C-120/88

2. Before I go on to examine whether the 4. According to the Kingdom of Spain, that States in question have indeed failed to fulfil principle was of an exceptional and their obligations, I must for a moment temporary nature and the prospective consider the arguments put forward by the removal of fiscal frontiers should now give Kingdom of Spain which expressly requests the Court cause to modify, if not to the Court to modify the legal principles on reconsider, that solution, which gives rise to which it has decided past case-law 1in the serious practical difficulties. More matter and in particular to modify the particularly, it benefits States of exportation, solution presented in its judgment in Gaston which retain the VAT originally levied, to Schul I. the detriment of States of importation, whose revenue is unfairly reduced. In addition, such a system is anything but satis­ factory, whereas other solutions advocated 3. I do not at this point intend to describe by the Commission in its proposals for a in detail the problem which the Court directive or in its White Paper, or by the resolved in that case. Suffice it to recall that Council, which the latter, however, has not yet adopted, provide a satisfactory solution * Original language: French. 1 — Judgment in Case 15/81 Gaston Schul v Inspecteur der to the problem of avoiding double impo- Invoerrechten en Accijnzen (Gaston Schul I) [1982] ECR 1409; judgment in Case 47/84 Staatssecretaris van Financien v Gaston Schul (Gaston Schul II) [1985) ECR 2 — Council Directive 77/388/EEC of 17 May 1977 on the 1491; judgment in Case 39/85 Bergeres-Becque v Service harmonization of the laws of the Member States relating interrégional des douanes [1986] ECR 259 and judgment in to turnover taxes — Common system of value-added tax : Case 299/86 Drexl [1988] ECR1213. uniform basis of assessment (OJ L 145, 1977, p. 1).

sition while at the same time distributing remission of tax on all products at the time VAT revenue on an equitable basis between of exportation. It is for the political Member States. Such is the case with institutions of the Community to adopt such schemes which provide either for full a solution since it involves a political remission on exportation and imposition choice', 3 when the goods in question are imported, or for one single VAT charge (in the State of exportation or in that of consumption) with subsequent payment of compensation the Court ruled in unequivocal terms that: between the Member States concerned. In contrast, the system which the Commission proposes would seriously penalize those 'although the establishment of a system of Member States of the Community with the complete neutrality in the field of compe­ lowest living standards because the influx of tition involving full remission of tax on second-hand goods is most marked in such exportation is indeed a matter for the States. Community legislature, so long as such a system is not established Article 95 of the Treaty prevents an importing Member State from applying its system of value added tax 5. I would not deny that the arguments to imported products in a manner contrary 4 which the Kingdom of Spain has presented to the principles embodied in that aniele'. to the Court are of interest; however, I do not believe that the Court is the appropriate forum in which to discuss such matters. What we have heard are arguments which 7. In other words, the absence of VAT are primarily of a political order and which harmonization in this area cannot effectively illustrate the need for fiscal harmonization be relied on in order to render nugatory the in this area, rather than legal arguments rights conferred on individuals by Article 95 which might lead the Court to a reappraisal of the Treaty. Moreover, this reasoning of principles laid down in its earlier suffices to dispel the arguments in which case-law. Greece and Italy relied on the existence of a proposal for a directive, just as it also suffices to undermine the reasoning based on equity between Member States which Spain used in its attempts to persuade the 6. Furthermore, those principles have Court in the present cases not to confirm already refuted in advance the main the principle that residual VAT is objections submitted to the Court in the deductible. Budgetary difficulties with which present cases. Thus, while certain Member States may on occasions have to contend States maintained, according to the cannot have any bearing whatever on their judgment in Gaston Schul I, that compliance with the absolute and uncondi­ tional prohibition against taxing imported goods more heavily than domestic goods.

Spain to the effect that the Commission 11. There can be no doubt that Member failed to take account of other indirect States are under an obligation to ensure that charges levied on goods and that it has private individuals shall benefit from a thereby given rise to distortions in compe­ deduction in the amount of residual VAT tition to the detriment of those States which incorporated in the value of the product. In have not introduced such charges. The latter other words, any failure to apply Article 95 might for that reason be persuaded to adopt as interpreted in the case-law of the Court those charges, and this would push back undoubtedly constitutes a failure to fulfil even further the prospective removal of obligations. However, the Commission's fiscal frontiers. In answer to this line of action is not directed against the actual argument, the Commission points out, quite failure to apply that Article — a failure correctly in my opinion, that the situation which in any case is not really disputed by described by the defendant State could not Spain, Greece or, as became clear from the under any circumstances justify the hearing, by Italy — but rather against the infringement of Article 95 which would absence of measures designed to ensure that arise under a system of discriminatory national legislation complies with Article 95. taxation. Equally cogent, in my view, are the secondary observations of the Commission to the effect that Member States are entitled, under Community law as 12. I would first point out that, while the it stands at present, to set up specific directly applicable provisions of the Treaty systems of taxation other than VAT, do not make it necessary to adopt 'national provided that such charges meet the implementing provisions' 5and while there is requirements set out in Article 95 and do no doubt that private individuals may rely not discriminate against imponed products. on Article 95 before courts and tribunals, Finally, it should be noted that the removal those facts relate only to a 'minimum of barriers caused by differences between guarantee' which is not adequate in itself to taxation systems, even those which are not ensure a full and comprehensive application discriminatory, comes under Article 99, of the Treaty. 6 rather than under Article 95 which seeks to eliminate directly and immediately those fiscal provisions which are discriminatory and protective. 13. Moreover, according to the decided case-law of the Court, 7

and enable national courts to ensure that administrative provisions, gives to those rights and obligations are observed'. 8 understand that it will in future be satisfied with administrative instructions which have been sufficiently publicized. Is it possible to reconcile this view with the principles laid down in the Court's own case-law that a 14. If we apply those principles to the cases national legislative provision which infringes in hand, we shall find that the absence of Community law cannot be revoked merely suitable provisions in national law designed by administrative instructions, but rather to ensure that the residual portion of VAT requires a similarly mandatory text?

quences. In the first place, one can only brought by the Commission, while accepting agree with the Commission's view that that the Member States have in any case not public servants in the Member States will adopted the necessary measures. not implement the principles relating to the deduction of residual VAT unless they have been instructed to do so by their superiors. Secondly, individuals will find themselves in a situation in which the only available text 16. There is, however, reason to ask will be that of the national measure whether the situation in the present cases providing for taxation at the time of may not be distinguished from that in which importation, a measure which will have national legislation actually conflicts with nothing to say on the subject of the Community law. National legislation which deduction of residual VAT, whereas it is provides for the imposition of VAT when precisely such a deduction which guarantees goods are imported is not at variance with that national legislation complies with Community law; such legislation complies Community law. In such circumstances, with Community law provided that it can be individuals will be completely uncertain as interpreted in the manner required under to whether they may invoke Community Article 95. What we are concerned with,

In other words, the nature of the measures required to ensure respect for the correct application 15. I would make one final comment: the of Community law may vary in the light of Commission, which had initially called in the distinction between situations in which question the absence of laws, regulations or there is an infringement stricto sensu of Community law brought about by a legis 8 — Case 257/86, cued above, at paragraph 12 lative provision and situations where the 9 — See Case 168/85 Commision v Italy, cited above infringement consists only in the fact that