C-20/67

2. Agriculture ~ Common agricultural policy — Common organization of the markets — Turnover equalization tax — Not a charge having an effect equivalent to that of custom duties (Regulation No 19 of the Council of the EEC on the progressive establishment of the market in cereals, Article 20(1))

1. Since the provisions of Article 95 of the absense of any protective intention, con­ Treaty establishing the European Econ­ stitute a charge having an effect equiv­ omic Community relate only to products alent to a customs duty within the mean­ originating in Member States, they ing of Article 20(1) of Regulation No 19 cannot be applied to imports from a on the progressive establishment of a third country. common organization of the market in cereals. 2. A tax which is levied within the frame­ work of turnover tax legislation and is Cf. paragraph 1, summary, Case 7/67. designed to place all categories of prod­ ucts, whatever their origin, in a com­ Cf. paragraph 5, summary, Case 57/65, parable fiscal situation does not, in the Rec. 1966, p. 295.

In Case 20/67

Reference to the Court under Article 177 of the Treaty establishing the European Economic Community by the Finanzgericht, Munich, (a court with jurisdiction in taxation matters) for a preliminary ruling in the action pending before that court between

Firma KUNSTMÜHLE Tivoli , Munich,

and

Advocate-General: J. Gand

Registrar: A.Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Summary of the facts United States of America. The customs office concerned levied a turnover equaliza­ 1. Summary tion tax. (hereinafter referred to as the A — According to Article 1 of Regulation 'equalization tax') on these imports at 1.5 % in accordance with German law. No 19 of the Council on the progressive establishment of a common organization of For this reason the Tivoli undertaking the market in cereals (Official Journal of 20 brought an action before the Finanzgericht April 1962, p. 933) (hereinafter referred to as (Finance Court), Munich. Its argument before that court was that, since no domes­ 'Regulation No 19') 'A common organiza­ tion of the market in cereals shall be pro­ tic product comparable to the abovemen­ gressively established, comprising a levy tioned product exists in Germany, the levy system applicable to trade between Member in question contravenes Article 20(1) of States and to trade between Member States Regulation No 19. and third countries' (for certain categories of cereals). 2. Contents of the order referring the matter; The other provisions of the regulation set arguments of the Finanzgericht out the details of this 'levy system'. Article A — On 17 May 1967 the Finanzgericht, 20(1) provides in particular that: Munich, decided to request the Court of 'The application of the levy system to third Justice for a, preliminary ruling on the fol­ countries shall entail the abolition of all lowing question: customs duties, or charges having equiv­ alent effect, on imports from third coun­ 'Is the turnover equalization tax levied on tries'. the importation of a product a charge having an effect equivalent to a customs B — Between 1 July 1966 and 3 October duty within the meaning of Regulation No 1966 the Kunstmühle Tivoli undertaking 19 [of the Council of the EEC] when no (hereinafter referred to as 'the Tivoli under­ similar or competing product (which could taking') cleared through customs several be used as a substitute) within the meaning consignments of hard wheat from the of the first and second paragraphs of Article

95 of the EEC Treaty is produced in the tax, with a view to aligning imported prod national territory?' ucts which are not subject to the turnover tax to the domestic fiscal rate. B — The opinion of the Finanzgericht is, in effect, as follows: II — Procedure (a) The parties to the main action rightly agree that hard wheat imported into Ger The order referring the matter reached the many does not meet with any competition Registry of the Court of Justice on 24 May from any 'similar' domestic product (first 1967. paragraph of Article 95 of the EEC Treaty) The Government of the Federal Republic of or from one which may be substituted for it Germany, the Commission of the European (second paragraph of Article 95). Communities and the Tivoli undertaking (b) Taxes levied on the importation of goods submitted written observations in accord for which the domestic market does not ance with Article 20 of the Protocol on the offer any competition do not fall under any Statute of the Court of Justice of the EEC, of the prohibitions of Community law. and delivered oral argument at the hearings They are not 'charges having an effect on 5 and 7 December 1967.

parties Articles 95 and 97 of the Treaty cannot apply either, because they only concern The observations of the Tivoli undertaking cases in which the imported product meets may be summarized as follows: competition from comparable domestic products. A — If the opinion of the Finanzgericht Article 17(3) of the Treaty confirms what were correct, each Member State would have the right to subject the importation of has been said above. According to this provision Member States have the right to products for which the home market offers substitute for customs duties of a fiscal no competition to a tax fixed at an arbitrary

The levy Treaty, which are precisely to ensure that undertakings have the same chance of sell ing, in such a case, of a turnover equaliza tion tax on imported products is, it seems, ing their goods in all parts of the territory justified by the German law on the equaliza governed by the Treaty. tion tax which imposes it on all deliveries of B — Taxes on the importation of products products carried out in Germany in return for which the home market offers no com for payment.

JUDGMENT OF 4. 4. 1968 — CASE 20/67

57/65 (Rec. 1966, p. 293). It is also supported product can be subjected to taxation if, and by Article 17(1) of the Treaty which states only if, there are comparable domestic prod that the provisions of Article 9 et seq. also ucts in competition with it, so that the apply to customs duties of a fiscal nature. charge is thus a genuine example of'internal A characteristic of such duties is that they taxation' within the meaning of Article 95. do not protect (or do not only protect) The observations of the Federal Govern domestic production, but are intended only ment may be summarized as follows: (or also) to bring in revenue to the state. A — In distinguishing between charges Thus the levying of these duties is not having an effect equivalent to customs directly subject to a condition precedent duties and internal taxation, the one deci that the imported product must be com sive test is the general purpose of the charge parable to a domestic product with which it in question. Therefore the turnover equali competes. zation tax must be considered as an example From all these observations, as from the use of internal taxation. This follows necessarily

These ele question can only be interpreted as meaning ments are not present when taxation is that there is no 'increasing of the price' of a imposed on products which are not in com product when the purpose of the tax is only petition with any domestic products; in to offset a charge imposed at an earlier this case there is 'internal taxation' within stage on the domestic product. The judg the meaning of the EEC Treaty. The judg ment in Joined Cases 52 and 55/65 (Rec. ment delivered by the Court in Joined 1966, p. 227) shows that the Court con Cases 2 and 3/62 (loc. cit.) does not run siders the 'increasing of the price' as a counter to this line of reasoning, particu decisive factor. larly since, in the case which it decided, C — Article 17(3) of the EEC Treaty does comparable domestic products did in fact not provide any argument to the contrary. exist and could have been subjected to The complete elimination of customs duties comparable taxes. and of charges having equivalent effect can B — Nor can Article 95 be taken as meaning sometimes be advantageous for the prod that it prohibits the levying of a turnover ucts of the exporting state compared with equalization tax in cases such as the present those of the importing state, especially one.

decide the rate at which the turnover equal­ The Commission also puts forward the ization tax is to be levied. following argument. The second paragraph C — Article 17(3) of the Treaty confirms of Article 95 points the same way. The what has already been said. By definition protective measures referred to consist in customs duties of a fiscal nature are levied levying on a product taxation which is on products which are not made within the heavier than the taxation on a competing country. In allowing these duties to be con­ product. Usually these measures are only verted into internal taxation, Article 17(3) adopted when the product against which must mean that the taxation in question the protection is to take effect is not made does not have 'an effect equivalent to that of inside the country. If this were not so, there customs duties'. From this it must also be would be discrimination in favour of one concluded that Article 93 does not prohibit domestic product as compared to another. the levying of taxation on the importation Thus to a large extent the second paragraph of products for which the domestic market of Article 95 would have no point if taxation offers no competition. This is because on products which are not made within the otherwise the provision in question would country were illegal simply because of the have no practical point, since it is the very prohibition on charges having an effect absence of such competition which is deci­ equivalent to customs duties. sive as regards products subjected to cus­ C — Presumably turnover equalization toms duties of a fiscal nature. taxes on products which are not in com­ petition with domestic products can have The observations of the Commission may be 'effects equivalent to customs duties' if they summarized as follows: are levied at excessively high or even pro­ A — No answer to the question asked here hibitive rates. It matters little that they may is to be found in the case-law of the Court, be neither protective nor discriminatory. because in the cases previously decided the First, this is true also of the customs duties imported product was in competition with to which the abovementioned products are comparable domestic products. subjected. Secondly, the restriction or the B — In principle the levying of a turnover elimination of the free circulation of goods equalization tax on products which are not is also to be included amongst the 'effects in competition with domestic products is equivalent to customs duties'. Since Article compatible with the Treaty. In the thinking 95 makes no provision with regard to such of national legislature, the turnover tax and an activity and since it is also a fact that this the equalization tax relating to it are both activity would be incompatible with the intended as a levy on domestic consump­ principles of the Common Market, the tion. This argument is also true of the prod­ inevitable conclusion is that the prohib­ ucts already mentioned. To exonerate itions on imposing charges having equiv­ products which have not been made inside alent effect are applicable here. the country from the equalization tax However, that is not the position in this would encourage their consumption and case. The rate of the equalization tax levied

Although Article 177 of the Treaty does not give the Court jurisdiction to apply the provisions of Community law to a national tax, nevertheless the Court may inter­ pret Article 20 of Regulation No 19 with regard to the elements of a national tax levied on cereals from their countries and which adapts to the products imported a general turnover tax levied on all products sold within a Member State. Article 20(1) of the said regulation provides that the application of the levy system to third countries, which was established by that same regulation, 'shall entail the abolition of all customs duties, or charges having equivalent effect, on imports from third countries'. It follows that the question referred to the Court amounts to whether a tax levied in the circumstances stated above falls under this prohibition.

Regulation No 19 has as its purpose in particular to substitute a uniform system of levies for all the protective measures of different kinds previously applied by Mem­ ber States.

KUNSTMÜHLE TIVOLI v HAUPTZOLLAMT WÜRZBURG

In consequence, Article 20(1) of the same regulation abolished all national measures having protective effects similar to those of the levy.

Taxation such as that which is the subject of the main action, levied within the framework of legislation relating to the turnover tax, does not constitute a specific tax on imported products, but a general tax applying without distinction to all categories of products, whether domestic or imported, even if charged at the mo­ ment of importation.

Such a charge, of an essentially fiscal nature, when it is imposed on importation, is intended to place in a comparable fiscal situation all categories of products what­ ever their origin may be.

JUDGMENT OF 4. 4. 1968 — CASE 20/67

A tax imposed on the importation of products originating in third countries does not constitute a charge having an effect equivalent to a customs duty within the meaning of Article 20(1) of Regulation No 19 on the progressive establishment of a common organization of the market in cereals when it is imposed as a charge under the national system of turnover tax;

and declares :

It is for the court making the reference to decide on the costs of the present proceedings.

Lecourt Donner Strauß

Trabucchi Mertens de Wilmars