a dependent child is calculated in the Member States on an annual basis. Furthermore, since the tax abatement allowed by the Member States is calculated in accordance with the various national income-tax rules, it is impossible for the Community administration to calculate its effect for tax purposes on the taxable incomes.

15. Consideration of the submissions put forward by the applicants leads to their rejection. Although it is true that the applicable provisions do not expressly preclude a husband and wife who are both officials of the Communities from being allowed the tax abatement, such an exclusion is, however, in accordance with the aim and scheme of the system. The tax abatement for a dependent child is justified only if it is allowed for social reasons connected with the existence of the child and the cost of maintaining him. Article 3 (3) of Regulation No 260/68 provides that the dependent-child allowance shall be deducted from the basic taxable amount for the purpose of calculating the tax. The second subparagraph of Article 4 (2), which provides that an additional abatement equivalent to twice the amount of the allowance for a dependent child shall be made for each dependent child, must be read in this context.

16. It is not disputed that pursuant to paragraph (6) of Article 2 of Annex VII to the Staff Regulations not more than one dependent-child allowance shall be paid in respect of any one dependent child, even where the parents are in the service of two different institutions of the Communities. Article 2 (2) thereof provides that dependent child means the child of an official, or of his spouse, who is actually being maintained by the official. It cannot be thought that a child may actually be maintained at the same time by each of his parents. Under these circumstances, if the two parents are officials, the institutions apply by analogy the provisions of Article 1 (4) of Annex VII, which provides that, in cases where, under the provisions of the said Article 1, a husband and wife employed in the service of the Communities are both entitled to the household allowance, this shall be payable only to the person whose basic salary is the higher. It was by the application by analogy of this provision that as from the date when Mrs Sorasio-Allo was promoted, the dependent-child allowance was granted thenceforth to her and not to her husband Mr Alio.

17. The Commission has maintained with good reason that for the purpose of applying the provisions of the second subparagraph of Article 3 (4) of Regulation No 260/68 a child cannot be deemed to be actually maintained by each of his parents individually, so that, if not more than one dependent-child allowance is to be paid in respect of him within the meaning of Annex VII to the Staff Regulations and of Article 3 (3) of Regulation No 260/68, an additional abatement within the meaning of the said second subparagraph cannot be allowed in respect of him either.

18. As far as concerns the alleged breach of the principle of equality the tax system of the Communities is an independent system which is applied irrespective of the national systems, and the Commission is right to maintain that the hypothetical situations put forward by the applicants are not comparable. The principle of equality does not require account to be taken of possible inequalities which may become apparent because the Community and national systems overlap.

19. It follows that the applications are unfounded and must be dismissed.

20. Under Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs. As the applicants have failed in their submissions they must be ordered to pay the costs. However, under Article 70 of the Rules of Procedure, in proceedings by officials arid other servants of the Communities, institutions are to bear their own costs.

On those grounds, THE COURT (First Chamber) hereby:

1 Dismisses the applications;

2 Orders the parties to pay their own costs.