C-175/88

OPINION OF MR DARMON —CASE C-175/88

OPINION OF MR ADVOCATE GENERAL DARMON delivered on 24 J a n u a r y 1 9 9 0 *

Mr President, could be undermined by the effects of Members of the Court, discriminatory tax provisions. On the other hand, Article 7 of Regulation No 1612/68, relating to equal treatment as regards tax advantages, constitutes a specific embodiment of the general principle of non-discrimi- 1. The reference made to the Court for a nation in the field of taxation. preliminary ruling by the Conseil d'État du Luxembourg (State Council of Luxembourg) concerns, in substance, the compatibility with Community law of a tax provision under which the repayment of any overpaid 3. It should further be pointed out that the income tax is refused if the taxpayer is not rule at issue before the national court does resident in the territory of the Grand Duchy not impose any conditions based on of Luxembourg during the entire year of nationality; it is formally applicable to assessment in question. Mr Biehl is a nationals and Community nationals without German national who left Luxembourg on distinction. However, that finding does not 1 November 1983 and, as a consequence, totally rule out the possible existence of has been refused the sums corresponding to indirect or covert discrimination. According tax deducted in excess of the tax he should to the case-law of the Court: have paid in accordance with the applicable scales.

4. Consequently, it must be determined first The Court pointed out that, for workers of all whether the rule at issue before the national court, although applicable without whose home was within the Federal distinction, leads in fact to different Republic of Germany, payment of the treatment for Luxembourg nationals and for separation allowance was only temporary nationals of the other Member States. and was bound up with an obligation to transfer the residence to the place of employment, whereas workers whose residence was abroad were not subject to such a time-limit and to such an obligation.

5. It is sufficient to state in that regard that use of the criterion of permanent residence 7. For present purposes, it is important to in the territory of Luxembourg will have the bear in mind that an actual comparison of result of denying the repayment at issue situations may show that a situation which essentially to persons who are not is treated differently does not constitute Luxembourg nationals. It is mainly they unlawful discrimination if, in the final who will leave the country in the course of analysis, the national in question is not in a the year or who will take up residence less favourable position than nationals of the there. host State.

remained in Luxembourg, a higher rate of Similarly, a Community national who takes tax would have been payable on his income. up residence in Luxembourg at the end of February and immediately finds employment there will be refused any repayment, whereas his colleague, who was recruited on the same day as he was but has been an 9. I am by no means convinced that that 'unemployed resident' since 1 January, will argument entirely disposes of the submission obtain repayment of any tax overpaid. On that the provision at issue infringes the arrival or on departure, the migrant worker principle of equal treatment. is thus penalized in some cases. That manifest disadvantage is in my opinion sufficient to render the provision at issue incompatible with the principle of equal treatment. 10. It is of course quite clearly for the Member States alone to lay down the rules governing income tax; as Community law stands at present, direct taxation is outside the scope of the EEC Treaty. The objectives 12. Therefore, that provision infringes the pursued by the Luxembourg legislature do principle of non-discrimination with regard not, as such, fall to be examined by to the situation of Community nationals reference to the principles of Community taking up residence or leaving Luxembourg. law. Nevertheless, the Member States must respect the limits laid down by Community law. Even if the objectives pursued by the national legislature in seeking to introduce 13. But the situation of all Community the equivalent of a clause ensuring that nationals, including Luxembourg nationals, progressive rates of taxation are not called wishing to exercise their right to seek in question, the manifestly discriminatory employment or to be employed in another nature of the rule at issue is evident in Member State may, in addition, disclose an particular in all cases in which the national infringement of the fundamental principle of concerned received no income during the the free movement of persons laid down in year in question in the Member State of Article 48(1) of the Treaty. origin or destination.

States are guaranteed by Community law. obtain repayment of tax overpaid in every The non-repayment of tax overpaid will case, it certainly does not remove the uncer- constitute an obstacle, which is in any event tainty 5 created by the tax provision in unjustified, for a person who leaves question. It is sufficient here to allude to the Luxembourg to seek work in another consistent case-law of the Court according Member State where, for example, he does to which: not manage to find employment. The same applies for a person who, in the course of the year, arrives in Luxembourg to take up 'mere administrative practices' — and a employment there after a fruitless search in non-contentious appeal clearly falls within another Member State. In such cases, there this category — 'which by their nature are is no danger whatsoever of avoidance of alterable at will by the authorities and are progressive rates of income tax, and yet the not given the appropriate publicity, cannot provision at issue automatically denies be regarded as constituting the proper repayment of tax overpaid to the worker fulfilment of obligations under the Treaty'. 6 who exercises his right to freedom of movement, which, as was confirmed by the Court in its judgment in Van Duyn,4 has 20. Therefore, a provision which has the direct effect. It is therefore up to the effect of infringing the fundamental Member States, where necessary, to achieve principle of non-discrimination and of the fiscal objectives they wish to pursue by constituting an obstacle to the exercise by means other than denial of the principle of many individuals of fundamental rights the right to obtain repayment of tax accorded to them by Community law overpaid. cannot be made to conform with the requirements of the free movement of workers by the existence of a non-contentious appeal procedure — to 16. In my view, therefore, the provision at which, incidentally, neither the preliminary issue disregards both the fundamental question nor the judgment of the Conseil principle of the free movement of persons d'État refer. and the principle of equal treatment which it entails. 21. Secondly, the national court raised the possibility of assessing the provision at issue in the light of Article 7 of the Treaty. I 17. I would make two final observations. would recall in that connection that the Court held in its judgment of 30 May 1989: 7

Treaty. Consequently, any rules incom- covered by Anieles 48, 52 and 59 of the patible with those provisions are also incom- Treaty. In application of that principle, 9it patible with Article 7 . . . appears that non-repayment of tax deducted from the wages and salaries of employed persons — who are the only persons referred Article 7 of the Treaty . . . applies indepen- to in the question of the Conseil d'État du dently only to situations governed by Luxembourg and the provision at Community law in regard to which the issue — infringes Article 48 of the Treaty and Treaty lays down no specific prohibition of Regulation No 1612/68 adopted in discrimination'. 8 implementation of that article, without there being any need, therefore, to establish any specific infringement of Article 7 since, The Court did not find that there had been moreover, the only situations adduced are any specific infringement of Article 7 since those of employed persons who fall within the the Commission had adduced only situations scope of the national provisions at issue.

22. Consequently, I propose that the Court should give the following ruling:

'Article 48(1) and (2) of the Treaty and Council Regulation N o 1612/68 preclude a Member State from providing in its tax legislation that sums deducted by way of tax from the salaries and wages of employed persons who are nationals of a Member State and are resident taxpayers during only part of the year because they take up residence in the country or leave it during the course of the tax year are to remain the property of the Treasury and are not repayable.'