CJEC, February 16, 1977, No 20-76

The court

1 By order of 17 december 1975, which was received at the court registry on 23 february 1976, the finanzgericht baden-wurttemberg referred to the court pursuant to article 177 of the eec treaty various questions concerning the interpretation of the first paragraph of article 95 of the treaty prohibiting member states from imposing ' directly or indirectly, on the products of other member states any internal taxation.... In excess of that imposed.... On similar domestic products '.

2 The questions arise in the context of a dispute between a german importer of gravel from french territory and the Finanzamt Freudenstadt calling in question the compatibility of the german tax on the carriage of goods by road with the first paragraph of article 95 of the treaty in that for transport operations which were in every way comparable the importer had to pay a tax in respect of french goods but was able to carry out the transport operation in respect of national goods without paying tax.

3 It is necessary to recall the essential features of the german law on the taxation of the carriage of goods by road.

The national rules

4 The tax in question was part of a series of measures adopted in 1968 to coordinate the various means of transport. In this context the tax on the carriage of goods by road was intended to divert long-distance traffic towards the railways and inland waterways. Consequently short-distance transport of goods which cannot reasonably be diverted from the roads was exempted from the tax.

5 For this purpose the law in question refers to the definitions of the concepts of long-distance and local transport contained in the german law relating to the powered transport of goods, the guterkraftverkehrsgesetz (bundes- gesetzblatt 1952 i p. 697). In the second paragraph of that law it is provided that local transport covers all transport of goods for others by powered vehicle within the borders of the town or village or the ' local ' zone.

The local zone is the territory within a radius of 50 km calculated directly from the centre of the town or village in which the lorry has its place of origin and includes the territory of any town or village the centre of which is within that circle. If a town or village has several centres the local zone covers all the territory included within a radius of 50 km from each centre with the result that the territories of the local zones may vary in size.

6 A powered vehicle registered abroad is deemed to have its place of origin in the border town or village at which it crosses the german border (paragraph 6 (b) of the law relating to the powered transport of goods) as amended by the fourth law amending the law relating to the powered transport of goods (viertes gesetz zur anderung des guterkraftverkehrsgesetz) (bundesgesetzblatt i, p. 1157).

7 The long-distance transport of goods includes any transport of goods by a powered vehicle outside the local zone or which leaves a local zone.

8 It should be pointed out that the tax is assessed on the basis of the weight of the goods and the distance covered while in the case of own goods transport the rate of tax is progressive.

9 The law in question provides that long-distance goods transport and international local transport is subject to the tax. On the other hand international transport which commences in or has its destination in the local zone of a frontier town or village is exempt from the tax. Thus the treatment of international transport is identical to that of domestic transport by a lorry whose place of origin is the frontier town or village.

10 It appears from the data in the file that the imposition of the tax on international local traffic could in certain circumstances form a barrier to intra-community trade in that in the case of transport within the local zone by a national lorry the tax was only levied if the german border was crossed.

The first question

11 The first question asks whether

' A tax which is imposed on the basis of distance covered within a member state for the carriage of goods by road constitutes taxation on products within the meaning of article 95 of the eec treaty. '

12 The first paragraph of article 95 provides that no member state may impose, directly or indirectly, on the products of other member states any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products. Thus the purpose of article 95 is to remove disguised restrictions on the free movement of goods which may result from the tax provisions of a member state.

13 In view of the general scheme and objectives of that provision the concept of tax on a product must be interpreted in a wide sense.

14 Such restrictions may result from a tax which in fact compensates for taxes which are imposed on the activity of the undertaking and not on the products as such. This problem does not arise when the national product and the imported product are subject to tax at the same time and on the basis of a specific activity, for example, the use of national roads.

15 Nevertheless such a tax which has an immediate effect on the cost of the national and imported product must by virtue of article 95 be applied in a manner which is not discriminatory to imported products.

16 Therefore the reply must be given to the national court that taxation imposed indirectly on products within the meaning of article 95 of the eec treaty must be interpreted as also including a charge imposed on international transport of goods by road according to the distance covered on the national territory and the weight of the goods in question.

The second, third and fourth questions

17 The second, third and fourth questions ask the court to interpret the prohibition on imposing on foreign products taxation in excess of that imposed on national products having regard to the fact that:

1. The possibility of different treatment for imported products may in any case only arise if imported products are delivered in a strip of territory approximately 50 kilometres wide running parallel to and at a distance of 50 km from the border;

2. Transport of domestic goods abroad is subject to the same tax as transport of foreign goods into the country;

3. The objective of the tax is part of the transport policy and the discriminatory effects could only have been avoided by considerable extra administrative expenditure and they were restricted to the years 1969 to 1971.

18 These questions should be answered jointly.

19 Article 95 is intended to ensure that the application of internal taxation in one member state does not have the effect of imposing on products originating in other member states taxation in excess of that imposed on similar domestic products. Therefore it is irrelevant that the taxation is also imposed on the same conditions on national products which are exported and on imported products.

20 The first paragraph of article 95 is infringed where the taxation on the imported product and that on the similar domestic product are calculated in a different manner on the basis of different criteria which lead, if only in certain cases, to higher taxation being imposed on the imported product.

21 Higher taxation of the imported product exists when the conditions under which the carrier is subject to tax are different with regard to international transport and purely domestic transport so that in comparable situations the product moving within the member state is not subject to the tax to which an imported product is subject. Indeed in order to compare the tax on goods moving within the national territory with that on the imported product for the purposes of the application of article 95, account must be taken of both the basis of assessment of the tax and the advantages or exemptions which each tax carries with it. For the taxation of the imported product to be higher it is sufficient that in certain circumstances the national product may be transported without being subject to tax for the same distance within the member state while the imported product is subject to the tax solely because the border was crossed. In this respect it is for the national judge to compare in specific cases the situations which may arise.

22 The information supplied by the national court shows that a real obstacle to free movement of goods may sometimes result from the application of different conditions for the imposition of taxation with regard to both international transport and domestic transport. The minor and incidental nature of the obstacle created by a national tax and the fact that it could only have been avoided in practice by abolishing the tax are not sufficient to prevent article 95 from being applicable. Title iv of part two of the treaty concerning the common transport policy enables member states to resolve problems of competition between means of transport without however adversely affecting the free movement of goods. However the lack of such a policy is no jusitification for a derogation from article 95 of the treaty.

Costs

23 The costs incurred by the government of the federal republic of germany and the commission of the european communities which submitted observations to the court are not recoverable. As these proceedings are, so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, costs are a matter for that court.

On those grounds,

The court

In answer to the questions referred to it by the finanzgericht baden-wurttemberg by order of 17 december 1975, hereby rules:

1. Taxation imposed indirectly on products within the meaning of article 95 of the eec treaty must be interpreted as also including a charge imposed on international transport of goods by road according to the distance covered on the national territory and the weight of the goods in question.

2. Article 95 is intended to ensure that the application of internal taxation in one member state does not have the effect of imposing on products originating in other member states taxation in excess of that imposed on similar domestic products and it is therefore irrelevant that the taxation is also imposed on the same conditions on national products which are exported and on imported products.

3. In order to compare the tax on goods moving within the national territory with that on the imported product for the purposes of the application of article 95, account must be taken of both the basis of assessment of the tax and also of the advantages or exemptions which each tax carries with it.

4. The minor and incidental nature of the obstacle created by a national tax and the fact that it could only have been avoided in practice by abolishing the tax are not sufficient to prevent article 95 from being applicable.