C-20/76

JUDGMENT OF 16. 2. 1977 — CASE 20/76

the national judge to compare in and the fact that it could only have specific cases the situations which been avoided in practice by abolishing may arise. the tax are not sufficient to prevent 4. The minor and incidental nature of Article 95 from being applicable. the obstacle created by a national tax

In Case 20/76,

Reference to the Court pursuant to Article 177 of the EEC Treaty by the Finanzgericht Baden-Württemberg, Außensenate Stuttgart, for a preliminary ruling in the proceedings pending before that court between:

SCHÖTTLE & SÖHNE OHG, Oberkollwangen,

and

JUDGMENT

Facts

The order for reference and the written I — Facts and procedure observations submitted pursuant to Article 20 of the Protocol on the Statute 1. In November 1967 the Government of the Court of Justice of the EEC may of the Federal Republic of Germany be summarized as follows: adopted the Transport Policy Programme

SCHÖTTLE v FINANZAMT FREUDENSTADT

railways. The draft law on this tax was all towns and villages the centres of which lie within the local zone. It communicated to the Commission which, in a recommendation (JO 1968, must be determined and publicly No 35, p. 14) drew the attention of the notified for each by the lower Government of the Federal Republic of transport authorities. Germany to the fact that 'under the draft 3. The highest regional transport law international short-distance transport authority (Oberste Landesverkehrs is subject to tax in respect of the distance behörde) may divide towns with more than one thousand inhabitants into covered in Germany while national short-distance transport is exempt.

Paragraph 6 (1) of the Law relating to the Under the first paragraph of the law, powered transport of goods provides: carriage of goods over long distances and all international carriage were subject to 'For all powered vehicles which are to be the tax. The tax was calculated on the used in longdistance goods transport or 'tonne per kilometre'. Domestic local local goods transport a place of origin transport of goods (Güternahverkehr) was must be determined. The undertaking not subject to the tax. Furthermore, must have the registered office of the international transport into the Federal undertaking or permanent business Republic to a destination within the local premises at this place of origin'. zone (Nahzone) of the town or village at which the border was crossed and Under Paragraph 3 (5) of the Law on the international transport to a foreign taxation of the carriage of goods by road destination which commenced in this the tax was not applied if the place of zone were exempt. unloading or the place of loading of goods carried by road lay within the local The Law relating to the powered zone of the town or village in the area of transport of goods (the Güterkraftver which the loaded vehicle first entered the kehrgesetz, Bundesgesetzblatt, 1952 L, territory in which the law was applicable page 697), defines local transport of or last left it, in other words in the local goods.

JUDGMENT OF 16. 2. 1977 — CASE 20/76

2. Firma Schöttle & Söhne OHG runs a II — The questions, the reasons sand and gravel wholesale undertaking in for the questions and the Baden-Württemberg in the north of the written observations Black Forest. It used to transport to the Stuttgart area materials for the most part The first question from a gravel quarry at Lauterbourg in Alsace. 'Does a tax which is imposed on the basis of distances covered within a Member State for the carriage of goods Following the introduction of the tax on by road which cross a frontier, constitute the carriage of goods by road the plaintiff taxation on products within the meaning in the main proceedings had to pay 4 of Article 95 of the EEC Treaty?' pfennigs per tonne per km for the transport of gravel from Alsace to In the opinion of the Finanzgericht the Stuttgart which meant that the basis of the taxation is not the product or transaction was no longer competitive. the value which it represents but the Consequently it decided to obtain transportation service as the product of supplies in the Baden part of the Rhine the weight and the distance covered. plain which its lorries could reach Thus, like a charge for the use of roads without its being subject to the tax on which is economically comparable to it, the carriage of goods by road as the the tax is not imposed directly on journey was entirely within the local products. However it is possible that it zone of the undertaking. may also be regarded as a charge imposed indirectly on products. In the In August 1969 the plaintiff in the main case of a charge imposed solely for proceedings had to pay the tax in reasons of transport policy doubts may question, having carried a single load of arise as to whether the indirect gravel from Lauterbourg (Alsace) to relationship between such a charge and Stuttgart. It subsequently lodged an the product itself is not too distant to be objection seeking to be exempted from taken into account.

origin. Consequently the answer to the meaning of Article 95 of the EEC Treaty first question must be in the affirmative. if, although no taxation is imposed on transport in the same area within the The Commission observes that in view of country, the different treatment is its purpose the prohibition must be restricted to foreign goods which are widely interpreted as this is the only way delivered in a strip of territory running to guarantee complete protection against parellel to and between approximately 50 overt or disguised discrimination. The and approximately 100 km from the interpretation follows moreover directly border?' from the text which twice contains the terms 'directly or indirectly', the first The Finanzgericht states that since with regard to internal charges on transport into or outside the 'free zones' imported products, the second in respect was exempted from the tax but the of internal charges on similar national situation of the 'free zones' was products (cf. Molkerei Westfalen/Lippe dependent on the frontier crossing point, GmbH v Hauptzollamt Paderborn the charge could in most cases be ([1968] ECR 143)). avoided by the judicious choice of the frontier crossing point. A theoretical A tax such as the German tax on the linking together of all possible 'free carriage of goods by road which is zones' along the frontiers of the Member charged on the basis of the distance State would produce a zone covered on the national territory in cases approximately 50 km wide running of importation by lorry thus constitutes a parallel to the frontier within which charge on products. foreign products could not be subject to a charge. The aim of the legislature in introducing the tax is therefore not relevant in this In these inland areas which foreign respect even if it merely formed part of products could only reach by the transport policy and was not long-distance transport, that is to say, intended to be a source of income. broadly speaking, all those towns or villages which are more than 100 km It suggests the following answer to the from the border, there could also be no first question: discrimination against foreign products. Therefore it is only within the narrowly '"A charge indirectly affecting products" defined strip of territory between 50 and within the meaning of Article 95 of the 100 km from the border that the

Firma Schöttle & Söhne OHG observes meaning that an indirect imposition of that the mere hypothetical alteration of higher internal charges within the the equality of opportunity in the sphere meaning of what has been stated under of competition implies the existence of (1) above exists where products imported prohibited discrimination. In fact the by international transport are subject to detriment caused by the tax to products tax in a particular zone while national originating in each of the neighbouring transport of goods in the same zone is states along the whole length of the 50 not always subject to the tax.' km strip cannot be regarded as minimal. It is also relevant that the effect of the The third question additional tax on each undertaking involved in local transport established at 'Is discrimination within the meaning of a distance from the frontier comparable Article 95 of the EEC Treaty excluded if to that of the plaintiff must be regarded transport of domestic goods abroad is as serious. Such undertakings which, subject to the same tax as transport of because the validity of their licences is foreign goods into the country?' restricted to local transport, are obliged The Finanzgericht states that the fact to carry out the greater part of their that, under the law, not only products transport operations in the strip of from other Member States but also territory subject to the additional charge domestic products which are transported cease to be competitive because of this in the opposite direction are liable to tax measure when they transport foreign in Germany shows clearly that goods. discrimination against foreign goods was not intended by the legislature. The Commission observes that Article 95 does not merely seek to eliminate Firma Schöttle & Söhne OHG states that obstacles to trade at frontiers. On the Article 95 prevents distortions of contrary this article requires that a competition in the national market comparison be made of fiscal charges at which are contrary to Community law any place whatever in the country. In from being compensated by the taxation this respect reliance may not be placed of national products abroad. Therefore it on the fact that a certain category of is not relevant to state that the German

legislature which is relevant but solely be ignored at will to the detriment of the the objective situation. It proposes the protected community national as soon as following answer: this appears opportune to the national administration because the necessary 'Discrimination within the meaning of rules entail administrative difficulties. the first paragraph of Article 95 of the EEC Treaty is not excluded by the fact In order to avoid the discriminatory that the tax in question affects not only effect it would have been sufficient to the carriage of imported products on the enlarge the free zone referred to in national territory but also the carriage of Paragraph 3 (5) of the Law on the national products to a foreign country.' taxation of the carriage of goods by road in such a way that short-distance The fourth question transport undertakings continue to be exempt from the tax on transport 'Is discrimination within the meaning of entailing the crossing of the border Article 95 of the EEC Treaty excluded by where the place of loading or unloading the fact that the taxation is of is on that part of the territory situated considerable national importance to an between 50 and 100 km from the border. objective in the field of transport policy which is approved by Community law The Commission observes that whereas and that the discriminatory incidental from a general economic point of view effects are minimal and only avoidable the discriminatory effect of the German by considerable extra administrative work tax was minimal it is however rather

paying tax the provisions contained in administrative work. Even if this were the Paragraph 1 (1) No 2 of the Law relating case the direct nature of the prohibition to the carriage of goods by road were contained in Article 95 would not be at included in the Law. If Article 95 obliged all altered by the fact that a Member the Federal Republic of Germany to State has to surmount certain difficulties make the same distinction between in order to be able to comply with the long-distance and local transport as provision within the context of the national law with regard to transport legislative measures adopted by it. within the country it would have been necessary to determine the central points It proposes the following answer: of all towns and villages outside Germany which might possibly fall The importance attached to the tax from within the boundaries of domestic local the point of view of its political purpose, zones. However the additional ad­ the scope of the discrimination, the ministrative expenses which would be increase in work required to avoid it and involved would not be in proportion to its term of validity are of no relevance the advantage thereby gained. with regard to the first paragraph of Article 95 of the EEC Treaty.' Firma Schöttle & Söhne OHG observes that Articles 7 and 95 of the EEC Treaty Upon hearing the report of the contain an absolute prohibition the Judge-Rapporteur and the views of the extent of which is clearly defined. It may Advocate-General the Court put certain

JUDGMENT OF 16. 2. 1977 — CASE 20/76

It was intended to take account of the reservations expressed by the Com intended to divert extensively the mission without however accepting the transport of goods by lorry, in particular Commission's legal viewpoint. Later the heavy goods transport, to other means of Commission informed the Federal transport, by means of the charge Government that it would raise no more imposed under the programme. objections to these provisions. In particular in the course of further Local traffic was exempt from this special consultations the Commission at no time tax as not being capable of replacement brought the matter up again. by other means of transport.

As Westfalen/Lippe v Hauptzollamt the international transport operations Paderborn [1968] ECR 143). carried out by these local transport undertakings could equally be carried out The basis of assessment of the tax on the by other means of transport they were carriage of goods by road was not the made subject to the tax irrespective of goods carried but the physical load what proportion the distance covered in imposed on the roads by the transport of the Federal Republic was of the total the goods, expressed in metric tons per transport distance. kilometre (Case 9/70, Grad v Finanzamt Traunstein [1970] ECR 825). The charge on the international carriage of goods by road was particularly If such charges which were not related to necessary because important German the product itself but to its distribution industrial centres lie within the local area

of the borders of the Federal Republic of place of origin (Standort) in the case of Germany. Because of their close foreign transport, foreign vehicles would economic links with the economic thereby have been granted a local zone centres of other Member States these with a radius of 100 km compared with a centres constitute the place of origin and zone of a 50 km radius for German destinations of a considerable volume of vehicles. The introduction of a tax-free long-distance transport which, because of zone for transport by domestic and the proximity to the frontier, are carried foreign vehicles of 100 km from the out to a large extent by German local border would have produced the result transport vehicles. that the objective of the Transport Policy

It may be Federal Republic the solution chosen by concluded from the experience acquired it was quite compatible with the by the German administration of this prohibition on discrimination contained system within Germany that its in the EEC Treaty. The technically extension to foreign countries would in different form of the rules for domestic practice be impossible. The determi transport and for international transport nation of local zones often entails has not however resulted in dis extensive and complicated research as to crimination against international local the centre of the town or village.

disadvantage. An extension of the to extend the transport policy measures tax-free zone for transport by foreign which were considered justified with vehicles to a distance of 100 km from the regard to the national territory to other border would however have prejudiced markets and thus indirectly to influence German undertakings. As the frontier the transport policy of neighbouring crossing-point had to be regarded as the States.

The national rules

4 The tax in question was part of a series of measures adopted in 1968 to coordinate the various means of transport. In this context the tax on the carriage of goods by road was intended to divert long-distance traffic towards the railways and inland waterways. Consequently short-distance transport of goods which cannot reasonably be diverted from the roads was exempted from the tax.

SCHÖTTLE v FINANZAMT FREUDENSTADT

5 For this purpose the law in question refers to the definitions of the concepts of long-distance and local transport contained in the German Law relating to the powered transport of goods, the Güterkraftverkehrsgesetz (Bundes­ gesetzblatt 1952 I p. 697). In the second paragraph of that law it is provided that local transport covers all transport of goods for others by powered vehicle within the borders of the town or village or the 'local' zone.

The local zone is the territory within a radius of 50 km calculated directly from the centre of the town or village in which the lorry has its place of origin and includes the territory of any town or village the centre of which is within that circle. If a town or village has several centres the local zone covers all the territory included within a radius of 50 km from each centre with the result that the territories of the local zones may vary in size.

6 A powered vehicle registered abroad is deemed to have its place of origin in the border town or village at which it crosses the German border (Paragraph 6 (b) of the Law relating to the powered transport of goods) as amended by the Fourth Law amending the Law relating to the powered transport of goods (Viertes Gesetz zur Änderung des Güterkraftverkehrsgesetz) (Bundesgesetzblatt I, p. 1157).

The first question

11 The first question asks whether

'a tax which is imposed on the basis of distance covered within a Member State for the carriage of goods by road constitutes taxation on products within the meaning of Article 95 of the EEC Treaty.'

12 The first paragraph of Article 95 provides that no Member State may 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. Thus the purpose of Article 95 is to remove disguised restrictions on the free movement of goods which may result from the tax provisions of a Member State.

13 In view of the general scheme and objectives of that provision the concept of tax on a product must be interpreted in a wide sense.

14 Such restrictions may result from a tax which in fact compensates for taxes which are imposed on the activity of the undertaking and not on the products as such. This problem does not arise when the national product and the imported product are subject to tax at the same time and on the basis of a specific activity, for example, the use of national roads.

1. the possibility of different treatment for imported products may in any case only arise if imported products are delivered in a strip of territory approximately 50 kilometres wide running parallel to and at a distance of 50 km from the border;

2. transport of domestic goods abroad is subject to the same tax as transport of foreign goods into the country;

3. the objective of the tax is part of the transport policy and the discriminatory effects could only have been avoided by considerable extra administrative expenditure and they were restricted to the years 1969 to 1971.

18 These questions should be answered jointly.

19 Article 95 is intended to ensure that the application of internal taxation in one Member State does not have the effect of imposing on products originating in other Member States taxation in excess of that imposed on similar domestic products. Therefore it is irrelevant that the taxation is also imposed on the same conditions on national products which are exported and on imported products.

20 The first paragraph of Article 95 is infringed where the taxation on the imported product and that on the similar domestic product are calculated in a different manner on the basis of different criteria which lead, if only in certain cases, to higher taxation being imposed on the imported product.

Costs

23 The costs incurred by the Government of the Federal Republic of Germany and the Commission of the European Communities which submitted observations to the Court are not recoverable. As these proceedings are, so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, costs are a matter for that court.

On those grounds,

THE COURT

in answer to the questions referred to it by the Finanzgericht Baden-Württemberg by order of 17 December 1975, hereby rules:

1. Taxation imposed indirectly on products within the meaning of Article 95 of the EEC Treaty must be interpreted as also including a charge imposed on international transport of goods by road according to the distance covered on the national territory and the weight of the goods in question.

Kutscher Pescatore Mertens de Wilmars

Sørensen Mackenzie Stuart O'Keeffe Touffait

Delivered in open court in Luxembourg on 16 February 1977.

A. Van Houtte H. Kutscher

Registrar President

OPINION OF MR ADVOCATE-GENERAL CAPOTORTI