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Duties collected for the Agricultural Marketing Fund incompatible with the Basic Law
Press Release No. 10/2009 of 03 February 2009
Judgment of 03 February 2009
2 BvL 54/06
The Agricultural Marketing Fund was established in 1969 pursuant to the Agricultural Marketing Fund Act as an institution under public law for the marketing of the German farming and food industry; for the exercise of its functions, it avails itself of the German Agricultural Marketing Board (Centrale Marketinggesellschaft der deutschen Agrarwirtschaft mbH - CMA) and of the Central Market and Price Reporting Bureau for Agricultural, Forestry and Food Products GmbH (Zentrale Markt- und Preisberichtstelle für Erzeugnisse der Land-, Forst- und Ernährungswirtschaft GmbH - ZMP) (see German press release no. 75/2008 of 16 July 2008). The funding of these institutions is essentially based on duties which are collected from certain farming and food businesses. These duties collected pursuant to the Agricultural Marketing Fund Act were the subject of a Federal Constitutional Court ruling already in 1990 (Order of 31 May 1990, Decisions of the Federal Constitutional Court (Entscheidungen des Bundesverfassungsgerichts - BVerfGE) 82, 159). Under the conditions at that time, the Federal Constitutional Court only regarded the Agricultural Marketing Fund Act as unconstitutional to the extent that it included forestry businesses in the group of those liable to make payment.
The Second Senate of the Federal Constitutional Court now decided that the provisions of the Agricultural Marketing Fund Act on the levying of duties have at any rate since 1 July 2002 been incompatible with the Basic Law (Article 12 in conjunction with Article 105 and Article 110) and are hence void. The duty is an impermissible special levy because a responsibility of the German farming and food industry for providing the funding of the state-organised marketing is missing.
In essence, the decision is based on the following considerations:
The duty collected pursuant to § 10 of the Agricultural Marketing Fund Act is a special levy whose function is to provide funding; it is subject to the strict permissibility requirements which constitutional law places on such special levies. The duty collected pursuant to § 10 of the Agricultural Marketing Fund Act does not meet these requirements. It is not a tax because it is not imposed as a shared burden; instead, those liable to make payment are, as a defined group of business enterprises, assigned a special responsibility for funding due to their special proximity to the function for which funding is to be provided.
Pursuant to the Federal Constitutional Court's established case-law, special levies are subject to narrow boundaries; in contrast to taxes, their imposition must remain a rare exception. The legislature may avail itself to a levy only when pursuing an objective which goes beyond mere fundraising. Only a homogeneous group which has a specific relationship (factual proximity) to the objective which is pursued by the collection of the duty and which can therefore be attributed a special responsibility for funding can be considered as its addressee. The yield from the duty must be used for the benefit of the group. In the interest of democratic parliamentary legitimisation and control, the legislature must in addition fully document pursuant to budgetary law the special levies collected.
According to these standards, the duty for the Agricultural Marketing Fund is a constitutionally impermissible special levy because there is no justifying connection between group homogeneity and factual proximity on the one hand and a special responsibility of those liable to make payment for providing the funding for the exercise of the function on the other hand.
This duty is not a special levy which takes up the idea of causation when special burdens are attributed to those liable to make payment and which finds its justification in a responsibility for the consequences of group-specific circumstances or behaviour. Instead, it is a promotion measure which is carried out compulsorily, the funding of which is imposed on the group of those liable to make payment only for reasons of a benefit which the legislature has intended for this group. Here, the state actively intervenes in the economic system on the basis of the Agricultural Marketing Fund Act through promotion measures which it justifies by giving economic policy reasons; it assigns the need for funding, which arises from these measures in the first place, to the businesses that are burdened with the duty to make payment. From the perspective of those liable to make payment, this financial burden arising from the state's exercising of functions that takes the place of individual entrepreneurial activities as the result of a sovereign decision appears not only as a special burden that must be paid in addition to taxes and which requires justification, but also as a curtailment of their entrepreneurial freedom, which is protected by Article 12.1 of the Basic Law, and it requires specific justification also in this respect. The freedom-restricting nature of the duty becomes especially apparent as regards the advertisement campaigns for agriculture-based products, which are the focus of activities pursued under the Agricultural Marketing Fund Act, as the financial burden which such advertisement campaigns constitute can also be regarded as a curtailment of the enterprise's own advertising budget.
Constitutionally permissible agricultural and food policy objectives and possible positive effects of state advertising measures for a specific branch of industry are not alone sufficient for establishing a tangible benefit for the group which would justify funding by special levies instead of tax funding. This also applies because no sufficient indications exist for the assumption of an added value in case of state-organised advertising as compared to privately organised advertising. If a responsibility for providing funding on the part of those liable to make payment can virtually exclusively be justified with a view to the objective and the effect of state-organised promotion measures for the burdened group, stricter requirements exist as regards the use for the benefit of the group. There must be an evident benefit for the group. It is true that this can be the case if state-organised promotion measures are necessary for averting, or compensating for, considerable impairments or special disadvantages, for instance also those which arise in transnational competition. Such a justification, which initially was essential for the Agricultural Marketing Fund Act, has been missing at any rate since 2002, the year under dispute in the original proceedings.
Whilst the Federal Constitutional Court's decision passed in 1990 could still justifiably assume the existence of disadvantages in intra- Community competition that had to be averted, the situation of the German farming and food industry has since stabilised so markedly that a necessity of averting considerable impairments of the competitiveness of the German farming and food industry is now out of the question.