JUDGMENT OF 3. 2. 1981 — CASE 90/79 COMMISSION v FRANCE

In Case 90/79

THE COURT composed of: J. Mertens de Wilmars, President, P. Pescatore, Lord Mackenzie Stuart and T. Koopmans (Presidents of Chambers), A. O'Keeffe, A. Touffait and O. Due, Judges, Advocate General: J.-P. Warner Registrar: A. Van Houtte

gives the following

JUDGEMENT

Facts and Issues

I — Facts and written procedure

II — Conclusions of the parties

III — Arguments of the parties

A — Application

B — Defence

(a) The absence of domestic production of reprographic equipment

(b) The use to which the levy is put

C — Reply

D — Rejoinder

1. The facts

2. The legal aspects

IV — Oral procedure

Decision

Costs

I —. Facts and written procedure

II —. Conclusions of the parties

1. Declare that by charging levies on the importation of reprographic equipment the French Republic has failed to fulfil its obligations under Article 12 of the EEC Treaty, under Regulation (EEC) No 950/68 of the Council of 28 June 1968 on the Common Customs Tariff as subsequently amended, and under Article 113 of the EEC Treaty;

2. Order the French Republic to pay the costs.

1. Dismiss the application;

2. Order the Commission to pay the costs.

III —. Arguments of the parties

A —. Application

B —. Defence

(a). The sums raised by the levy in issue are allocated entirely to the Centre National des Lettres whose work in promoting the reading of books by the public at large supplements that of the Ministry of Culture. The Centre National des Lettres was created by the Law of 11 October 1946, which was amended by the Decree of 30 January 1976, and its objects are to promote writing and the dissemination of books, mainly by subsidizing orders for published works, both foreign and French, placed by libraries and cultural bodies, and by providing direct aid for authors consisting mainly of grants, which represents about 10% of its work. The Law did not place any requirement on the Ministry of Culture or on the Centre National des Lettres as to the use of the revenue from the levy.

(b). As regards the legal assessment of the tax on reprography in the light of Community law, the French Government first of all criticizes the Commission's approach in listing a number of complaints which do not add up to a coherent argument free of obscurity and contradiction. It particularly challenges the statement that the factor which determines whether a charge should be described as one having equivalent effect is the fact that importation gives rise to the collection of the levy and that there is accordingly a causal link between the crossing of the frontier and the collection of the charge. That alleged causal link is not relevant because the essential issue is whether the tax is borne equally by domestic and imported products alike, in which case it comes under Article 95. The Court of Justice made it plain in its judgment of 22 March 1977 in Case 74/76 Iannelli [1977] ECR 557 that the time when the duty is charged is immaterial; the test is whether it is because of the crossing of frontiers alone that the duty is charged, in which case there can be no identical taxation of the domestic product.

(1). Under the scheme of the Treaty the same tax may not simultaneously belong to the category of charges having an effect equivalent to a customs duty and to the category of internal taxation within the meaning of Article 95 since those in the first category are purely and simply prohibited whilst in the case of the second Article 95 merely prohibits discrimination between domestic products and those imported from other Member States which is adverse to the latter (judgment of 22 March 1977 in Case 78/76 Steinike & Weinlig [1977] ECR 595).

(2). The criterion for distinguishing between the two categories follows quite logically from that duality of the system and the Court put it in these terms in the judgment of 25 January 1977 in Case 46/76 Baubuis [1977] ECR 5: Any pecuniary charge, whatever its designation and mode of application, which is imposed unilaterally on 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 within the meaning of Articles 9, 12, 13 and 16 of the Treaty, even if it is not imposed for the benefit of the State. The position would be different only if the charge in question is the consideration for a benefit provided in fact for the exporter representing an amount proportionate to the said benefit or if it is related to a general system of internal dues applied systematically in accordance with the same criteria to domestic products and imported products alike. As the Court stated in its judgment in Case 78/76 Steinike & Weinlig, cited above, the fact that a tax is imposed on a product solely by reason of its crossing a frontier precludes the existence of an identical tax on domestic products.

(3). A charge coming under Article 95 may nevertheless come within the category of charges having equivalent effect if, although applying to domestic and imported products according to the same criteria, it has the sole purpose of financing activities for the specific advantage of the taxed domestic product judgment of 25 May 1977 in Case 77/76 Cucchi, cited above).

(4). Finally, it follows from the judgment of the Court of 22 March 1977 in Case 74/76 Iannelli [1977] ECR 557 that a tax applying systematically, according to the same criteria, to domestic and imported or exported products alike, and as such coming under Article 95, must satisfy only the requirement of non-discrimination imposed by that provision. The fact that a tax or levy is collected by a body governed by public law other than the State or is collected for its benefit and is a special tax or one allocated to a specific purpose cannot prevent its falling within the field of application of Article 95 (paragraph 19). On the other hand there is an infringement of Article 95 not only if the rate of the tax on domestic and imported products is different but also if the difference affects the mode of assessment and collection of that tax.

(1). The levy fulfils all the necessary requirements to come under a general system of internal taxation. It applies to domestic and imported products according to the same criteria because the tax of 3% applies uniformly and the mode of assessment of the tax, for both imported and domestic products, is that used for value-added tax.

(2). It then remains, according to the French Government, to consider whether the two sets of circumstances relied on by the Commission are such as to prevent the levy in question falling within the ambit of Article 95 and to bring it back within that of Articles 9 and 12.

(a). The absence of domestic production of reprographic equipment

(b). The use to which the levy is put

C —. Reply

1. The Commission makes two preliminary remarks. It says that the French Government does not contest the accuracy of the statistical data submitted by the Commission as regards the respective shares of domestic and imported products and that it has admitted that the levy in question does not form part of the scheme of French legislation on copyright.

2. The Commission then goes on to consider the pleas advanced by the French Government in its defence and contends first of all that it is impossible to resolve the dispute between the two parties to the action without raising the question whether there is or is not in fact any domestic production. A unilaterally imposed tax which is basically aimed at imports alone and is borne by foreign goods by reason of their crossing a frontier constitutes a charge having an effect equivalent to a customs duty.

3. As a final argument the Commission seeks to show that, even without taking account of whether or not there is any domestic production, the levy in question cannot be defined as internal taxation.

D —. Rejoinder

1. The facts

(a). The French Government first criticizes the Commission's statement that the French Government has not contested the facts put forward by the Commission. It claims that the Commission's officials have misinterpreted the statistics on the actual position of the reprographic industry in France. The most direct and accurate sources of information available to assess the actual share of French products in relation to imports of foreign equipment are the vouchers for the revenue from the levy on reprographic equipment which are held by the Centre National des Lettres.

(b). The French Government believes that those statistics are perfectly consistent and accurate. The difference in the figures obtained from them and the lower ones submitted by the Federation des Industries Électriques et Électroniques on which the Commission relies stems from the fact that French subsidiaries of foreign manufacturers of reprographic equipment were omitted from that Fédération's list although, as checks which have been carried out have shown, as French undertakings they paid the tax to the tax authorities.

(c). As regards the deliberate intention of the French legislature to tax imported equipment only, the statements made by the Ministre de l'Économie et des Finances [Minister for Economie Affairs and Finance] before the Senate on 22 November 1975 should be placed in their context. Not only is it questionable to found an argument on statements made in the context of an internal debate, in which any responsible politician is necessarily concerned to present the measures which he is advocating in a light as favourable as possible to the interests of his country, but the Commission should have referred to the entire debate which opened with a long report from the President of the Senate Commission for Cultural Affairs setting out the need for and the importance of a tax on reprography at a time of rapid development in photocopying.

(d). The French Government lays stress on the fact that the system instituted in France is similar to the one which the Commission itself favoured when it proposed the idea of a tax on reprography in its Communication to the Council of 22 November 1977. The conditions under which the tax on reprography is charged on equipment are entirely the same as those for value-added tax and the tax is consequently included in the final price which the user pays.

(e). As regards the arguments of the Commission based on the conditions governing the use to which the tax is put, the French Government observes that the Commission's opinion that in Community law, the only relevant question is whether the levy in issue is part of the system of copyright rules because the question whether that levy is or is not part of a system of internal taxation depends on the answer to that question alone is not acceptable in any respect because cultural policy remains the prerogative of national authorities. The Commission's Communication of 22 November 1977 did no more than set out very broad objectives and cannot be invoked in order to restrict that prerogative.

2. The legal aspects

IV —. Oral procedure

1. By application lodged at the Court Registry on 5 June 1979 the Commission of the European Communities brought an action before the Court under Article 169 of the EEC Treaty for a declaration that by charging levies on the importation of reprographic equipment, the French Republic has failed to fulfil its obligations under Articles 12 and 113 of the Treaty and under the provisions of Regulation No 950/68 of the Council of 28 June 1968 on the Common Customs Tariff (Official Journal, English Special Edition 1968 (I), p. 275) as subsequently amended and in force on the date of the reasoned opinion sent to the French Republic.

2. Article 22 of the French Finance Law for 1976, No 75-1278 of 30 December 1975 (Journal Officiel de la République Française of 31 December 1975, p. 13564), introduced a tax called a levy on the use of reprography which is charged at the rate of 3% on sales and appropriations for their own use, otherwise than for export, of reprographic machines by undertakings which have manufactured them or have had them manufactured in France and on imports of such machines. A Decree of 12 July 1976 (Journal Officiel de la République Française of 17 July 1976, p. 4279) listed the types of machines subject to the levy. The list includes certain offset printing machines, hectographs and stencil duplicating machines, special photographic equipment for the copying of documents, microfiche scanners linked to copying equipment, optical photocopying equipment, thermo-copying equipment and certain contact-photocopying equipment.

3. Article 22 of Law No 75-1278 further provides for the introduction of a levy on the publication of books which is charged at the rate of 0.20% and is payable by publishers on their sales, other than export sales, of any kind of works published by them.

4. Under the same provision the sums raised by both those levies are allocated entirely to the Centre National des Lettres and remitted to a special account called the Fonds National du Livre [National Book Fund]. Those levies are added to the other resources of the Fund — particularly subsidies — which are available to the Centre National des Lettres which uses them amongst other things to subsidize the publication of quality works and the purchase of both French and foreign books by libraries and the translation of foreign works into French. Finally, it is apparent from paragraph II of Article 22 of the said Law that those levies are assessed, paid and collected in the same manner as value-added tax.

5. It is not disputed that the widespread use of reprography for the reproduction of printed works results in the loss not only by authors but also by publishers of the monetary gain which national copyright laws guarantee them. As it stated in its Communication to the Council of 22 November 1977 concerning Community Action in the Cultural Sector (Bulletin of the European Communities, Supplement 6/77, p. 13), the Commission believes that a sum ought to be included in the selling price of equipment (photocopiers, tape-recorders, video-recorders) and the material they use ... to guarantee the remuneration which authors, publishers and performers are entitled to expect....

6. It is also not disputed that the levies in issue do not confer any direct and individual benefit on the authors and publishers whose works are reproduced in this way. The French Government maintains however that the allocation of the sums raised by those levies to purposes such as the dissemination of books, which is promoted by the Centre National des Lettres, amounts to a kind of collective compensation which helps to make good, if only to a partial extent, the loss of earnings suffered by authors and publishers owing to the increasingly frequent use of reprography.

7. The Commission came to the conclusion that French production of reprographic equipment, taken as a whole, was extremely small compared to all imports of such equipment and it concluded from that fact that the levy in issue was borne in practice by imported products alone and that it accordingly contravened Article 12 of the Treaty, so far as it applies to equipment from other Member States, and Article 113 of the Treaty and the provisions of the Common Customs Tariff so far as it applies to equipment originating in non-member countries.

8. The Government of the French Republic submits on the contrary that the levy in issue does not constitute a charge having an effect equivalent to a customs duty referred to in Articles 9, 12 and 13 but is an internal tax as referred to in Article 95 of the Treaty and that it satisfies the requirements of the last-mentioned provision regarding the prohibition of discrimination against products imported from other Member States.

9. Investigations undertaken jointly by the parties at the request of the Court and on the results of which both parties are agreed show that domestic production of all the different kinds of reprographic machine is only a small percentage, amounting in value to about 1% in 1977, 1978 and 1979, of the value of the total number of products, both domestic and imported, put on to the French market.

10. As regards the facts which form the basis for the Commission's case, it should be observed that the percentage mentioned above relates to the entire French production of reprographic machines. The Decree of 12 July 1976 however lists eight different kinds of machines so that, the parties not having been able to provide accurate details on this point, it is not inconceivable that the percentage in question might be higher in the case of certain categories of machines.

11. The fact that French production is extremely limited compared to imports, which actually appears to be the case even if the reservation expressed above is taken into account, does not by itself justify the conclusions which the Commission draws from it regarding a failure by the French Republic to fulfil its obligations.

12. Well-established case-law of the Court is to the effect that the prohibition laid down by Articles 9, 12 and 13 of the Treaty in regard to charges having equivalent effect covers any charge exacted at the time of or on account of importation which, being borne specifically by an imported product to the exclusion of the similar domestic product, has the result of altering the cost price of the imported product thereby producing the same restrictive effect on the free movement of goods as a customs duty.

13. The essential feature of a charge having an effect equivalent to a customs duty which distinguishes it from an internal tax therefore resides in the fact that the former is borne solely by an imported product as such whilst the latter is borne both by imported and domestic products.

14. The Court has however recognized that even a charge which is borne by a product imported from another Member State, when there is no identical or similar domestic product, does not constitute a charge having equivalent effect but internal taxation within the meaning of Article 95 of the Treaty if it relates to a general system of internal dues applied systematically to categories of products in accordance with objective criteria irrespective of the origin of the products.

15. Those considerations demonstrate that even if it were necessary in some cases, for the purpose of classifying a charge borne by imported products, to equate extremely low domestic production with its non-existence, that would not mean that the levy in question would necessarily have to be regarded as a charge having an effect equivalent to a customs duty. In particular, that will not be so if the levy is part of a general system on internal dues applying systematically to categories of products according to the criteria indicated above.

16. The Court is of the opinion that the particular features of the levy in issue lead to its being accepted as forming part of such a general system of internal dues. That follows first from its inclusion in taxation arrangements which have their origin in the breach made in legal systems for the protection of copyright by the increase in the use of reprography and which are designed to subject, if only indirectly, the users of those processes to a charge which compensates for that which they would normally have to bear.

17. That conclusion follows in the second place from the fact that the levy in issue forms a single entity with the levy imposed on book publishers by the same internal legislation and from the fact, too, that it is borne by a range of very different machines which are moreover classified under various customs headings but which have in common the fact that they are all intended to be used for reprographic purposes in addition to more specific uses.

18. It follows from those considerations that the alleged failure to fulfil obligations has not been proved and that the action should be dismissed.

19. Under Article 69 (2) of the Rules of Procedure the unsuccessful party must be ordered to pay the costs if the other party has asked for them. Since the applicant has failed in its submissions, it must be ordered to pay the costs.

On those grounds, THE COURT hereby:

1 Dismisses the application as unfounded;

2 Orders the applicant to pay the costs.