DELIVERED ON 6 JUNE 1978 (*1)

Mr President

Members of Court,

1. This: procedure for a preliminary ruling coi. ns the interpretation of Articles It 95 of the EEC Treaty which pr bit respectively customs duties or xports and discriminatory internal ation. The question is essentiali i to establish whether a domestic tern of taxation on articles of precir metal which is also, but not exclusiement imposed on articles intend e. for export, is compatible with those two. provisions.

The probiem has arisen from the Danish system of control of precious metals used in goldsmithery (gold, silver and platinum). The law governing that control (Law No 499 of 29 November 1972), like that of 1961 which it replaced, applies to all articles of precious metal produced in Denmark or imported from other States and intended to be marketed either on the national market or abroad. The supervision is entrusted to a public body (the Statens Kontrol med Ædle Metaller), whose main income is the revenue from a charge which is imposed on producer undertakings and traders in that sector and calculated on the basis of either the value of the metal used by each manufacturer or the value of the imports of articles of precious metal.

Under Article 6 (1) of the above-mentioned law, manufacturers and importers of goldsmithery must be owners of a registered mark; this applies even if the manufacturer manufactures only for export and regardless of whether or not he applies his own mark to the articles which he exports. No article of goldsmithery made of precious metal may be sold in Denmark unless the mark of the manufacturer or of the trader or importer has previously been applied to it as a guarantee of the title of the metal. A goldsmithery undertaking which manufactures for a third person who is Danish and the owner of a mark registered in Denmark may send the article to the customer without applying his own mark to the product; in that case, to be put on the market in Denmark the article must be marked by the customer. An undertaking which manufactures for third persons and delivers the article without itself applying a mark thereto is exempted from including the precious metal thus used in the quantity of metal in its possession for the purposes of taxation, provided that the customer is Danish and itself the owner of a registered mark. In that case it is for the customer to declare the metal used and to bear the burden of the charge.

As regards articles manufactured in Denmark for foreign customers and therefore intended for export, the manufacturer may also avoid applying his mark to them. However, on the date of export of the article he must declare for tax purposes the consumption of precious metal even if a mark has not been applied to the article and will therefore have to bear the burden of the charge. This is not expressly laid down by the above-mentioned law but follows from the interpretation thereof given by the court of appeal with jurisdiction for Eastern Denmark (the Østre Landsret) by a judgment of 21 October 1976.

2. In the present case two Danish undertakings which manufacture articles of goldsmithery for undertakings in other Member States and which export their production without previously applying their mark thereto unsuccessfully requested the Statens Kontrol med Ædle Metaller to exempt manufacturers from the duty to pay the charge in question in respect of the proportion of their production which is intended for export without application of their mark to the goods. This attempt however failed and they brought legal proceedings against the Statens Kontrol med Ædle Metaller, contesting the compatibility of the above-mentioned legislation with the EEC Treaty, as results from the interpretation of it given in the above-mentioned judgment of the Østre Landsret; in fact in their opinion, in so far as goods exported without the application of a mark are concerned, the charge is capable of constituting a heavier burden than in the case of products marketed in similar conditions and at the same marketing stage on the domestic market.

Within the context of the proceedings pending in this connexion between the two Danish undertakings and the national institution responsible for the control and guarantee of precious metals, Københavns Byret, by decision of 2 November 1977, referred to the Court under Article 177 of the EEC Treaty the following questions for a preliminary ruling:

‘1. Does a levy which is imposed upon undertakings manufacturing, importing or dealing in articles of precious metal in order to meet the costs of the supervision of such undertakings by the authorities and which is calculated on the basis of the undertakings' consumption of precious metals constitute a charge having an effect equivalent to a customs duty on exports within the meaning of Article 16 of the EEC Treaty when it is imposed upon all undertakings which are subject to such supervision in accordance with provisions whereby one and the same article is only subject to charge on one occasion in Denmark irrespective of whether it is again subject to charge abroad?

2. Where manufacture is effected for other persons but the manufacturer does not apply his own mark is the answer to Question 1 affected by the fact that such consumption of precious metal is not included in the calculation of the chargeable value when such goods are manufactured for a Danish owner of a mark since the latter includes such precious metals in the account of his chargeable consumption whilst the consumption must be included when manufacture is for a foreign undertaking which is not subject to the charge in Denmark since such consumption would not otherwise be included in the basis for the Danish levy, still irrespective of whether it is again subject to charges abroad?

3. In this connexion is it relevant that the precious metal which is made up in Denmark is supplied to the Danish manufacturer by the foreign customer in question to whom the finished product is re-exported?

4. If such a levy is not regarded as constituting a charge having an effect equivalent to a customs duty on exports is it to be regarded as internal taxation (on the imported quantity of gold) contrary to the first paragraph of Article 95 of the EEC Treaty?’

As explained in previous decisions of this Court, within the system of the EEC Treaty one and the same fiscal charge cannot belong simultaneously to the category of customs duties and charges having equivalent effect, which are prohibited by Article 12 et seq., and to that of internal taxation referred to in Article 95 (judgment of 18 June 1975 in Case 94/74 IGAV v Ente Nazionale per la Cellulosa e per la Carta [1975] ECR 699; judgment of 22 March 1977 in Case 78/76 Firma Steinike und Weinlig v Federal Republic of Germany [1977] ECR 595). According to the established case-law of this Court any pecuniary charge, regardless of its amount, designation and mode of application, which is imposed unilaterally by a Member State on domestic or foreign goods by reason of the fact that they cross a frontier constitutes a customs duty or at least a charge having equivalent effect (judgment of 1 July 1969 in Joined Cases 2 and 3/69 Sociaal Fonds voor de Diamantarbeiders v SA Ch. Brachfeld and Sons and Chougol Diamond Co. [1969] ECR 211). However, financial charges within a general system of internal taxation applying systematically to domestic and imported products according to the same criteria do not constitute charges having an effect equivalent to customs duties.

On the basis of these exact indications it is possible to define the precise field of application of Article 95, which concerns internal taxation, in relation to the field governed by the provisions of the above-mentioned Article 12 et seq. In the case-law of this Court the hypothetical case has also however been considered in which charges imposed on particular products in a manner which is formally not discriminatory have the sole purpose of financing activities for the specific advantage of the taxed domestic products so as to make good, wholly or in part, the fiscal charge imposed upon them. In such a hypothetical case the Court has held that the national measure in fact would only appear to be internal taxation whereas in reality by reason of its protective nature it could be termed a charge having an effect equivalent to customs duties so as to bring Article 13 (2) into operation (judgment in the IGAV case quoted above [1975] ECR 710-1; judgment of 25 May 1977 in Case 77/76 Fratelli Cucchi v Avez S.p.A. [1977] ECR 988).

Thus the same criteria which serve to determine the concept of a charge having an effect equivalent to a customs duty on imports and to distinguish it from internal taxation referred to in Article 95 must also apply in respect of charges having an effect equivalent to customs duties on exports. In theory, there is no justification for having recourse to different criteria according to whether the charge having equivalent effect is imposed on imports or exports for the purposes of differentiating it from internal taxation. This is confirmed in the case-law of this Court which has also applied identical criteria to those set out above in relation to national charges imposed on exports (judgment of 22 October 1974 in Case 27/74 Demag AG v Finanzamt Duisburg-Süd [1974] ECR 1037).

Having said that I would observe that a charge such as that to which the court making the reference refers is applied not by reason of the import or export of the product charged but solely by virtue of the use of precious metals in goldsmithery and of the need to guarantee that the article contains the correct amount of one of those metals without the origin or the destination, whether national or foreign, of the raw material or of the finished or semi-finished article's being important. The proceeds of the charge serve, as I have said, to cover the operating costs of the public body responsible for the supervision of undertakings which manufacture, import or deal in articles of precious metal and which are owners of a registered hallmark. The income from the charge is therefore used to finance an activity which, though it can only contribute to the good name of Danish goldsmithery, does not specifically and exclusively benefit taxed domestic products but more generally aims to protect the consumer as regards articles of goldsmithery of whatever origin.

These observations seem to me to be sufficient in order to state, in the light of the above-mentioned criteria, that a charge such as that in question constitutes internal taxation which comes within the provisions of Article 95 et seq. of the Treaty. That iself makes it impossible for the same charge to come within the scope of application of Article 16 of the Treaty, which relates to the prohibition on customs duties on exports and charges having equivalent effect.

At this point, it is impossible not to answer in the negative the first three questions submitted by the court making the reference, in so far as they refer to Article 16 of the Treaty. They are linked to a classification of the charge concerned which must in my opinion be rejected. However, I consider that certain details contained in those questions are worth taking into account in the examination of the fourth question, which has been formulated much more succinctly.

4. In order to establish whether the levy in question must be considered as contrary to the first paragraph of Article 95 of the Treaty it is appropriate to recall the wording of that provision. It provides as follows: ‘No Member State shall 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’.

I would point out first of all that it is doubtful at least whether a charge applied on the basis of the metal used by a Danish undertaking in its goldsmithery even but not only when the latter uses metal supplied to it by a foreign client for whom the products obtained from the working of that metal are intended may be considered as a charge applied to products of other Member States. The charge in fact is imposed on a domestic undertaking in connexion with an activity (the use of precious metals in goldsmithery) which that undertaking carries out on the territory of the State. However that may be, even if it were held in the hypothetical case which has been put forward that it was possible to relate the charge to the raw material (at least from the point of view of the economic effects), the presumed discrimination would occur in relation not to the action of importing the raw material but to the action of exporting the finished product. It would in fact consist of the different treatment of a Danish manufacturer according to whether its product not bearing a mark is intended for a foreign customer or for a home customer who is the owner of a mark registered in Denmark; in the first case, as we have seen, the charge is payable by the manufacturer and in the second case it is payable by the customer.

In the circumstances, before dealing with the substance of the problems which have been taken into consideration by the national court, albeit mistakenly, it is necessary to settle the question of the applicability of the above-mentioned first paragraph of Article 95 to charges on products far export.

The literal wording of that provision in fact establishes a relationship between the charges applied to national products and those applied to similar products imported from other Member States. Its field of application might however appear not to cover a case such as that to which the court making the reference refers which involves the treatment for tax purposes of exported national products which is alleged to be discriminatory compared with the treatment of the same products sold in the producer State. In the oral stage of these proceedings the representative of the Danish Government expressed himself to this effect.

There is no doubt that the Treaty intended to ensure equal treatment for tax purposes for national products and products from other Member States in the legal system of each Member State. If equality were not however uniformly ensured with regard to the same national products in the sense that the same fiscal charge had to be imposed on those marketed in the producer State and those exported to other Member States it would be necessary to recognize that there was a serious lacuna or at least a surprising lack of harmony in the system of the Treaty and in particular in the system of freedom of movement of goods between the Member States.

The lacuna would exist if, on the basis of an absolutely literal and restrictive interpretation of Article 95, it were held that each Member State were free to impose from the tax point of view a heavier burden on products intended for export than on products sold on the domestic market. Such treatment might seem to be abstract theory in periods characterized by a plentiful supply of products or even merely by domestic economic policies designed to stimulate exports. It might however become a reality and threaten the principle of the freedom of movement of goods within the Community in periods of shortages (perhaps in certain sectors) of products and of national policies preoccupied by excessive exports. Through discriminatory application of the weapon of tax each Member State would in fact be able to discourage exports of products in short supply, if such conduct could not be penalized under the Community legal system; assuming that in theory it would fall outside the prohibition laid down by Article 95 and that, moreover, since it constitutes genuine internal taxation it would automatically fall outside the field of application of Article 16 of the EEC Treaty.

5.I therefore consider that in order to avoid the above-mentioned serious lacuna in the system of the movement of goods within the Community it is necessary to regard the charges levied on exported products as coming within the field of application of the first paragraph of Article 95.

Within the system of the Treaty it would be illogical to hold that the intention was to leave the Member States free as regards the discriminatory application of the weapon of tax to exports. In reality, in view of the general economic situation at the date on which the Treaty was drafted and adopted the real danger from the point of view of the exercise of the powers of taxation of the Member States was that of discriminatory treatment against products from other States of the Community. As far as national products for export were concerned the problems were quite different: they consisted in the large number of facilities, incentives and aids by means of which each State sought to promote its own exports. It therefore seems reasonable to consider that in drafting Article 95 the more urgent requirements at that time were taken into account and that in the meantime the possibility of a discriminatory use of the weapon of tax against exports which could have arisen, in a different economic context, has been Forgotten.

The basic characteristic of the principle of the freedom of movement of goods between the Member States and the need to guarantee fully the effectiveness of the provisions laid down in the Treaty must however lead to an extension the provision laid down in Article 95 by analogy also to the case of charges imposed on exported goods. The analogy is justified by the fact that the function which the provision is required to perform is the same in this case as in that of charges imposed on imported goods: to avoid any tax treatment forming an obstacle to actual freedom of trade through discrimination based on the origin or destination of the products. Moreover, if the secondary function of the provision laid down in Article 95 with regard to the prohibition on customs duties and charges having equivalent effect is taken into account it seems reasonable to consider that it must fully perform that function and therefore apply to obstacles which may be placed not only in the way of imports but also of exports, as occurs in the case of all provisions coming within the customs union.

However, the case-law of this Court already contains rulings to the effect that Article 95 applies to exports. In the judgment of 23 January 1975 in Case 51/74, P. J. Van der Hulst's Zonen v Produktschap voor Siergewassen ([1975] ECR 80) internal charges were considered in the light of both Articles 95 and the second subparagraph of Article 40 (3) (the rule prohibiting discrimination between producers or consumers in the agricultural sector) and it was stated that the national regulations ‘conflict with the prohibitions which are embodied in these provisions, if only by analogy, in circumstances where exported goods are subject to a heavier charge than those placed on the national market’ (paragraph 35 of the decision). In the judgment of 25 January 1977 in Case 46/76 W. J. G Bauhuis v The Netherlands State ([1977] ECR 5), concerning pecuniary charges on exports imposed by virtue of veterinary and public health inspections carried out under a Community directive, it was stated that such charges, ‘if … demanded in the case of internal marketing as well as in the case of exportation … form part of a general system of domestic charges and are not charges having an effect equivalent to a customs duty on exports but fall within the prohibition of discrimination under Article 95 of the Treaty’ (paragraph 25 of the decision).

It would be possible to put forward an alternative hypothesis, in other words that internal taxation which discriminates against exports comes within the field of application of Article 34, which lays down the prohibition on quantitative restrictions on exports and measures having equivalent effect. It might be possible to maintain that, in view of the wide and residual character of the category of measures having an effect equivalent to quantitative restrictions on exports, a discriminatory charge of the kind mentioned above might well come within that category. A lack of harmony would however remain in the structure of the system since, whilst customs duties and charges having equivalent effect, quantitative restrictions and measures having equivalent effect are all prohibited, both on exports and on imports, the discriminatory treatment from the tax point of view would be prohibited as such only with regard to imports, and internal taxation arranged so that it discriminates against exports would eventually be incorporated in a provision different from that relating specifically to the field of tax.

In addition to the lack of harmony at the theoretical level, differences would also exist in the rules. In fact, as the Court observed in the above-mentioned judgment in the IGAV case, whilst charges having an effect equivalent to customs duties must simply be abolished (this also applies to measures having an effect equivalent to quantitative restrictions), internal taxation must however merely be applied so that any direct or indirect form of discrimination between products is excluded. Assuming that a charge is incompatible with Article 95 in so far as it is discriminatory, it is nevertheless always possible for the national court to confine itself to declaring that charge to be inapplicable to the extent to which, by reason of its uses, it constitutes an infringement of that provision; I would recall the judgments of this Court to that effect of 4 April 1968 in Case 34/67 Ftrma Gebrüder Lück v Hauptzollamt Köln-Rheinau [1968] ECR 251 and of 22 March 1977 in Case 74/76 Iannelli and Volpi S.p.A. v Ditta Paolo Meroni [1977] ECR 578. That kind of close adjustment to the requirements of the Treaty by national administrative and judicial authorities would however be precluded if it were necessary to classify the charge within the scope of measures having an effect equivalent to a quantitative restriction; in that case the prohibition would cover the whole charge and the State levying it might well have to repay any amount which might have been charged to all those on whom the charge was unlawfully imposed.

However it is in the interests of the same Member States to incorporate the charges of which I am speaking in the part of the Treaty relating specifically to the field of tax. This solution has the advantage of safeguarding the special character of the rules on the field of tax from which the Court concluded that those rules are independent of the precept of the customs union. Moreover, it helps to avoid the mistake of treating internal taxation, in so far as it discriminates against exports by its character or effects, more severely than in the case (which is in practice more serious) of discriminatory charges on imported goods. For that reason the alternative hypothesis advanced should not be accepted.

6.It is now appropriate to turn to the first question put by the Danish court. Reworded along the lines I have indicated above — in other words replacing the reference to Article 16 and to the concept of a measure equivalent to a charge on exports by a reference to Article 95 and to the concept of a discriminatory charge — that question prompts us to examine whether the levying of the charge involved is contrary to the first paragraph of Article 95 in so far as it applies in such a way that the same goods are certainly subject to charge on only one occasion in Denmark but without taking into account any further taxation in other Member States.

In my opinion the answer must be in the negative. The compatibility of a charge with Article 95 cannot depend on the conduct of other States nor on the situation in which the exported product finds itself within the context of other systems of taxation which are outside the legal system of the exporting State. The prohibition against tax discrimination both with regard to products imported into a Member State and to products exported from the same State means that both must be treated in that State without discrimination as against national products marketed within the country. The problems which may result from the phenomenon of double taxation imposed on goods which are placed on the market in various Member States of the Community are caused by the existence of independent tax systems which are not co-ordinated and are not therefore attributable to one or other State considered individually. These are absurdities which can only be eliminated by harmonization of the national bodies of tax legislation.

7.The second question referred to the Court by Københavns Byret is related more to the particular mechanism of the charge described above. It concerns the difference in treatment existing between Danish goldsmiths who manufacture for third dealers according to whether the customer to whom the goods are consigned is situated in Denmark or in another State of the Community. It has been seen in fact that when the manufacturer consigns the article to the customer without previously applying his mark to it the precious metal used is not included in the calculation of the chargeable value if the customer is established in Denmark whereas the same metal is included for the purposes of the application of the charge involved when the production is carried out for a foreign undertaking which is not a taxpayer in Denmark regardless of the kind of legal relationship between the Danish manufacturer and the foreign customer.

It is appropriate to point out immediately that there is no difference in the treatment of the goods since in both cases the charge will nevertheless have to be paid and the amount thereof will be determined by means of identical criteria, in other words, on the basis of the value of the precious metal used in the manufacture. There is a difference however in the stage at which the charge is applied and therefore as regards the person who must pay it. If the article is intended for a dealer established in the State who applies his own mark to that article the person liable to pay the charge will be that dealer. However, when the article is exported directly by the manufacturer there is no alternative for the purpose of applying the charge but to collect it from that manufacturer regardless of whether or not he consigns the article with his mark applied thereto.

The important factor, for the purposes of determining the existence of tax discrimination in a State, is the situation of exported articles compared with articles intended to be marketed within the country as regards the fiscal charge imposed on them in that State.

It was observed by the undertakings concerned that the commercial value of an article which is marketed without a mark being applied thereto is less than that of a product which has been marked and that therefore the same charge ultimately effects the former to a substantially greater extent than an article to which a mark has been applied. It is necessary to consider that the charge in question was devised not on the basis of the application of a mark but on the basis of the control to which all articles belonging to the category in question are subject regardless of their origin or their destination. That control, which is intended to verify that the title of the precious metal corresponds to the legal requirements, is generally carried out at die manufacturer's establishment on the basis of criteria identical for all articles which are subject to that control regardless of their destination (which would however be very difficult to ascertain at the actual date of the control). It is therefore possible to understand the observation made by the Danish Government that the system of taxation could not in practice function effectively if articles to which a mark had not been applied and intended for export had to be exempted from the control.

On the other hand if a manufacturer prefers to refrain from applying his own mark to articles intended for export this is because the foreign client prefers articles which have not been marked at source. In these circumstances it seems difficult to give credence to the argument that the value of an article to which a mark has been applied is lower. This might possibly be the case if the article were intended directly for sale to the public. The hypothesis of sale to a foreign wholesaler who prefers to apply to the article his own mark which is probably better known on his own market than that of the Danish supplier which has been put forward by the court making the reference is however quite different. For that reason exemption from the charge for articles to which a mark has not been applied and which are intended for dealers in other States would amount to the preferential treatment of exported products compared with those marketed in the State, in other words to discrimination from the tax point of view between two identical operations using precious metal carried out in the same State.

With regard to the third question put by the Danish court I would observe that the fact that the precious metal intended to be worked in Denmark has been sent to the Danish manufacturer by the foreign customer to whom the finished product is then sent does not alter the terms of the problem in the least. I have already had occasion to observe that the charge is applied in relation to the precious metal used to produce articles of goldsmithery and in relation to the control (even if it is not carried out systematically) as to whether such products comply with the qualitative requirements laid down by the national legislation. Therefore the fact that articles manufactured for foreign clients using precious metal which those clients have supplied for that purpose are also made subject to the system of taxation at issue corresponds to that function.

For all these reasons I conclude by proposing to the Court that it should answer as follows the questions referred to it for a preliminary ruling by Københavns Byret by decision of 2 November 1977:

A levy imposed upon undertakings manufacturing, importing or dealing in articles of precious metal in the State or for export which is intended to meet the costs of the supervision by the authorities and which is calculated on the basis of the undertakings' consumption of precious metals does not constitute a charge having an effect equivalent to a customs duty on exports prohibited by Article 16 of the Treaty as long as the levy is applied according to identical criteria regardless of the origin or destination of the article or of the raw material and the proceeds thereof are not intended to finance activities which specifically and exclusively benefit the taxed domestic products.

The prohibition on discriminatory fiscal charges laid down by the first paragraph of Article 95 of the EEC Treaty is also applicable to charges on national products intended for export compared with charges on national products intended for the domestic market.

The first paragraph of Article 95 does not impose upon the exporting State the duty to take into account, in the application of a domestic charge to a product, any other charges which might be imposed on the same product in the importing country.

For the purposes of the provision laid down in the first paragraph of Article 95, the amount of the fiscal charge to which the product for export is directly or indirectly subject compared with that imposed on a product which is marketed within the boundaries of the State imposing the charge is important, whereas the fact that the raw material used for the manufacture of articles intended for a dealer situated in the producer State is subject to a charge payable by the customer whilst the raw material used for articles produced for a foreign customer is subject to a charge payable by the producer is in principle irrelevant. The fact that the precious metal worked in the State imposing the charge might possibly be supplied to the national manufacturer by foreign customers for whom the finished product is intended is likewise irrelevant.

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Translated from the Italian.