Topic 3- Free Movement of Goods – Fiscal Barriers PDF

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Topic 3: Free Movement of Goods – Fiscal Barriers Articles 30 and 110 TFEU Article 26: ‘the internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties’ Definition of Goods: Commission v Italy (Art Treasures) - ‘Products which can be valued in money and which are capable, as such, of forming the subject of commercial transactions’ Objective of Treaties in this area is the removal of obstacles to the free circulation if goods between Member States - Necessary for the achievement of the internal market and the achievement of a customs union that economists regard as an essential step for integration of markets o Customs Union: agreement between States to abide by 2 principles:  ‘A free trade area’: internal aspect of a customs union  ‘System for the charging of a common customs tariff’: external aspect of a customs union Article 30 + 100 TFEU – concern barriers to trade between Member States that are of a pecuniary nature Article 30 TFEU – Prohibits Custom duties and Charges having Equivalent Effect ‘Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States. This prohibition shall also apply to customs duties of a fiscal nature’ -

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Applies to: o Custom Duties o Charges having Equivalent Effect (CEE’s) Prohibits: o All Custom Duties and CEE’s o Absolute prohibition (charge designated as CD or CEE in unlawful regardless of the purpose of the charge) Direct Effect o Van Gend en Loos: treaty articles are capable of DE (Article 30 has DE)

Customs Duties -

Tariff, however small, specifying the rate of duty to be paid by the importer to the State solely for the reason that the foods are being imported into that State Woods and Watson, Steiner & Woods EU Law: ‘generally understood as charges levied on goods – whether imports or exports – on the crossing of a border’ Customs duties have the effect of making the imported goods more expensive relative to rival domestic good = constitute an obstacle to free trade Commission v Italy (Art Treasures): purpose of duty is irrelevant because effect is to hinder charge – effect not purpose of the charge

Charges having Equivalent Effect (CEE) Commission v Italy (Statistical Levy) - CoJ held that the levy was a CEE and so was prohibited by Article 30

‘Any pecuniary charge … which is imposed unilaterally on domestic or foreign goods by reason of the fact that they cross a frontier and which is not a customs duty in the strict sense constitutes a charge having equivalent effect’ Material Requirements for a CEE - Any pecuniary charge - Imposed unilaterally on domestic or foreign foods - By reason of crossing a frontier - Which is not a customs duty in the strict sense - The charge need not be levied at the border so long as it is levied by reason of crossing the border Irrelevant Factors for Identifying a CEE - Size of the charge - Its designation and mode of application - The charge is not imposed for the benefit of the state - The charge is not discriminatory or protective in effect - The product is not in competition with any domestic product Examples of Unlawful CEEs Commission v Italy (Statistical Levy) - Small 10 Lire fee to fun compilation of statistics - Unlawful CEE = a pecuniary charge, no matter how small Sociaal Fonds voor de Diamantarbeiders - Levy on imported diamonds to fund benefits for diamond workers - Unlawful CEE = even if non-protectionist and product charged is not in competition with any domestic product Charges Falling Outside Article 30 (not CD or CEE) Commission v Germany (Animal Inspections) -

Charge will not fall within Article 30 where o It relates to a general system of internal dues applied systematically to imported + domestic products alike’ o Constitutes proportionate fees for services in fact rendered to importer o Charges for inspections carried out to fulfill EU law obligations

Internal Dues (Internal Tax) - Not governed by Article 30 – governed by Article 110 instead - Lütticke: CEEs and internal taxation are governed by 2 systems which are mutually exclusive Payment for Services Rendered - Charge not within Article 30 if consideration for a specific service actually rendered i) Trader / importer has requested the service: Commission v Belgium (Customs Warehouses) – charge for the temporary storage of goods in the warehouse at the request of the importer was not a CEE as this was a charge for a service ii) Trader specifically benefits from the service: Commission v Italy (Statistical Levy) / Bresciani iii) Charge is proportionate to the costs of the service provided: Commission v Italy (Statistical Levy)

Charge for EU Inspections Charge imposed by a Member State to cover the costs of an inspection is not a CEE where the inspection was required by EY law in order to promote the free movement of goods Commission v Germany (Animal Inspections) -

4 requirements need to be fulfilled for an inspection charge not to constitute a CEE: i) The charge must not exceed the actual costs of the inspections ii) The inspections must be obligatory and uniform for all the relevant products in the Union iii) The inspections must be prescribed by EU law in the general interest of the Union iv) The inspections must promote the free movement of goods

Commission v Netherlands - Same position applies to charges for inspections carried out as a result of rules imposed by international treaties Article 110 TFEU – Prohibits Discriminatory Taxation

(1) ‘No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products’ (2) Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products’ -

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Applies to: o Internal Taxation o Ensures that internal fiscal barriers to trade are eliminated Prohibits: o Discriminatory Taxation o Protectionist Taxation Direct Effect o Lütticke: Article 110 recognized as having DE

Scope of Article 110 Commission v France (Levy on Reprographic Machinery) -

Defined internal taxation as: o ‘A general system of internal dues applied systematically to categories of products in accordance with objective criteria irrespective of the origin of the products’

Distinguishing from CEE Commission v France (Levy on Reprographic Machinery) = Internal Tax - System of internal dues - Applied irrespective of the origin of the products - Dansk Denkavit  Article 110

Commission v Italy (Statistical Levy) = CEE - Imposed unilaterally on domestic or foreign goods - By reason of crossing a frontier - Bresciani  Article 30 Article 30 and Article 110 have different effects o Charge which falls within Article 30 will simply be unlawful, irrespective of whether or not it is discriminatory or protectionist – CEE is imposed unilaterally wither on domestic exports or foreign imports o Contrastingly, an internal tax which is governed by Article 110 will be permissible, as long as it does not discriminate against imports under Article 110(1) and is not protectionist under Article 110(2) Article 110(1) – Prohibits Discriminatory Taxation (Imported Goods and Similar Domestic Goods) - ‘No Member State shall impose directly or indirectly, on the products of other members states any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products’ Requirements of Article 110(1) 1. The imported and domestic products are similar 2. Taxation must not discriminate against the imports Similar Products / Goods Test  Rewe-Zentrale v Hauptzollampt - Similar characteristics at same stage of marketing or production - Meet the same needs from point of view of consumers Commission v France (‘Sprits) - Based on similar and comparable use - NOT whether products are strictly identical Commission v Denmark (Fruit and Grape Wines = similar) / John Walker Ltd (Fruit Liquors and Spirits = not similar as characteristics were manifestly different) - Characteristics = objective test - Needs = from point of view of the consumer - To be similar – alcohol content needed to have been more or less in proportion Where it is established that the goods are similar goods, the next enquiry is whether the Member State has discriminated against the imported goods Discrimination - Article 110(1) prohibits Member States from imposing, directly or indirectly, a higher tax burden on the imported goods than that it imposes on its domestic goods Direct Discrimination - Involves a tax system that overtly treats the imported goods less favourably than the similar domestic goods (discrimination against the imported goods) o Commission v Italy (Regenerated Oil): CoJ refused to accept that instances of direct discrimination can be justified Indirect Discrimination

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Although it makes no over distinction between domestic goods and imported goods on its face, it has the effect of discriminating against imported goods by placing them in a less favourable position compared to the imported goods in practice o Commission v Denmark: Denmark imposed a higher rate of tax on wine made from grapes than it did on wine made from fruit – rates were imposed irrespective of the origin of the wine, but Denmark did not produce any wine made from grapes – only produced wine made from fruit o The practical effect of this was that only imported wine was subject to the higher rate of tax while the wine produced in Denmark was only subject to the lower rate of tax – breach of Article 110(1) TFEU Identification of indirect discrimination can be less straightforward where the rate of tax progressively increases in accordance with a set of criteria such as the engine size of the car o Humblot: tax regime involved a tiered system comprising two distinct taxes on cars  On the surface, this system of car tax appeared neutral between imported and domestic cards – cars were taxed on the basis of their engine size, not on the basis of their origin  However, French manufacturers only produced cars with an engine sizes up to 16 CV (maximum engine size which was subject to the lower rate of tax)  Practical effect of this was that French cars were subject only to the lower rate of tax while the only cars which were subject to the higher rate of tax were imported ones  Indirect Discrimination: effect was to cancel out any competitive advantage which these larger engine imported cars would otherwise have had in the eyes of consumers over French cars which all had smaller engines  tax system was unlawful o Commission v Greece: ruled that Greece were not favouring its domestic models specifically in any way: tiered tax system was held to be lawful o Reconcile the cases by contrasting two features of the tax systems involved  Humblot: discourages consumers from considering cars over 16CV, all of which were imported, and encouraged them to consider purchasing French cars which had engine sizes of 16CV or below  Commission v Greece: all of the cars with engine sizes immediately below the relevant 1,800cc threshold were still only imported – therefore the increase in tax at 1,800cc was unlikely to encourage consumers to buy Greek cars as no Greek cars were manufactured with engine sizes over 1,600cc – also, the disparity in the levels of taxation was not as extreme as they were in Humblot

Objective Justification for Indirectly Discriminatory Taxation - Unlike direct discrimination, taxation measures which appear to discriminate indirectly against imported goods may be capable of being legitimately justified on an objective non-discriminatory basis  Chemical Farmaceutici - CoJ held that the difference in the rates of taxation was justifiable, even though the two types of alcohol could be used interchangeably 1. Tax must differentiate between products on the basis of objective criteria 2. Must pursue economic policy objectives compatible with EU law 3. Detailed rules must not discriminate Article 110(2) – Prohibits Member State from using Taxation to Protect Domestic Goods, which though not similar to the Imported Goods, are in Competition with them

‘No Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products’ -

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Which products fall within Art. 110(2)? o Commission v France (Spirits)  ‘Products which, without being similar, are nevertheless in competition, even partial, indirect or potential, with certain goods of the importing country Prohibits taxation which has protective effect o Commission v Belgium  Essential Question = whether reduces even potential consumption of imported products to the advantage of competing domestic products

Wine and Beer Cases -

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Commission v United Kingdom (Wine and Beer): higher rate of tax on wine than beer  beer and wine were in competition according to Commission o CoJ concluded that in view of the substantial differences in the quality and price of wine, the decisive competitive relationship was between beer and the lightest and cheapest varieties of wine  clear that the tax burden on the cheaper types of wine was considerably higher than that of beer Commission v Belgium: wine was subject to a VAT rate of 25% whilst beer was subject to rate of 19% o CoJ reiterated that wine and beer were in a competitive relationship o CoJ concluded that, as the retail price of 1l of wine in Belgium was 4 times that of beer, the Commission had failed to prove that the difference of 6% between the VAT rates applied to the two products was capable of influencing consumer behaviour and therefore of having a protective effect in favour of beer

A Member State which has infringed Article 110(1) must equalise the tax regime between the similar and imported and domestic products A Member State which has been found to infringe Article 110(2) need only remove the protective effect...