CJEC, May 7, 1985, No 18-84

The court

1 By an application lodged at the court registry on 19 january 1984 the Commission of the European Communities brought an action under article 169 of the eec treaty for a declaration that, by providing that newspaper publishers are not to enjoy certain tax advantages in respect of publications which they print in other member states, the French Republic has failed to fulfil its obligations under article 30 of the eec treaty.

2 It appears from the application that article 39 bis of the french code general des impots (general tax code) accords certain tax advantages to undertakings publishing either a newspaper or a monthly or fortnightly journal devoted mainly to political affairs. Those advantages consist in the authorization to establish, by means of a charge against taxable profits, a tax-free reserve for the purchase of assets needed in order to run the newspaper or to deduct from taxable profits any expenditure incurred for that purpose. The limits applicable to such reserves or expenditure and also the definition of the assets which they may be used to finance have varied from year to year.

3 A change was introduced by article 80 of the loi de finances (finance law) n°80-30 of 18 january 1980 (journal officiel de la republique francaise of 19 january 1980, p. 147), amending the rules laid down by article 39 bis of the code general des impots. According to the final paragraph of article 80 of the loi de finances, ' newspaper publishers shall not benefit from the provisions of article 39 bis in respect of publications which they print abroad '.

4 On 29 march 1982 the commission, taking the view that that provision was incompatible with article 30 of the eec treaty, addressed to the french government, pursuant to article 169 of the treaty, a letter requesting it to submit its observations on the matter. On 5 may 1983, as it had received no reply, the commission delivered a reasoned opinion to the French Republic.

5 The commission considers that the provision in question is likely to encourage french newspaper publishers to conclude contracts with french printers, and not with printers established in other member states, so that they may derive the greatest possible benefit from the tax advantages described above. Consequently, the rules laid down by article 39 bis of the code general des impots must be considered to constitute a measure having an effect equivalent to a quantitative restriction, prohibited by article 30 of the eec treaty. In that connection the commission also refers to directive n°70-50 of 22 december 1969 (official journal, english special edition 1970 (i), p. 17), article 2 (3) (k) of which states that measures having an effect equivalent to a quantitative restriction include any national measures which ' hinder the purchase by private individuals of imported products only, or encourage, require or give preference to the purchase of domestic products only '.

6 The commission adds that the provision in question is part of a set of tax advantages which may constitute aid within the meaning of articles 92 to 94 of the treaty. However, it considers that, where the provision is an aspect of an aid scheme which is not necessary for attainment of the object or the proper functioning of the scheme, articles 92 to 94 cannot prevent the application of article 30, as the court held in its judgment of 22 march 1977 in case 74-76 (iannelli & volpi v meroni (1977) ecr 557).

7 In the course of the procedure before the court, the French Republic put forward three arguments in its defence.

8 In the first place, it contends that printing is a service and cannot be regarded as a product, so that the tax provision criticized by the commission falls outside the ambit of article 30 of the treaty and directive n°70-50. Such an activity can be covered only by the treaty provisions on the freedom to provide services. As regards the application of directive n°70-50, the french government adds that article 2 (3) (k), since it refers to purchases by ' private individuals ', cannot be applied to newspaper publishers since the latter cannot be assimilated to private individuals.

9 Secondly, the French Republic denies that the fact that a publication has been printed in france rather than another member state can influence the choice of a potential reader. Thus there is no purpose in the commission ' s attempting to show that the contested measure encourages the purchase of domestic products only, within the meaning of the above-mentioned article of directive n°70-50.

10 Lastly, in the event that the court should decide that the measure in question is part of an aid scheme, the french government argues that it cannot be separated or dissociated from the aid scheme introduced in favour of the newspaper industry by the tax provisions at issue. If a measure forms an integral part of such a scheme it cannot be considered a secondary aspect, within the meaning of the judgment of the court cited by the commission, and hence cannot be challenged under article 30.

11 Those arguments call for the following observations.

12 In the first place, printing work cannot be described as a service, since it leads directly to the manufacture of a physical article which, as such, is classified in the common customs tariff (heading n°49.02, entitled ' newspapers, journals and periodicals, whether or not illustrated '). In any event, article 60 of the treaty provides that ' services shall be considered to be ' ' services ' ' within the meaning of this treaty where they are normally provided for remuneration, in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons '. The case must therefore be considered solely on the basis of article 30.

13 As to whether the measure laid down by the french tax legislation might possibly be considered an integral part of an aid scheme, it should first be noted that it is clear from the replies given to a question put by the court that such a scheme was never notified to the commission. Secondly, it should be pointed out that articles 92 and 94 cannot, as is clear from a long line of cases decided by the court, be used to frustrate the rules of the treaty on the free movement of goods or the rules on the repeal of discriminatory tax provisions. According to those cases, the provisions relating to the free movement of goods, the repeal of discriminatory tax provisions and aid have a common objective, namely to ensure the free movement of goods between member states under normal conditions of competition (in addition to the judgment of 22 march 1977, cited by the commission, see judgments of 13 march 1979 in case 91-78 hansen v hauptzollamt flensburg (1979) ecr 935, 26 june 1979 in case 177-78 pigs and bacon commission v mccarren (1979) ecr 2161, and 24 november 1982 in case 249-81 commission v ireland (1982) ecr 4005). The mere fact that a national measure may possibly be defined as aid within the meaning of article 92 is therefore not an adequate reason for exempting it from the prohibition contained in article 30. The argument relating to the community rules on aid, which the French Republic in any case raised only by way of hypothesis in reply to observations of the commission, therefore cannot be accepted.

14 As regards the applicability of the criteria set forth in directive n°70-50, it should be observed in the first place that the term ' private individuals ' in article 2 (3) (k) covers any private trader, so that newspaper publishers cannot be excluded from its scope.

15 In relation to the french government ' s argument, concerning that directive, to the effect that the origin of publications sold by french newspaper publishers cannot influence the choice of a potential reader, it should be noted that the commission ' s application is concerned not with the ultimate readers of the publications but with the options available to newspaper publishers with regard to the production of their publications. It cannot be disputed that deprivation of the tax advantage provided for by article 39 bis of the code general des impots encourages undertakings to have printing work done in france rather than another member state. Thus, on the basis of article 2 (3) (k) of directive n°70-50 the tax provision at issue may be regarded as an obstacle to intra-community trade because it gives preference to publications printed on national territory.

16 Thus it appears that, since it encourages newspaper publishers to have publications printed in france rather than other member states, the tax provision criticized by the commission is likely to restrict imports of publications printed in such states and must therefore be regarded as a measure having an effect equivalent to a quantitative restriction prohibited by article 30.

17 It must therefore be held that, by depriving french newspaper publishers of certain tax advantages in respect of publications which they print in other member states, the French Republic has failed to fulfil its obligations under article 30 of the eec treaty.

Costs

18 Under article 69 (2) of the rules of procedure, the unsuccessful party is to be ordered to pay the costs. As the French Republic has failed in its submissions, it must be ordered to pay the costs.

On those grounds,

The court

Hereby:

(1) Declares that, by depriving newspaper publishers of certain tax advantages in respect of publications which they print in other member states, the French Republic has failed to fulfil its obligations under article 30 of the eec treaty;

(2) Orders the French Republic to pay the costs.