C-18/95

OPINION OF MR RUE-JARABO — CASE C-18/95

OPINION OF ADVOCATE GENERAL RUIZ-JARABO COLOMER delivered on 30 April 1998 *

1. The questions on which the Court is to 3. Under the bilateral convention between give a preliminary ruling in this case have those two States for the avoidance of double been referred by the Gerechtshof te taxation, Mr Terhoeve's income from employ- 's-Hertogenbosch (Regional Court of Appeal, ment in the United Kingdom was not subject 's-Hertogenbosch), the Netherlands ('the to income tax in the Netherlands. However, Gerechtshof), and have arisen in the context that income was taken into account when it of an appeal lodged by Mr Terhoeve against came to determining the tax basis to be applied a decision of the Head of the Foreign Indi- in calculating the social security contributions viduals and Undertakings Section of the Rijks- for the period during which he worked in the belastingsdienst (National Inland Revenue United Kingdom, throughout which he Department) concerning a combined assess- remained subject to the social security legisla- ment, covering income tax and social security tion of the Netherlands. contributions, for the period in the 1990 fiscal year during which he was regarded as a non- resident in the Netherlands.

I — The facts in the main proceedings While he was working abroad he was regarded as a non-resident taxpayer in the Netherlands, with the result that income arising in that country remained liable to tax there. From 7 November 1990 he became a resident tax- payer in the Netherlands once again.

2. It appears from the documents before the Court that the appellant in the main proceed- ings is a Dutch national who resided and worked in the United Kingdom from 1 Jan- uary to 6 November 1990, having been posted there by his employer, a company established 4. In accordance with Article 14(1)(a) of in the Netherlands. From 7 November 1990 Council Regulation (EEC) N o 1408/71 of 14 until the end of that year he resided and June 1971 on the application of social secu- worked in the Netherlands. rity schemes to employed persons, to self- employed persons and to members of their families moving within the Community, as * Original language: Spanish. amended and updated by Council Regulation

7. The income tax in question was calculated on a taxable amount of N L G 16 210, repre- 5. O n 29 April 1992 he received in the Neth- senting income obtained entirely in the Neth- erlands a combined assessment to income tax erlands from personal employment and from and social security contributions for the period real property situated in that country. from 7 November to 31 December 1990, during which he was a resident taxpayer. His taxable income during that period was N L G 15 658 so that, after the deduction of N L G 9 136 to which he was entided at that time, the taxable amount 'was N L G 6 522. By contrast, the social security contributions were calculated not only on that income but also on the income received by the appellant in the United Kingdom, with the result that the taxable amount for this purpose amounted to N L G 98 201. As the contribution rate of 22.1% applies only to the first tranche of income, which was N L G 42 123 for the period in question, the amount due was N L G 9 309, which was the maximum contribution for 1990. Income tax at 1 3 % , amounting to N L G 847, and social security contributions amounting to 22.1%, amounting to N L G 1 441, were charged on that sum, giving a total due of N L G 2 288. In the order for reference, the Gerechtshof states that the appellant with- drew the objection lodged by him against that assessment, which therefore became final. 8. It appears from the observations which have been submitted in this case that the existence of a ceiling for social security con- 1 — OJ 1983 L 230, p. 6. tributions is due to the fact that the amount

9. The dispute between the parties to the main proceedings centres on the calculation of the social security contributions for the period from 1 January to 6 November 1990. The first question which the national court II — The national legislation has to decide is whether the National Inland Revenue Department was right to treat the income from employment in the United Kingdom as income subject to contributions for that period. Then, if the answer to that question is in the affirmative, the national court will have to decide whether the 22.1% rate must be applied to the sum of N L G 42 123, which would mean that the appellant would have to pay the maximum contribu- tion, amounting to N L G 9 309, or whether, as he claims, that amount should be reduced in proportion to the number of days during 1990 to which the assessment relates. 11. In the order for reference the Gerecht- shof states that in 1990 the system for col- lecting income tax and social security contri- butions underwent a radical change and was simplified. Since that year both income tax and social security contributions have been collected by means of a combined assessment. 10. Mr Terhoeve argues that in 1990 he did As a general rule, the basis on which the con- not receive the whole or even almost all of his tributions are calculated is the same as that income in the Netherlands and that he con- for income tax, the two forms of taxation siders himself the victim of indirect discrimi- being closely linked inasmuch as contribu- nation on grounds of nationality, which is tions are levied only in respect of income prohibited by Article 48 of the EC Treaty. In falling within the first income tax bracket.

14. In practice, those provisions mean that anyone who, in one and the same calendar year, is subject to income tax in the Nether- lands as a resident taxpayer and subsequently as a non-resident taxpayer, or vice versa, receives two combined assessments. For those who are insured under the compulsory gen- 13. The collection of general social insurance eral social insurance scheme throughout the contributions is governed by the Wet finan- •whole year, each assessment is made by refer- ciering volksverzekeringen (Law on the ence to the maximum tax base on which con- financing of social security). Under Article 8, tributions are calculated. Depending on the the income on which contributions are levied circumstances of each case, the effect of that is the same as the total taxable income or, as scheme may be that the total sum assessed for the case may be, the taxable income arising in social security contributions exceeds the the Netherlands. That article makes no provi- ceiling obtained by applying the percentage sion for contributions to be levied •where a contribution to the first tranche of income. person subject to compulsory insurance The example of Mr Terhoeve offers a good receives income which is not taxable in the illustration of those perverse effects. For 1990 Netherlands. However, Article 6 of the Uitvo- the contribution claimed for the period during eringsregeling premieheffing volksverzek- which he was a non-resident taxpayer is N L G eringen 1990, the regulation implementing the 9 309, which corresponds to the maximum abovementioned law, widens the class of possible total contributions for a single year income in respect of which contributions are and which was obtained by taking 22.1% of to be paid by providing that persons who are the first tranche of income, fixed for that year insured by reason of activities the income at N L G 42 123, and for the period during from which is not liable to income tax are to which he was resident the additional contri-

I-352

TERHOEVE v INSPECTEUR VAN DE BELASTINGDIENST PARTICULIEREN/ONDERNEMINGEN BUITENLAND

cance attaches in the present case to who transfers his residence during that the following circumstances: year from that Member State to another Member State, or vice versa, than on an employee who, in otherwise similar cir- cumstances, continues to reside throughout the whole year in a single Member State?

— the respondent authority has stated that, of the very much broader category of taxpayers residing abroad, almost one half are its own nationals, without adducing any evidence in support of that assertion; 4. If the imposition of a heavier contribu- tions burden, as referred to in the pre- vious question, is in principle incompat- ible with Article 7 or Article 48(2) of the E E C Treaty, or with any other rule of Community law, can it be justified by one or more of the following circum- — the appellant, who pleads indirect stances, whether or not they are linked discrimination on grounds of with each other: nationality, has not contested the correctness of that assertion by the authority;

— the measure results from legislation whereby the levying of income tax — the respondent authority is in an and social security contributions is appreciably better position than intended, in order to simplify mat- the appellant to collect informa- ters, to coincide to a very great extent, tion capable of rebutting the afore- if not entirely; mentioned presumption?

3. Is there any rule of Community law pre- — solutions which, whilst maintaining cluding a Member State, regardless of that link, preclude the imposition of any question of (indirect) discrimination the heavier contributions referred to on grounds of natio nah ty, from imposing, above, result in technical problems of in a given year, a heavier social security implementation or in possible over- contributions burden on an employee compensation;

6. (a) If in the present case there was an infringement of any rule of Commu- 3 — As amended by Article G.8 of the Treaty on European Union, signed at Maastricht on 7 February 1992 (OJ 1992 C 191, nity law, is the national court obliged p. 1).

I-354

TERHOEVE v INSPECTEUR VAN DE BELASTINGDIENST PARTICULIEREN/ONDERNEMINGEN BUITENLAND

Article 48(2) of the Treaty reads as follows: if the registered office or place of business of the undertaking or individual employing him is situated in the territory of another Member State;

'Freedom of movement [for workers within the Community] shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other » conditions of work and employment.'

So far as the present case is concerned, Article 17. Tide II of Regulation 1408/71 contains a 14, which lays down special rules applicable complete system of conflict rules for deter- to persons, other than mariners, engaged in mining the law applicable to persons within paid employment, provides as follows: its scope. Under Article 13:

19. Written observations have been submitted by the appellant in the main proceedings, the Government of the Netherlands and the Com- mission. The defendant authority has informed the Court that it adopts and joins in the observations of its Government. Representa- tives of the appellant in the main proceedings, of the Government of the Netherlands and of the Commission appeared at the hearing on 17 March 1998.

18. O n the other hand, Article 7 of Regula- tion N o 1612/68 provides:

Question 1

' 1 . A worker who is a national of a Member 20. I deduce from the reasoning of the Gere- State may not, in the territory of another chtshof in the order for reference that the Member State, be treated differently from first question aims to establish whether a national workers by reason of his nationality worker may rely, as against the Member State in respect of any conditions of employment of which he is a national, on the provisions of and work, in particular as regards remunera- Community law relating to freedom of move- tion, dismissal, and should he become unem- ment for workers when his employer, an ployed, reinstatement or re-employment. undertaking established in that State, posts

I-356

TERHOEVE v INSPECTEUR VAN DE BELASTINGDIENST PARTICULIEREN/ONDERNEMINGEN BUITENLAND

This statement was repeated in the Bou- 23. The Commission considers that a situa- choucha judgment 5 and Kraus, 6in which the tion such as that of the appellant in the main Court added that the same reasoning must be proceedings has sufficient points of connec- followed as regards Article 48 of the Treaty. tion with Community law. In moving to the United Kingdom in order to reside and work there, he exercised his freedom of movement 4 — Case 115/78 Knoors v Secretary of State for Economic Affairs and that is sufficient to differentiate his situ- [1979] ECR 399, paragraph 24. ation from that of other Community nationals 5 — Case C-61/89 Bouchoucha [1990] ECR I-3551, paragraph 13. 6 — Case C-19/92 Kraus v Land Baden-Württemberg [1993] ECR who have never exercised such freedom. I-1663, paragraphs 15 and 16.

I-357

OPINION OF MR RUE-JARABO — CASE C-18/95

26. Mr Terhoeve's situation differs completely from that of Mr Werner, a German national, 28. By this question the national court asks, who obtained his qualifications and voca- in essence, whether the Dutch legislation in tional training in Germany, where he had question gives rise to indirect discrimination on grounds of nationality since it affects mainly nationals of other Member States. The 7 — Case C-419/92 Scholz [1994] ECR 1I505, paragraph 9. 8 — Case C-107/94 Asscher v Staatssecretaris van Financiën [1996] ECR I-3089. 9 — Case 246/80 Broekmeulen v Huisarts Registratie Commissie 10 — See the judgment in Case C-112/91 Werner [1993] ECR [1981] ECR 2311, paragraph 20. I-429.

I - 358

TERHOEVE v INSPECTEUR VAN DE BELASTINGDIENST PARTICULIEREN/ONDERNEMINGEN BUITENLAND

legislation provides that workers in a situa- person could have been required to pay was tion similar to that of Mr Terhoeve in 1990 N L G 9 309, the contributions ceiling set for are to receive a combined assessment for 1990. income tax and general social security contri- butions for the period during which they are resident taxpayers and another such assess- ment, for the same purposes, for the period during which they are non-resident taxpayers. As a result, the contributions levied for that year may be higher than the maximum pay- In Mr Terhoeve's opinion, the legislation in able by workers who remained resident question applies mainly to migrant workers, throughout the whole year. most of whom are nationals of other Member States, and it is they who will have to pay social security contributions higher than the annual ceiling.

I-359

OPINION OF MR RUIZ-JARABO — CASE C-18/95

governing the collection of funds intended nation. n However, with regard to freedom for general social insurance form part. of movement for workers, the principle of Depending on the many different individual equal treatment has been applied and ampli- circumstances, the system may have favour- fied by Article 48(2) of the Treaty, which pro- able or unfavourable consequences. For vides for the abolition of any discrimination example, it will be favourable where two as regards employment, remuneration and assessments are issued in one year and the other conditions of work and employment. progressive nature of income tax is therefore less pronounced. The Netherlands Govern- ment concludes that there is nothing what- ever to indicate that the disadvantages of this system of collection mainly affect nationals of other Member States, and maintains that in reality the persons affected are mostly nationals of the Netherlands. Accordingly, it is unnecessary in this case to refer to Article 6 of the Treaty in order to reply to the questions referred by the Gere- chtshof.

31. The Commission maintains that the Neth- erlands legislation in question does not give rise to any discrimination on grounds of nationality.

Article 48 of the Treaty, I think it would be is the reasoning informing both the order for more appropriate to use Article 3(1) of Regu- reference and the observations submitted by lation N o 1408/71, which lays down the fun- Mr Terhoeve. damental principle of non-discrimination in social security matters.

37. I would point out, however, that is a worker exercising his right to freedom of movement is to be adversely affected by the Netherlands legislation at issue, two condi- tions must be satisfied. He must have been a 35. It is also settled law that the Treaty rules resident taxpayer, then subsequently a non- regarding equal treatment forbid not only resident taxpayer (or vice versa), in the Neth- overt discrimination on grounds of nation- erlands in the course of one and the same cal- ality but also all covert forms of discrimina- endar year and, last but not least, he must tion which, by the application of other cri- have remained subject to the Netherlands teria of differentiation, lead in fact to the same general social security legislation in spite of result. It may therefore be that, in certain cir- working and residing in another Member cumstances, the use of criteria such as the State. place of origin or residence of a worker may, in terms of its practical effect, be tantamount to discrimination on grounds of nationality, as prohibited by the Treaty. 12

38. The general rule for determining the social security legislation applying to a migrant worker is set out in Article 13(1)(a) of Regu- lation N o 1408/71, which provides that a worker employed in the territory of one Member State is subject to the legislation of 36. In the cases in which the Court has found that State even if he resides in the territory of indirect discrimination on grounds of nation- another Member State or if the registered ality, it is often the criterion of residence office or place of business of the undertaking which has given rise to discrimination because or individual employing him is situated in the it is a requirement which nationals generally territory of another Member State. fulfil more easily than migrant workers who are nationals of other Member States. 1 3That

In such cases, the workers concerned will continue, pursuant to Article 14(1) of Regula- tion N o 1408/71, to be subject to the social security legislation of the Netherlands while working in the other Member State. Conse- quently, under the legislation in force since 40. Article 14(1) of Regulation N o 1408/71 1990, they will receive two combined assess- expressly provides for an exception to this ments for income tax and social security con- general rule where a national of a Member tributions and, like Mr Terhoeve, they may State is posted by his employer to another be compelled to pay contributions above the Member State, as was Mr Terhoeve. The third maximum payable if they had not exercised recital in the preamble to Decision N o 162 of their right to freedom of movement. the Administrative Commission of the Euro- pean Communities on Social Security for Migrant Workers 14 states that the purpose of that exception is 'to avoid, for workers, employers and social security institutions, the administrative complications which would result from the application of the general rule laid down in Article 13(2)(a) or (c) of the Regulation [No 1408/71] where the period of employment is of short duration in a Member 42. I suspect that, as a general rule, the workers State ... other than the State in which the involved will be nationals of the Netherlands. undertaking has its registered office or a place In any case, there is nothing to indicate that of business'. the legislation at issue is likely to operate to the disadvantage mainly of workers from other Member States, even potentially. It 14 — Decision N o 162 of 31 May 1996 on the interpretation of cannot be said, therefore, that it gives rise to Article 14(1) and 14a(1) of Council Regulation (EEC) N o 1408/71 on the legislation applicable to posted workers (OJ indirect discrimination on grounds of nation- 1996 L 241, p. 28). ality.

47. The Commission considers that the effect of the Netherlands legislation at issue, or at least the way in which it is applied, is to deprive workers who have exercised their right to freedom of movement during the cal- 44. The purpose of the third question is to endar year in question of a social security ascertain whether Community law precludes advantage, that is to say, the right enjoyed by a Member State from requiring a Community those who work in the Netherlands national — possibly even one of its own throughout the whole year not to pay general nationals — who has exercised his right to social security contributions in excess of the freedom of movement to pay social security ceiling fixed for the period in question. The contributions in excess of the maximum pay- Commission concludes that this situation may able by workers who have not exercised that have the effect of preventing a worker from right. exercising his right to freedom of movement and that the Netherlands legislation, or the way in which it is applied, constitutes an obstacle to the freedom of movement of workers, contrary to Articles 48 to 51 of the Treaty.

45. Mr Terhoeve argues that to impose a heavier financial burden on those who exer- cise the right to freedom of movement may constitute an obstacle to doing so.

48. Here, again, I agree with the Commis- sion. The Court has consistently held that freedom of movement for workers is one of 46. The Netherlands Government maintains the fundamental principles of the Commu- that 'workers in the situation postulated in the nity and the Treaty provisions guaranteeing question are not always required to pay higher that freedom have had direct effect since the

50. In this connection the Court added, in Masgio, that 'the aim of Articles 48 to 51 of the Treaty would not be attained if, as a con- sequence of the exercise of their right to freedom of movement, migrant workers were to lose the advantages in the field of social security guaranteed to them by the laws of a single Member State'. 18 Such a consequence 49. In the field of social security for migrant could deter Community workers from exer- workers there is a consistent body of case law cising their right to freedom of movement to the same effect. For example, in Masgio 17 and would therefore constitute an obstacle to the Court held that Article 48(2) of the Treaty that freedom. 19 and Article 3(1) of Regulation N o 1408/71, which lay down the principle of equal treat- ment within the scope of the Regulation, 'must be interpreted in the light of then- objective, namely to contribute, particularly in the field of social security, to the establish- 51. Pursuant to Article 14(1) of Regulation ment of the greatest possible freedom of N o 1408/71, a worker employed in the Neth- movement for migrant workers, which is one erlands who exercises his right to freedom of of the foundations of the Community' and movement upon being posted by his employer that 'Articles 48 to 51 of the Treaty and the to another Member State to work there for a Community legislation adopted in implemen- limited, relatively short period and who — in tation thereof, in particular Regulation N o the same year or, at the latest, the following year — returns to the Netherlands to work remains subject to the social security legisla- 15 — See the judgments in Case 118/75 Watson and Belmann tion of the Netherlands. It is clear from the [1976] ECR 1185, paragraph 16; Case 222/86 Heylens [1987] ECR 4097, paragraph 8; Case C-351/90 Commission v Lux- embourg [1992] ECR I-3945, paragraph 18; Case C-370/90 Singh [1992] ECR I-4265, paragraph 15; and Case C-415/93 Bosman [1995] ECR I-4921, paragraph 93. 18 — Ibid., paragraph 18. This observation also appears in the 16 — See the judgments in Case 143/87 Stanton [1988] ECR 3877, judgments m Case 24/75 Petroni [1975] ECR 1149, para- paragraph 13, and Joined Cases 154/87 and 155/87 Wolf and graph 13; Case 807/79 Gravina [1980] ECR 2205, paragraph Others [1988] ECR 3897, paragraph 13; and in the Singh and 6, and in the Spruyt and Winter-Lutxins judgments cited in Bosman cases, cited in footnote 15, paragraphs 16 and 94 footnote 17, paragraphs 19 and 14 respectively. respectively. 19 — Ibid., paragraph 18. See also the judgments in Case C-228/88 17 — Case C-10/90 [1991] ECR I-1119, paragraphs 16 and 17. See Bronzino [1990] ECR I-531, paragraph 12, and Case C-12/89 also the judgments in Case 10/78 Belbouab [1978] ECR Gatto [1990] ECR I-557, paragraph 12. This case law was 1915, paragraph 5; Case 284/84 Spruyt [1986] ECR 685, followed more recendy in the judgment in Joined Cases paragraph 18, and Case C-293/88 Wbuer-Lutzins [1990] C-45/92 and C-46/92 Lepore and Others [1993] ECR I-6497, ECR I-1623, paragraph 13. paragraph 21.

Question 4

54. By this question the national court wishes 52. That, in my opinion, will be the outcome to ascertain whether, if the answer to the third whenever a worker is posted by his employer question is in the affirmative, the obligation in the circumstances described above. It is to pay higher contributions may be justified difficult to believe, therefore, that workers by one or more specified factors: a desire on will willingly agree to work in another the part of the legislature to simplify the col- Member State. In any case, I do not think a lection of tax and social security contribu- worker would be interested in being posted tions; the technical difficulties raised by mech- more than once in his working life after expe- anisms for offsetting overpayment; or, finally,

I-365

OPINION OF MR RUIZ-JARABO — CASE C-18/95

the fact that in certain circumstances the leg- clear that none of the grounds of justification islation may result in a lower overall financial referred to by the national court or the Neth- burden, in terms of income tax and social erlands Government fulfils those require- security contributions, for workers who exer- ments. cise their freedom of movement than for those who remain in the Netherlands. The Nether- lands Government maintains that the legisla- tion is justified by the need to preserve the cohesion of the tax system.

I-366

TERHOEVE v INSPECTEUR VAN DE BELASTINGDIENST PARTICULIEREN/ONDERNEMINGEN BUITENLAND

respect of Article 59. The result of this is that that in the context of Community law admin- although, on the one hand, the prohibition istrative problems or difficulties of implemen- covers any measure which, albeit applicable tation cannot justify the fact that workers irrespective of nationality, nevertheless con- who have exercised their right to freedom of stitutes an obstacle to freedom of movement, movement are placed in a worse position than on the other hand, the number of possible those who have not. The Court has stated grounds of justification has increased beyond that 'although it is true that the application of those already provided for in Article 48(3) of those provisions may give rise to practical the Treaty. difficulties, that fact... must not prejudice the rights which individuals derive from the prin- ciples of the social legislation of the Commu- nity'. 24

57. However, in my view, the grounds of jus- tification suggested by the national court do not satisfy even the conditions laid down by this less restrictive line of case-law.

60. Finally, with regard to the tax advantages which a migrant worker may receive and which may offset the loss resulting from having to pay higher social security contribu- tions if posted to another Member State, suf- 58. First, although the legislature's aim of fice it to note that that was not the aim of the simplifying the collection of tax and social legislation in question and that such advan- security contributions is not incompatible tages, when they arise, depend on the par- with the Treaty, it cannot be said to be based ticular circumstances of each case. O n this on pressing reasons of public interest. point the Court has held that discrimination stemming from a provision which works to the disadvantage of certain migrant workers cannot be either eliminated or offset by the fact that other migrant workers, in other cir- cumstances, may derive an advantage from it. 25

The cohesion of a tax system of that nature 26 presupposed, therefore that, in the event of 62. In two judgments in 1992, the Court the State in question being obliged to allow held that the need to preserve the cohesion of the deduction of life assurance premiums paid the tax system justified certain Belgian legis- in another Member State, it should be able to lation concerning insurance which otherwise tax sums payable by insurers. As Community would have been incompatible with Article law stood at that time, the cohesion of such a 48 of the Treaty. Under that legislation, the tax system could not be ensured by means of deductibility of certain insurance premiums measures less restrictive than the Belgian leg- from the total taxable income was conditional islation at issue (which provided that, if pre- upon those premiums having been paid in miums were to be deductible, they had to be Belgium. paid in Belgium); the Court therefore con- cluded that the measure in question was justi- fied.

64. Although the Netherlands Government 66. As we know, Article 51 of the Treaty relies, in paragraph 21 of its written observa- provides for the coordination, not the har- tions, on the need to preserve the cohesion of monisation, of the laws of the Member States, the tax system as justification for the legisla- leaving in place substantive and procedural tion at issue (governing the collection of funds differences between the Member States' social for the general social insurance scheme), it security schemes and in the rights of workers offers no further explanation in support of its employed in the Member States. 28 In imple- argument. Nor, so far as I can find, do the mentation of Article 51, the Council adopted documents before the Court throw any light Regulation N o 1408/71 and Regulation (EEC) on why the cohesion of the Netherlands tax N o 574/72, which lays down the procedure system should require workers who exercise for implementing the former. 29 The primary their right to freedom of movement to pay purpose of both regulations is to coordinate higher social security contributions than those the various national laws applying in this field who remain in the Netherlands. in order to ensure that freedom of movement for workers does not result in disadvantages for those availing themselves of that freedom, as compared with those who work in a single Member State. 30

Question 5

67. As Community law stands at present, it is for the legislature of each Member State to lay down the conditions creating the right or

the obligation to become affiliated to a social at a disadvantage by comparison with those security scheme. 31 However, to my mind, the who do not. Member States must, in exercising that power, not only comply with the principle of equal treatment by making sure that such rules do not discriminate between their own nationals and those of other Member States, but also Question 6 ensure that national social security legislation does not create an obstacle to the effective exercise of the fundamental freedom guaran- teed by Article 48 of the Treaty. 70. By the sixth and last question, the national court asks what it should do should it find that Community law has been infringed, given that, in the present case, the infringement would be the result of the combined applica- tion of different statutory provisions and there 68. With the exception of Article 14e of Regu- are several ways of remedying the infringe- lation N o 1408/71, which lays down certain ment, none of which appears entirely satisfac- very specific provisions which do not apply tory. in the present case, the Community law gov- erning freedom of movement for workers does not lay down rules determining the basis on which contributions to national social secu- rity schemes are to be levied. This is not the first time that a national court has found itself in a dilemma of this kind and on several occasions the Court has given a ruling on this question.

hand and the national law of the Member ment for workers and which imposes on States on the other is such that those provi- Member States a precise obligation which sions and measures render automatically inap- does not require the adoption of any further plicable, by their entry into force, any con- measure-on the part of the Community insti- flicting provision of current national law. The tutions or the Member States and which leaves Court also stated that any provision of a them, in relation to its implementation, no national legal system and any legislative, discretionary power, is directly applicable and administrative or judicial practice which might confers on individuals rights which are impair the effectiveness of Community law enforceable by them and which the national by withholding from the national court having courts must protect. jurisdiction to apply such law the power to do everything necessary at the moment of its application to set aside national legislative provisions which might prevent, even tempo- rarily, Community rules from having full force and effect is incompatible with those require- 73. The Court has also consistently held that ments which are the very essence of Commu- it is for the national courts, in application of nity law. 34 The Court concluded that the the principle of co-operation laid down in national courts which are called upon, within Article 5 of the Treaty, to ensure the legal the limits of their jurisdiction, to apply provi- protection which persons derive from the sions of Community law are under a duty to direct effect of provisions of Community give full effect to those provisions, if neces- law. 37 sary refusing of their own motion to apply any conflicting provision of national legisla- tion, even if adopted subsequently, and it is not necessary for the courts to request or await the prior setting-aside of such provision by legislative or other constitutional means. 35 74. In view of the answers which I propose should be given to the previous questions and in the light of the case-law which I have just quoted, I think that it should be stated in reply to the sixth question from the Gerecht- shof that the national court called upon to apply Community law must, in adjudicating the dispute before it, ensure the full effective- ness of Articles 48 to 51 of the Treaty, so that workers who exercise their right to freedom

This decision was recently confirmed in the judgments in Case 170/88 Ford España [1989] ECR 2305; Joined Cases C-13/91 and C-113/91 Debus [1992] ECR I-3617, paragraph 32; Joined Cases C-228/90 to 234/90, C-339/90 and C-3253/90 Simba [1992] I-3713, paragraph 27, 37 — See the Factortame judgment, cited in footnote 34, paragraph and Moreüato, cited in footnote 32, paragraph 18. 19. See also the judgments in Case 811/79 Ariete [1980] ECR 36 — Case 41/74 [1974] ECR 1337, paragraphs 4 to 8. 2545, and Case 826/79 Mirem [1980] ECR 2559.

(3) Articles 48 to 51 of the Treaty preclude a Member State from requiring Com- munity nationals — including its own nationals — who have exercised then- right to freedom of movement to pay general social security contributions in excess of the maximum payable by workers who have not exercised that right.

(4) The Netherlands legislation at issue, in so far as it creates an obstacle to freedom of movement for workers, cannot be justified on any of the grounds put forward by the national court — that is to say, the desire on the part of the legislature to simplify the collection of tax and social security contributions, the technical difficulties raised by mechanisms for offsetting overpayment, or the fact that in certain cases the legislation in question may result in a lower financial burden in terms of income tax and social security contributions for workers who have exercised their right to freedom of movement than for those who have not.

I-372

TERHOEVE v INSPECTEUR VAN DE BELASTINGDIENST PARTICULIEREN/ONDERNEMINGEN BUITENLAND

(5) In the absence of any applicable Community measures, it is for the legislation of each Member State to specify the basis for calculating contributions to its social security schemes, provided that the resulting legislation does not dis- criminate between its own nationals and those of other Member States, and provided that workers who have exercised their right to freedom of movement do not find themselves at a disadvantage by comparison with those who have not.

(6) The national court called upon to apply Community law must, in adjudicating the dispute before it, ensure the full effectiveness of Articles 48 to 51 of the Treaty, so that workers who exercise their right to freedom of movement are not deprived of any social security advantage and are not required, for example, to pay contributions in excess of the maximum payable by workers who remain in their own Member State, thus ensuring that workers are not deterred from exercising that right.