Art.110 Internal Taxation

Art.110 Internal Taxation

1. TFEU Art.110(1) - prohibits discriminatory taxation in respect of SIMILAR products, may be directly or indirectly discriminatory

   • Genuine internal taxes which comply with Art.110 don't breach the treaties
     • Capolongo (Egg Box) Case 77/72 - Financial charges within a general system of internal taxation applying systematically to domestic and imported products alike according to the same criteria ]irrespective of the origin of the products] are not to be considered as CHEEs
     • But if it doesn't comply with Art.110 and discriminates against imports or is protective of domestic products, it is prohibited
   • What is similar?
     • Case law
       • Commission v Denmark Case 106/84 - Fruit table wines and grape table wines are similar based on two stage test
         • John Walker v Ministeriet for Skatter og Afgifter Case 243/84 - Scotch whisky and fruit liqueur not similar
           • Commission v Italy Case 184/85 - Apples and bananas not similar
             • Commission v France Case 302/00 - Dark and light tobaccos similar
     • CofJ tests
       • Fink-Frucht Case 27/67 - Formal test based on product classification
       • Commission v France (French Spirits) Case 168/78 - Broader, two part test
         • 1) Factual/Objective Comparison: do products have similar characteristics? Takes into account composition and physical characteristics, and methods of production
           • 2) Economic Comparison of use: do products meets same need from point of view of the consumer? Takes into account consumer perception and usage of products
   • Direct or Indirect
     • Direct - on face of it, there is less favourable treatment of imported goods
       • No defence, must remove discriminatory element and equalise tax
         • Case examples...
           • Lutticke Case 57/65 - Only imported product is taxed
           • Haahr Petroleum Case 90/94 - Imported product taxed at higher rate
           • Bobie Case 127/75 - MS uses different methods for calculating tax for domestic and imported products
           • Commission v Ireland Case 55/79 - Different conditions under which tax is paid or tax relief is granted for imported products
     • Indirect - on face of it, do not impose different tax rates based on country of origin but do nevertheless place greater burden upon imported product
       • May be objectively justified, eg if tax difference is based on objective criteria, provided it is proportionate
         • Objective criteria may include: protection of environment, regional development, saving scarce resources

2. TFEU Art.110(2) - prohibits discriminatory taxation in respect of products IN COMPETITION

   • What is competing?
     • Commission v UK (Beer and Wines) Case 170/78 - Two stage test
       • 1) Is there a competitive relationship between the products? "Test of Substitutability" - Do the products represent alternative choices for the consumer?
         • 2) Is the tax system, in fact, protective of domestic products? Does the tax policy 'crystallise consumer habits' and thus consolidate/reinforce the advantageous position of the domestic product? Is a potential market for an imported product suppressed by an unfair tax system? If yes, the tax will violate Art.110(2)

3. Where goods aren't similar for Art.110(1) look to goods in competition for Art.110(2)

4. Remedies for breach

   • Breach of Art.110(2) - the protective effect must be removed, not necessarily needing the equalisation of taxes
   • Breach of Art.110(1) - the tax must be equalised