Fiscal Barriers to Trade in Goods

RECAP ON INTERNAL MARKET
1. Art 26 TFEU
  1. 1. The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market, in accordance with the relevant provisions of the Treaties.
  2. 2. The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensure in accordance with the provisions of the Treaties
FISCAL v NON-FISCAL BARRIERS AND PROHIBITORS
1. Fiscal
  1. 1. Impose a levy on wine as it crosses the border - prohibits customs duties (Arts 28-32 TFEU)
  2. 2. Impose a levy on all imports of alcohol to fund a study into alcoholism - prohibits charges having an equivalent effect to customs duties (Arts 28-32 TFEU)
  3. 3. Impose a tax on all alcohol but a higher tax on imported wine than domestically produced beer - prohibits discriminatory internal taxation (Arts 110-113)
2. Non-fiscal
  1. 1. Ban the import of wine from other MS - prohibits quantitative restrictions on imports and exports (Arts 34-36 TFEU)
  2. 2. Impose a quota on the quantity of wine that may be imported into the UK annually - prohibits measures having an equivalent effect to quantitative restrictions (Arts 34-36 TFEU)
  3. 3. Introduce technical rules which wine must comply with - ibid.
CREATING A CUSTOMS UNION AND DEALING WITH CHARGES
1. Creating of a Customs Union
  1. Art 28 TFEU (ex Art 23 EC) - 'The Union shall be based on a customs union which shall cover all trade in goods and which shall involve the prohibition between MS of CDs on imports and exports and of all charges having equivalent effect (CHEEs), and the adoption of a common customs tariff in their relations with third countries'.
  2. Exclusive competence of the EU - Art 3 TFEU. Only EU can legislate on this.
2. Art 28 TFEU
  1. Internal aspect - prohibition of customs duties on imports and exports and charges having an equivalent effect to a customs duty (CHEE)
  2. External aspect - adoption of a common customs tariff in their relations with third countries (non-EU countries)
  3. Can free and fair trade work together? Trading powers - UK v smaller countries. Who is more likely to get a trading deal?
  4. Defining goods
    1. '...products capable of being valued in money and which are capable, as such, of forming the subject of commercial transactions.'
      1. Case 7/68 Commission v Italy (Italian Art) [1968]
    2. This also includes industrial and agricultural products subject to Arts 39-44 TFEU
3. Art 30 TFEU
  1. 'Customs duties on imports and exports and charges having equivalent effect shall be prohibited by MS.'
  2. Vertically directly effective - Van Gend en Loos [1963] (increase in customs duties)
  3. What is a CHEE?
    1. Any pecuniary charge, however, small, and whatever its designation and mode of application, which is imposed unilaterally on goods by reason of the fact that they cross a frontier and which is not a CD in the strict sense, constitutes a CHEE.
      1. Case 24/68 Commission v Italy (Statistical Levy) [1969] - wanted to do stats study on imports and charged importers. Not allowed.
    2. Will be a CHEE 'even if it is not imposed for the benefit of the state, is not discriminatory or protective in effect, and if the product in which the charge is imposed is not in competition with any domestic product.'
      1. Treaty does not clarify if certain circumstances are legitimate to charge. Seems so expansive that NO circumstances allow charges.
      2. Cases 2&3/69 Sociaal Fonds voor de Diamantarbeiders [1969] - Belgium charging for the import of diamonds for the benefit and welfare of diamond workers
    3. Are CHEE ever legit? Case 18/87 Commission v Germany (Live Animals) [1988]
      1. a) It it constitutes payment for a service in fact rendered to the economic operator of a sum in proportion to the service
        i. Benefit must be specific to the individual trader (and not traders in general)
        ii. Sum paid must be proportionate to the benefit received
        Cases
        Case 24/68 Commission v Italy (Statistical Levy) [1969]
        Case 63/74 Cadsky v ICE [1975]
        Case 170/88 Ford España v Spain [1989]
        Case 132/82 Commission v Belgium [1983]
      2. b) If it attaches to inspections carried out to fulfil obligations imposed by Union (or international) law
        i. Union law (secondary legislation) - Case 46/76 Bauhuis v Netherlands [1977]
        Charge must be proportionate to the cost; inspections must be obligatory and uniform; prescribed by EU law in the interests of the EU; and promote the FMG by neutralising unilateral measures adopted in accordance with Art 30 TFEU.
        ii. International law - Case 89/76 Commission v Netherlands [1977]
        Prescribed by international law; and charge is proportionate to the cost.
      3. c) If it relates to a system of internal dues applied systematically and in accordance with the same criteria to domestic products and imported products alike (art 110!)
        If it is internal taxation, apply Art 110 TFEU!
        Art 30 and 110 are mutually exclusive
        Case 57/65 Lutticke v HZA Saarlouis [1966]
  4. Legal effect of an infringement of Art 30 TFEU
    1. CD or CHEE prohibited under Art 30 TFEU is unlawful per se
    2. The exceptions set out for non-fisc barriers to trade under Art 36 TFEU do NOT apply to fisc barriers of trade.
4. External aspect
  1. Art 28 TFEU - the customs union includes the adoption of a common customs tariff in relations with third countries
  2. Arts 31 and 32 provide for the adoption of a common customs tariff (CCT/CET)
  3. EU has also developed a common commercial policy (CCP) towards third countries (Art 3 and 206-207 TFEU)
INTERNAL TAXATION
1. Art 110(1) TFEU
  1. No MS shall impose, directly or indirectly, on the products of other MS any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products
    1. Broadly defined
  2. Directly effective - Case 57/65 Lutticke v HZA Saarlouis [1966]
2. Art 110(2) TFEU
  1. Furthermore, no MS shall impose on the products of other MS any internal taxation of such a nature as to afford indirect protection to other products
    1. Discrimination that protects their goods.
  2. Directly effective - Case 27/67 Firma Fink-Frucht GmbH v HZA Munchen Landsbergerstrasse [1968]
3. Types of discriminatory taxation
  1. Direct - where imports and domestic products are explicitly treated differently; automatically unlawful and cannot be justified
    1. Tax burden must not differ according to the origin of the good (e.g. rate, method/stage of collection, sanctions, effect etc.)
    2. Case 55/79 Commission v Ireland [1980]; Case 127/75 Bobie v HZA Aachen-Nord [1976]
  2. Indirect - there is no explicit discrimination, but the tax burden on imports is greater; may be objectively justifiable
    1. Case 112/85 Humblot v Directeur des Services Fiscaux [1985]
      1. French - gradation of tax. Greater engine power = great rate of tax. Justifiable. However - steep rise between largest engines made in France v those imported from Germany. Significant premium on imported car. Indirect discrimination against importing countries and indirect protection for French industry.
    2. Case 433/85 Feldain v Direceur des Services Fiscaux [1987]
    3. Objective justification under Art 110 TFEU
      1. Case 140/79 Chemical Farmaceutici v DAF SpA [1981] (synthetic ethanol); Case 196/85 Commission v France [1987] (sweet wines); Case C-132/88 Commission v Greece [1990] (taxes on engine size)
4. Relationship between paras (1) and (2) of Art 110 TFEU
  1. (1) - where domestic goods and imports are deemed to be SIMILAR, the tax burden must be equalised (does not mean equalling benefit; treating them equally badly!)
    1. 'Similar goods' - goods in the same tax classification - Case 27/67 Fink-Frucht GmbH [1968]
    2. Similar - NOT identical.
    3. Have similar characteristics and meet the same needs from the point of view of the consumer - Case 45/75 Rewe [1976]
    4. Case 243/84 John Walker [1986] (luxury products) - said to look at objective characteristics of the product, alcohol content, method of manufacture, and consumer perception of the product
  2. (2) - where domestic and imported goods are not similar, but IN COMPETITION with one another, the tax must not indirectly protect the domestic product.
    1. Is there a competitive relationship between the goods? Actual or potential. 1. Is there a degree of substitution between the products? If so, a competitive relationship exists. 2. Is the tax system indirectly protecting the domestic product? If so, this protective effect must be removed...unless objectively justified.
      1. Case 170/78 Commission v UK (Beer and Wine) [1983]
RELATIONSHIP BETWEEN ARTS 30 AND 110
1. When is a tax a 'genuine tax'?
  1. A levy will fall under Art 110 TFEU if it relates to 'a general system of internal dues applied systematically and in accordance with objective criteria irrespective of the origin of the product' - Case 90/79 Commission v France [1981]
  2. So how do we distinguish a CHEE from a tax?
    1. Art 30 TFEU
      1. Imposed on goods as they cross the frontier
      2. Specific charge on the imported/exported good to the exclusion of domestic goods
      3. Unlawful per se
    2. Art 110 TFEU
      1. Imposed within the MS
      2. Imposed as part of the internal taxation system
      3. Prohibited only if discriminatory
2. Key questions:
  1. Is a charge imposed at the border?
    1. Case 29/87 Dansk Denkavit [1988]
    2. Will mostly be classed as a CHEE BUT...
    3. ...only very exceptionally will monies taken at a border be a tax.
    4. Therefore usually Art 30.
  2. Is a charge imposed on an import which the importing MS does not produce (i.e. exotic imports)?
    1. Which provision applies where a MS imposes a tax on an import, but there is no domestic production of that product?
      1. Art 110 - but why?
        No domestic product you are seeking to protect, BUT it may then come into competition.
      2. Case 193/85 Cooperativa Co-frutta SRL v Amministrazione delle Finanze dello Stato [1987]
  3. Is all of part of the charge refunded to domestic traders?
    1. Apply Art 30 TFEU if:
      1. The sole purpose of the refund is to finance activities which benefit the taxed domestic product
      2. The product which has been taxed and the product benefitting from the charge must be the same
      3. Refund of the charge imposed on the domestic product is made in full
APPLYING ART 110
1. Ensure it is a genuine TAX rather than a customs duty or a charge having equivalent effect. Then...
2. Are the products in question similar?
  1. TEST - objective characteristics and consumer needs
  2. If YES, the tax BURDEN must be the same (treating them just as badly)
3. If not similar, is there a competitive relationship between the products?
  1. Is there a degree of substitutability?
    1. If so, does the tax burden indirectly protect the domestic good? If so, remove the protective effect.
    2. If not, it is not caught by Art 110.
CONCLUSIONS
1. Customs union is the foundation of the internal market
2. Internal aspect - Art 30 and 110 TFEU are mutually exclusive and have direct effect - interpreted strictly by the CJEU
3. External aspect - a strong 'ring-fence' around the 28 MS is crucial
4. EU has exclusive competence in adopting a common commercial policy with third countries

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Fiscal Barriers to Trade in Goods

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