Key facts of the case:
Reference for a preliminary ruling — Freedom to provide services — Article 56 TFEU — Restrictions — Tax provisions — Tax on advertising activities based on turnover — Obligations relating to registration with a tax authority — Principle of non-discrimination — Fines — Principle of proportionality.
Outcome of the case:
For these reasons, I propose that the questions referred by the Fővárosi Közigazgatási és Munkaügyi Bíróság (Budapest Administrative and Labour Court, Hungary) be answered as follows:
4) The relevant rules of EU law can be found in the TFEU and the Charter of Fundamental Rights of the European Union (‘the Charter’).
24. By decision of 13 July 2018, the referring court decided to make an order for reference pursuant to Article 267 TFEU and referred the following questions to the Court for a preliminary ruling:
‘(1) Should Articles 18 and 56 TFEU and the prohibition on discrimination be interpreted as precluding a Member State’s tax legislation in which the penalty provisions require, for breach of the obligation to register for the purposes of an advertisement tax, the imposition of a fine for failure to comply, the total amount of which, for companies not established in Hungary, can be as much as 2000 times greater than the amount of the fine for companies established in Hungary?
(2) Can the penalty described in the previous question, which involves a markedly large sum and is punitive in nature, be considered as capable of discouraging service providers who are not established in Hungary from providing services in that country?
(3) Should Article 56 TFEU and the prohibition on discrimination be interpreted as precluding legislation under which, for undertakings established in Hungary, the obligation to register is satisfied automatically, without making an explicit application, through the allocation of a Hungarian tax identification number as part of the process of registering with the Companies Registry, irrespective of whether or not the undertaking publishes advertisements, whereas for undertakings that are not established in Hungary but that publish advertisements in that country it is not satisfied automatically, and instead they have specifically to comply with the obligation to register, and can be subject to a specific penalty if they fail to do so?
(4) If the answer to the first question is in the affirmative, should Article 56 TFEU and the prohibition on discrimination be interpreted as precluding a penalty such as the one at issue in the main proceedings, imposed for breach of the obligation to register for the purposes of an advertisement tax, in so far as the aforesaid legislation may be contrary to that article?
(5) Should Article 56 TFEU and the prohibition on discrimination be interpreted as precluding a provision under which the decision to impose a fine on an undertaking established abroad is final and enforceable from the moment when notice of it is served, and the decision may be contested only through judicial proceedings in which the court may not hold a hearing and only documentary evidence is admissible, while fines imposed on undertakings established in Hungary may be contested in an administrative procedure and, moreover, the judicial proceedings are not restricted in any way?
(6) In view of the right to good administration established in Article 41(1) of the Charter, should Article 56 TFEU be interpreted as meaning that this obligation is not satisfied where the fine for failure to comply is imposed in the form of a daily fine, meaning that the amount of the fine is tripled while the service provider is still unaware of the earlier decision and is therefore unable to make good its omission before the imposition of the next fine?
(7) Should Article 56 TFEU, as read with the right to good administration in Article 41(1) of the Charter, the right to be heard in Article 41(2)(a) of the Charter, and the right to an effective remedy and to a fair trial in Article 47 of the Charter, be interpreted as meaning that these requirements are not satisfied where the decision cannot be contested in an administrative procedure and where, in the administrative court proceedings, only documentary evidence is admissible and the court cannot hold a hearing?’
101) By its Questions 5 and 7, the referring court wishes to know, in essence, whether there is an unjustified restriction of the freedom to provide services in the light of Articles 41(1) and 47(2) of the Charter if only limited legal redress is available against the special fine for failure to comply under Article 7/B of the Law on the taxation of advertisements. Those limitations reside in the fact that no provision is made to contest the special fine for failure to comply in an administrative procedure before the authority, but the only possibility is legal redress before the courts, which is reduced to a written procedure and documentary evidence.