Opinion of Mr advocate-general Gand
Mr President,
Members of the Court,
The seven requests for preliminary rulings on which I have today to give an opinion were addressed, pursuant to Article 177 of the Treaty of Rome, by four German courts amongst which is the Bundesfinanzhof (Federal Finance Court). These requests deal with the interpretation of the tax provisions of this Treaty, more precisely with Articles 95 and 97 thereof. You are asked to reply to approximately fifty questions some of which occur in several of the cases or overlap, and you are questioned on the meaning and scope of practically every term in the articles in question: what, for example are an indirect charge, similar products or those capable of being substituted? What is to be understood by average rate? Does Article 95 create individual rights which national courts must protect? Does Article 97 do so as well? Thus the whole system of the turnover tax is considered in relation to the Treaty, in particular the cumulative multi-stage tax system which operated in the Federal Republic of Germany before 1 January 1967 and which may be continued in four other Member States until 1 January 1970. That is sufficient to outline the extent and the complexity of the problems which you must solve and which have already been considered in the oral observations heard by you.
It might be thought that first of all the questions put by the various courts should be grouped according to whether they relate to one or other of the provisions of Articles 95 and 97 and that they should then be considered in this logical sequence. Reasons of clarity and simplicity on the contrary induce me to keep strictly to the order in which you have chosen to hear those cases. Thus I shall first of all broach Case 28/67 which was referred to you by the Bundesfinanzhof, the supreme court in financial and tax matters, and which poses the most important questions of principle.
I 28/67 — Firma Molkerei-Zentrale v Hauptzollamt Paderborn
The facts which gave rise to the request for a preliminary ruling are as follows: an undertaking, which on 15 July 1962 imported into Germany whole-milk powder from Belgium, was required to pay in addition to the customs duty a tax of 4 % by way of turnover equalization tax (Umsatzausgleichssteuer). It argued unsuccessfully before the Finanzgericht that this levy was contrary to Article 95 of the Treaty because the appropriate German law on turnover tax had since 1 February 1956 exempted domestic powdered milk from this tax and because consignments of the primary product, namely, milk, were also exempt. This was the argument which it repeated before the Bundesfinanzhof. Its argument thus rests on the view that Article 95 of the Treaty produces direct effects and creates individual rights which national courts must protect; this is in accordance with your decision in Case 57/65 (Lütticke,16 June 1966, Rec. 1966, p. 293).
It is on this basic issue that the Bundesfinanzhof has serious doubts which are set forth very clearly and fully in its order of reference and which may be summarized as follows. The precedence of Community law over national law is not as such disputed, but your case-law — in particular the judgment in the Lütticke case — has been interpreted in Germany as implying that when a provision of the Treaty which is alleged to have direct effect imposes an obligation on a State, an individual may plead this infringement of the Treaty before the national court; the Community institutions — in particular the Commission — are charged with compelling the Member States to fulfil their obligations through the machinery of Article 169. To grant to individuals a direct remedy arising from infringement of the Treaty, instead of merely authorizing them to request the Member State to put an end to an illegal situation by means of an appropriate procedure, is in fact to confer upon them a wider right than that accorded to the Community institutions. With regard to Article 95, this solution moreover does not accord with the position as to the power of the courts under the constitution of the Federal Republic of Germany, as it is not the task of the courts to make good by thousands of separate decisions provisions of tax law which the competent authority has omitted to adopt. To a large extent, this concerns in addition questions of fact, which might give rise to divergent decisions by the Finanzgerichte which the supreme court could not harmonize. A contradiction might arise between the case-law of the national courts and that of the Court giving a ruling within the framework of Articles 169 and 170 of the Treaty. In short it must be recognized — this is the final argument — that your case-law has resulted in countless applications to the Finanzgerichte, which has given rise in the Federal Republic to a regrettable lack of legal certainty with regard to the turnover equalization tax.
1. The Bundesfinanzhof thus asks you — this is its first question — whether you continue to uphold your decision concerning the interpretation of the first paragraph of Article 95 of the Treaty; it further asks whether this article can confer on individuals the right to require before the national courts that despite the as yet unamended terms of the law, they should be placed in the same position as if the Member State had fulfilled the obligation which this article imposes on it with regard to legislation, whilst under Articles 169 and 170 the Commission and the other Member States may only require that the Member State should implement the Treaty, and whether the third paragraph of Article 95 has consequently created a breach in the legislative sovereignty of the Member States in the field of internal taxation.
2. The second question seeks to establish whether Article 97 is directly applicable in the sense that it accords to all citizens the right to cause the national court to establish whether the average rate of the tax conforms to the principles set out in Article 95, and whether this may be effected by means of an application for the annulment of a tax assessment.
3. In its third question the Bundesfinanzhof asks you what must be understood by average rates within the meaning of Article 97; it also asks you, in terms of the reply to this question, whether the disputed rate of the turnover equalization tax of 4 % then applicable to whole-milk powder constitutes such an average rate.
4. The Bundesfinanzhof then asks whether individuals continue to derive from Article 97 the right to have an average rate reviewed by the national courts even if the Commission has fulfilled its obligation of ensuring that the Treaty is observed or if the Member State has modified the average rate in accordance with the requirement of the Community institution. This question presupposes that Article 97 directly confers on individuals a right to have the court review the average rates applied in specific cases. If, as I suggest, you consider that this is not so, the question becomes pointless.
5. The final question put by the Bundesfinanzhof is as follows: What must be understood by internal taxation imposed indirectly on domestic products within the meaning of the first paragraph of Article 95? Since the rule of international trade is to apply the principle of taxation in the country of destination, the Member States are justified in wishing to have a complete set off for taxation on the import of domestic products, which makes for the widest possible interpretation of the concept of indirect taxation.
II 31/67 — Firma Stier v Hauptzollamt Hamburg
This case is referred to you by the Finanzgericht, Hamburg, and relates to Article 95 of the Treaty.
The Stier undertaking, which imported in 1966 3834 cases of lemons originating in Italy, received a claim from the customs for a turnover equalization tax on importation amounting to 2.5 %. It claimed before the Finanzgericht that German tax law in purported application of which this tax was claimed was contrary to Article 95 of the
Treaty; this Article, it asserted, only permitted an equalization tax to be applied on the importation of imported products competing on the domestic market with comparable domestic products. Germany produces no lemons (first paragraph of Article 95) and no other fruits capable of replacing these fruits for the consumer (second paragraph of Article 95).
1. In these circumstances the Finanzgericht has put to you three questions the first of which asks whether a Member State has the right to charge taxes on products originating in other Member States which compete neither with similar domestic products nor with domestic products capable of being substituted for them, or whether on the other hand this measure is contrary to the principles of law contained in the Treaty.
2. The Finanzgericht next asks you whether a rule of law worked out on the basis of the law inscribed in the Treaty within the meaning of the preceding question and contrary to the right to impose national taxes has direct legal effects in favour of the individual.
3. On the other hand you will have to give a ruling on the last question put to you, namely whether, to the extent to which its right to impose taxation is in principle recognized, a Member State is subject in this sphere, as far as concerns the amount of internal taxation, to restrictions by virtue of the Treaty and, if so, to what restrictions. The question is a rather difficult one and perhaps is not capable of a perfectly satisfying answer. Fortunately it remains a theoretical one.
III 25/67 — Firma Milch-, Fett- und Eierkontor v Hauptzollamt Saarbrücken
On 22 March 1967 the undertaking Milch-, Fett- und Eierkontor cleared through the Saarbrücken customs office a consignment of slaughtered poultry from the Netherlands. In addition to the duty, the customs office on this occasion levied turnover equalization tax at the rate of 4 %.
The importer commenced an action against the decision of the customs office before the Finanzgericht, Saarland. It maintained that the imposition of the equalization tax at the rate of 4 % constituted an infringement of Article 95 of the Treaty and of Article 11(1) of Regulation No 22 of the Council of the EEC on the progressive establishment of a common organization of the market in poultry meat; the first of those provisions because under the German legislation on turnover tax the said tax is not levied, or only at a much reduced rate, on similar domestic products, the second because Article 11 of Regulation No 22 prohibits the levying of charges having an effect equivalent to customs duties on imports from Member States. In the event of its being considered that Article 97 is important for the solution of the dispute, the undertaking adds that this article is an implementing provision of Article 95 and that it must be applied in such a way as to observe the principles laid down by Article 95; in addition there is no proof whatever that the disputed rate of the tax at 4 % is an average rate and the burden of proof that the average rate applied was legal rests on the customs administration. Finally, whilst in making a concrete comparison of taxation account may be taken of taxation imposed indirectly on similar domestic products, this cannot in all cases include the turnover tax imposed on the means of production and services.
In an order containing lengthy reasons, the Finanzgericht has taken the view that the solution to the dispute depends on the interpretation to be given to Articles 95 and 97 of the Treaty, in particular on the question whether the latter article creates individual rights which national courts must protect. It thus asks you to give a ruling on twelve questions some of which are divided into various sub-questions, certain of which also repeat the problems already encountered in Case 28/67, and this allows me merely to clarify or to fill out what I have said on those points.
Rather than broach each of those questions successively, I shall regroup them around certain principal problems in accordance with a more or less logical order since the Government of the Federal Republic and the Commission are at one in adopting it.
1. The first group of problems concerns the average rates.
2. The second group of questions to which we now come — the third, fourth and fifth — relate to the legal nature of Article 97, on which you have already been questioned in Case 28/67. The peculiarity of the present case is the basis of the Finanzgericht's question whether this article constitutes a special case under Article 95 or an independent rule.
3. The third group of problems — the eighth, ninth and tenth questions — concerns the interpretation of the concept of indirect taxation mentioned in Article 95, which may be employed in calculating the permitted equalization tax.
4. In its eleventh and twelfth questions, the Finanzgericht asks whether the turnover equalization tax must be regarded in whole or in part as a charge having an effect equivalent to customs duties within the meaning of Article 11 of Regulation No 22/62 — in its own view, the question which it puts to you should be answered in the negative — and, if so, whether this article creates direct individual rights which national courts must protect.
5. We come finally to the last question put by the Finanzgericht: with whom does the burden of proof rest when the dispute turns on whether the rate of a charge constitutes an average rate within the meaning of Article 97 of the Treaty?
IV 27/67 — Firma Fink-Frucht v Hauptzollamt München
On this occasion the import of fresh sweet peppers from Italy to Germany meant that the plaintiff in the main action, Firma Fink-Frucht, had to pay the turnover equalization tax.
The importer brought the matter before the Finanzgericht, Munich, alleging that Article 95 of the Treaty had been infringed. It maintained that the turnover equalization tax levied had a discriminatory effect in comparsion with the direct or indirect turnover tax on similar domestic products or competing products. The customs office, on the other hand, replied that neither Article 95 nor Article 97 of the Treaty was applicable, since Germany produces no fresh sweet peppers and no other domestic products capable of being substituted for them.
Under those circumstances the Finanzgericht brought before you five questions on the meaning and scope of Article 95.
1. First of all it asks whether the first paragraph of Article 95 merely lays down a prohibition against discrimination between the Member States, or whether it must be understood as authorizing the levy of a turnover equalization tax only where there are similar domestic products on which the turnover tax is imposed directly or indirectly, with the result that since it is not an equalizing tax it is prohibited when in the national territory there are neither similar products nor competing products capable of being compared with the imported products. It further asks you whether, where necessary, the turnover equalization tax must be regarded as a measure having an effect equivalent to quantitative restrictions under Article 30 of the Treaty. It will be noted that although the plaintiff expressly refers only to the first paragraph of Article 95, in fact the question as a whole also relates to the second paragraph.
2. The second question deals with the concept of similar products which appears in the Treaty and how they are to be distinguished from the products referred to in the second paragraph.
3. You are asked first of all to interpret the concept of taxation of such a nature as to afford indirect protection to other products employed in that paragraph. Does it refer to the smallest tax which gives a measure of protection to domestic products even remotely in competition with the imported product or does it refer to a tax which changes the price of the imported product sufficiently to make domestic consumers favour the competing domestic products? I think that the second paragraph must be understood in a fairly wide sense. In your judgment in Case 34/62 ([1963] E.C.R. 131), you admitted, for example, that oranges on the one hand and apples, pears and peaches on the other might be in competition, so that the former might not be burdened by heavier indirect taxation than that on the said fruit produced in the State.
4. The Finanzgericht also wishes to know whether the second paragraph of Article 95 prohibits the imposition of any taxation or whether the prohibition which it lays down covers only the imposition of higher taxation than that imposed on competing domestic products.
5. The Finanzgericht finally wishes to know whether the second paragraph of Article 95 produces direct effects and creates individual rights which national courts must protect.
V 13/67 — Firma Becher v Hauptzollamt München
The request for a preliminary ruling brought before you by the Finanzgericht, Munich, as Case 13/67 will not detain us long as the questions which that court asks you have generally been treated already in certain of the cases which we have just considered.
When the Becher undertaking obtained customs clearance on 7 December 1962 for two consignments of maize from Italy it was asked to pay an equalization duty of 1.5 %. It made an administrative complaint and subsequently alleged before the Finanzgericht that the provisions of German tax law which had been applied to it were contrary to Article 95 of the Treaty. In fact, consign ments of domestic maize effected in Germany are exempt from turnover tax (Umsatzsteur) and there is thus no taxation directly imposed on domestic products; nor is there an indirect charge, as the taxes on auxiliary materials cannot be placed in this category. Moreover it disputes that the rate of 1.5 % was a genuine average rate within the meaning of Article 97.
In those circumstances the Finanzgericht, Munich, referred three questions to you.
1. The first is whether Article 97 is directly applicable.
2. The second concerns the interpretation of the term average rate.
3. Finally, the Finanzgericht asks you whether the concept of indirect taxation includes the turnover tax, and possibly carriage tax, imposed on auxiliary materials, materials used for the packing of goods, the means of development or of production employed in the manufacture and marketing of the products, together with carriage by third parties. This question must be answered in the affirmative.
VI 7/67 — Wöhrmann v Hauptzollamt Bad Reichenhall 20/67 — Tivoli v Hauptzollamt Würzburg
The two cases in which it remains for me to give my opinion and which are both the subject of a reference for a preliminary ruling from the Finanzgericht, Munich, differ from the previous cases inasmuch as they concern the importation into Germany of products originating not in Member States but in third countries. They both relate to the interpretation of regulations on the establishment of a common organization of the markets in two agricultural sectors and the questions with which they face us are similar. It is essential to consider them together.
1. The Wöhrmann undertaking imported into Germany in 1966 unsweetened whole-milk powder coming from Austria. Apart from the levy laid down by Regulation No 13/64 of 5 February 1964 the customs imposed a charge of 3 % of the value as turnover equalization tax. An action was started before the Finanzgericht, Munich, on the ground that, as milk and milk products were not subjected in Germany to turnover tax, the equalization tax in question was not internal taxation within the meaning of Article 95 of the Treaty but a charge having an effect equivalent to a customs duty. However, the charging of any customs duty or charge having equivalent effect on imports from third countries is incompatible with the provisions of Article 12(2) of Regulation No 13/64.
2. I shall finish with Case 20/67 — Tivoli — in which the Finanzgericht, Munich, has again made a reference for a preliminary ruling.
1 Translated from the French.