C-158/88

Mr President, According to Article 1 of the directive, Members of the Court, exemption from turnover tax and excise duty on imports is to apply, as regards travel between non-member countries and the Community, to goods in travellers' personal luggage, if such imports have no commercial character and the total value of 1. By an application of 26 May 1988 based the goods does not exceed ECU 45 ; 2 on Article 169 of the EEC Treaty the Member States may reduce this exemption Commission has asked the Court to declare to ECU 23 for travellers under 15 years of that by limiting the exemptions from age. 3 In addition, in the case of travel turnover tax and excise duties on imports in between Member States, Article 2 of the international travel below the amounts directive provides that exemption from stipulated in Articles 1, 2 and 4 of Council turnover tax and excise duty is to apply to Directive 6 9 / 1 6 9 / E E C of 28 May 1969, ' goods in travellers' personal luggage if they Ireland has failed to fulfil its obligations were acquired subject to the general under the EEC Treaty. conditions governing taxation on the domestic market of one of the Member States and if such imports have no commercial character and the total value of the goods does not exceed an amount which, at the material time, was ECU 350; 4 2. The origin of the dispute between the Member States may reduce this exemption Commission and Ireland resides in the continuing increase in the number of short trips made to Northern Ireland by persons from Ireland for the purpose of purchasing goods bearing United Kingdom domestic taxes, which are generally lower than in Ireland, and bringing them back to Ireland free of its own internal taxes as goods in 'travellers' personal luggage' within the meaning of Directive 69/169. 2 — According to Article 1 of Council Directive 81/933/EEC of 17 November 1981 amending Directives 69/169/EEC a n d 7 8 / 1 0 3 5 / E E C as regards tax reliefs applicable in inter- national travel and to imports of small consignments of goods of a non-commercial character from third countries ( O J L 338, 25.11.1981, p. 24). 3 — According to the provision cited above. 4 — According to Article 1 of Council Directive 85/348/EEC of 8 July 1985 amending Directive 69/169/EEC on the 3. The Community exemption rules in harmonization of provisions laid down by law, regulation or administrative action relating to exemption from question here should be briefly recalled. turnover tax and excise duty on imports in international travel (OJ L 183, 16.7.1985, p. 24), that amount having since been fixed at ECU 390 by Article 1 of Directive * Original language: French. 88/664/EEC of 21 December 1988 amending for the ninth I — Council Directive 69/169/EEC of 28 May 1969 o n the time Directive 69/169/EEC on the harmonization of harmonization of provisions laid down by law, regulation provisions laid down by law, regulation or administrative or administrative action relating to exemption from action relating to exemption from turnover tax and excise turnover tax and excise duty on imports in international duty on imports in international travel (OJ L 382, travel (OJ, English Special Edition 1969 (I), p. 232). 31.12.1988, p. 41).

For the moment, I shall adhere to that general outline of the tax exemption rules, as defined by Articles 1, 2 and 4 of the directive; more precise aspects will have to be considered later. The burden of the Commission's charge against Ireland is that 6. Ireland puts forward a number of it adopted and implemented as from 1 April considerations in the light of which it 1987 a statutory instrument expressly considers the Commission's position un- relating to the aforesaid provisions of founded. It contends that its attitude was in Directive 69/169. More particularly, Section effect dictated by circumstances, namely the 4 of that statutory instrument provides that, enormous number of travellers going from for the purposes of the exemptions referred Ireland to Northern Ireland in order to to in Articles 1, 2 and 4 of the directive, a make fiscally advantageous purchases by traveller is to mean a person who for the using the tax exemptions. Certain significant period of 48 hours immediately preceding details have been given, whose relevance has the time of his arrival in Irish territory was not been denied. For example, in a single outside that territory and can show this day in December 1986 more than 18 500 upon the demand of a competent official. people crossed a frontier post after spending So, in order to draw a distinction between the day shopping in Northern Ireland, and what it calls 'genuine travellers' and 'fiscal before Christmas 1986 queues of up to 12 travellers', Ireland considers that the tax km in length of cars as well as many public exemptions defined by the directive may be transport vehicles stretched from the granted only to persons whose journey frontier all the way back to a large shopping outside its territory has lasted at least 48 centre in Northern Ireland. Customs hours. officers counted 220 coaches in a single day. In 1986, the Irish Government estimates that 3.6 million trips were made by Irish residents for the purpose of making fiscally advantageous purchases, which represents one shopping trip per inhabitant of Ireland, 5. The Commission's case may be summed and that goods valued in excess of up by the view that on the pretext of clar- IRL 300 million were imponed in the ifying the directive Ireland has in fact added baggage of those travellers, which is said to represent 1.9% of the gross national 5 — This amount was increased to ECU 100 by Article I of Directive 88/664/EEC, cited above. product, 12.9% of imports of consumption

7. In Ireland's view, such a situation reveals the scale of the abuse of the rights under Directive 69/169 inasmuch as it was not in accordance with the provisions and spirit of 9. Finally, the defendant State observes that that directive to grant the tax exemptions the initiative it has taken must be judged in for which it provides to persons travelling the light of the Commission's inaction from Ireland to Northern Ireland for towards the abuses of the tax exemptions. In the sole purpose of making purchases. particular, it contends that the Commission Therefore, in order to cut short an abusive failed to act upon the declaration inscribed use of the concessions available under the in the Minutes of the meeting of the directive, it appeared necessary to define a Council held on 8 July 1985, according to criterion distinguishing between 'genuine' which the Commission was asked to 'look travellers and 'fiscal' travellers by holding into the feasibility and desirability of that a person who upon his return to making a distinction between "genuine" Ireland had left its territory less than 48 journeys and those made purely for fiscal hours earlier was not a genuine traveller purposes and to submit a report to it before who might enjoy the tax exemption. In the end of 1987 accompanied by a proposal order to define the concept of abuse with if the problem still exists at that time'. 7 regard to Directive 69/169, Ireland refers in particular to the judgments of the Court in the 'butter-cruise' cases. It also contends that the abuses have been aggravated by the fact that the United Kingdom does not participate in the European Monetary System and that 'almost unique in the 10. There is certainly no doubt that because Communities a full EMS currency with of the possibilities which the directive great stability encounters a floating currency affords owing to the existence of a land at the land frontier between Ireland and the frontier with the United Kingdom, Ireland United Kingdom', 6 the volatility of the found itself in a special, indeed even punt/sterling exchange rate having tended uncomfortable, situation. The resulting periodically to enhance the attractiveness of economic disadvantages are unquestionable. 'fiscal' trips to Northern Ireland. However, even if one considers that the

draughtsmen of the EEC Treaty probably such goods can only be obtained in the envisaged progress towards the 'internal country from which they come (country of market' without the extraordinary sight of exit) already taxed, so that if the country of 12-km long queues of vehicles, including entry foregoes, within the prescribed limits, many coaches, full of travellers from one charging turnover tax and excise duty on Member State ready to storm the hyper- imports, this avoids double taxation without markets of the neighbouring Member State, leading to an absence of taxation'.

11. First of all, I consider the statutory the imported goods, expressed in ecus, with instrument to be at odds with the actual specific values applicable to travellers under wording of the directive. 15 years of age and in the case of specific products in the indication of maximum quantities, which, however, in the case of some of the products, are granted only to travellers of at least 15 or 17 years of age, 12. According to the recitals in the depending on the case. T h e articles in preamble to the directive, whilst 'it is question do not specify any condition necessary, until harmonization of indirect relating to a minimum journey duration.

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O P I N I O N OF M R D A R M O N — C A S E C-158/88

frontier-zone workers, or by the crew of the goods are imported by travellers resident in means of transport used in international Denmark after a stay in another country: travel. It permits similar reductions in the case of imports by members of a Member State's armed forces. Those restrictions are not applicable, however, where the persons (i) until 31 December 1985, when the stay concerned produce evidence to show that is less than 48 hours, and they are going beyond the frontier zone of the neighbouring Member State or neigh- bouring non-member country. As can be seen, none of the exemption reductions (ii) from 1 January 1986 to 31 December 1989, when the stay is less than 24 provided for in Anicie 5 of the directive hours. refers to any taking into account of the purpose or duration of the journey. Only the place of residence or the place or nature of the occupation matters for the purposes The authority given to Denmark is thus of those reductions. based on an express provision of the directive.

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COMMISSION v IRELAND

19. First of all, as far as the general scope jarticular, to grant exemptions based on of the directive is concerned in relation to :riteria other than those which it defines, the powers retained by the Member States jarticularly criteria based on the duration to apply exemptions other than those for 3Í travellers' journeys. It would therefore which it provides, the case-law of the court ippear from those dicta that Ireland is is very clear. In its judgment of 7 July 1981 Drecluded a priori from falling back on such in the first Rewe case (Rewe I15), for :riteria when applying the tax exemptions. example, the Court stated that both the recitals to and the provisions of Directive 69/169 and of the directives supplementing it showed that 20. Next, considering the guidance to be obtained from the Court's rulings on the interpretation of Directive 69/169 on more precise points, there would appear to me to 'the Council intended gradually to establish be no room for uncertainty. The Court a complete system of exemptions from clarified the meaning of the directive in its turnover tax and excise duty for goods judgment in Rewe II, when it stated that it contained in travellers' personai luggage and was clear both from its aims and from the that consequently in this field the Member terms of Article 2(1) of the directive itself States are left with only the restricted power that given to them in the directives to grant exemptions other than those specified in the directives'. ' 6 'the concessions provided for in that directive in relation to tax exemptions for goods contained in the personal luggage of Referring to that ruling in its judgment in persons travelling within the Community, the second Rewe case (Rewe II17) the Court are limited to travellers "coming from added that it followed that Member States of the Community", that is to say, travellers who go from one Member State to another after having in fact had an opportunity to make purchases in the 'the Community rules are exhaustive in the Member State of departure'. 19 matter and that the Member States retain only the restricted power given to them by the provisions of the aforementioned directives themselves'. ' 8 The Court went on to state that it followed that

Consequently, the Court held that another Member State and made purchases there as 'abusive' travellers, in disregard of the Court's ruling cited above. A judicial 'if, as is generally the case, intra-Com- precedent establishing an abuse expressly munity travel by combined ship and coach characterized by the lack of any possibility services, is organized in such a manner that of making purchases in a Member State travellers may actually make purchases in clearly provides no justification for drawing the Member State where they disembark a distinction whereby a journey allowing prior to returning by land, it is possible to such purchases to be made is treated as an regard the passengers as travellers within the abuse. meaning of Directive 69/169 ("véritables voyageurs au sens de la directive 69/169"), as amended'. 2 1

On the Court to take the view, as Ireland does, the contrary, that judgment, by adhering to on the basis of a minimum journey an objective criterion, excludes such a duration, that persons w h o return to Ireland distinction. after having in fact made purchases in another Member State and who also satisfy all the conditions expressly laid down by the directive are not genuine travellers within the meaning of the directive. It is true that 23. T h e Court's judgment in Paul v Haupt- not every traveller is a genuine traveller for zottamt Emmerichn also illustrates the strict the purposes of the directive and that interpretation which it gives to provisions of journeys such as those considered in the the directive expressly conferring on the judgment in Rewe II during which the call Member States the power to reduce the tax in the Member State travelled to is a purely exemptions. As regards the possibility given token call were abusive. But that established to the Member States to reduce the fact gave Ireland no authority to categorize ordinary exemptions in respect of goods persons who have incontestably stayed in imported in frontier-zone travel, the Court

'only purchases made by frontier-zone residents in the immediate vicinity of their 'the exporting Member State which has to home . . . are subject to the limitations on pay the monetary compensatory amounts exemptions'. that must be granted by the importing Member State is entitled to refuse payment where the product in question has not entered the importing Member State for However, the Court stated that that home use owing to fraud on the part of the consideration cannot purchasers of the said product, even where the customs formalities have been completed', 25 'justify a limitation on exemptions for purchases made in a place far from the frontier-zone resident's home even if that does not appear to me to support its point place is close to the frontier', of view. I do not consider that a comparison is possible between the inferences to be drawn from, on the one hand, the manifestly fraudulent character, in the M C A pointing out that such purchases are system, of the absence of a genuine importation since imports and exports are obviously part and parcel of that system, and, on the other hand, from the fact that 'comparable to those made without journeys are made from one Member State reduction of exemption by persons resident outside a frontier zone'. 2 3 24 —Judgment of II November 1986 in Case 254/85 Irish Grain Board (Trading) Limited v Minuter for Agriculture [1986] ECR 3309. 23 — Paragraph 19. 25 — Paragraph 13.

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OPINION OF MR DARMON —CASE C-158/88

to another with the essential or exclusive or clear that Ireland attributes to it. A purpose of making advantageous purchases distinction is being drawn which is there in view of the tax exemptions, when extraneous to the directive and which seems none of the provisions laying down the contrary to both its letter and spirit since exemption rules mentions any distinction purchases made in accordance with the based on the purpose of the journey. conditions expressly laid down in the directive are excluded from the exemptions by the statutory instrument in question.

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COMMISSION v IRELAND

Ireland adopted the statutory instrument on envisaged in the case of critical situations. It 31 March 1987 and brought it into force on is regrettable, to say the least, that an the following day, whereas the Commission agreement could not have been reached had until 31 December 1987 to produce its through goodwill. Did the Commission's report. Ireland cannot therefore purport to refusal to consider the question of possible justify its measure on the basis of an attitude adjustments to the exemption arrangements of the Commission which it largely fore- following the approach suggested in the stalled. Council's declaration prevent solutions from being found which could have forestalled these proceedings? They have nevertheless 30. I would add one observation, however. been brought and the Court must provide Everyone agrees that the problems with the ruling for which they call and about which Ireland is specifically confronted which there can, in my view, be no doubt. under the exemption arrangements are serious. The Commission itself indicated at the hearing that temporary rules of dero- 31. To conclude, I would mention that the gation, like those adopted for Denmark distinction drawn in the Irish Statutory which I mentioned earlier, could have been Instrument in question applies to the considered in Ireland's case through exemptions provided for in Articles 1, 2 and amendment of the directive. It thus 4 of the directive and that consequently it acknowledged that even before attaining also covers travellers between non-member the harmonization of taxes and excise countries and the Community to which the duties in the Community — an essential reduced exemptions provided for in Article aim for the establishment of the 1 apply. Ireland has therefore failed to fulfil 'internal market' — certain remedies could be its obligations in that regard, too.