Opinion of the Advocate General — ECLI:EU:C:1997:366
Date: 1997-07-15
Language of the case: Italian
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Taxation;Internal taxation
Procedure: Reference for a preliminary ruling
Origin: Italy

Summary
A — Facts I - 3777
B —Analysis I - 3779
I. Article 95 I-3779
II. The individual taxation procedures I - 3781
1. The different basis of assessment I - 3781
(a) Different initial value I - 3784
(b) Other aspects I - 3786
2. Possibility of making a flat-rate deduction in respect of products manufac­
tured in Italy I - 3789
3. Differences in the procedures for collecting the tax I - 3793
C — Conclusion I - 3795
A — Facts
1. In the present proceedings the Tribunale
di Trento (Trento District Court) has
referred to the Court for a preliminary rul­
ing a question relating to the compatibility
of the Italian consumption tax on audiovi­
sual and photo-optical products 1 with Com­
munity law. The Court has already had occa­
sion to examine this tax, although in another
context. 2 The main proceedings from which
the present case arises relate to an action
brought by Grundig Italiana SpA against the
Ministry of Finance of the Italian Republic,
in which the plaintiff seeks repayment of the
sum of LIT 112 236 330 770 and statutory
interest. This is the amount of consumption
tax paid by the plaintiff between 1 Janu­
ary 1983 and 31 December 1992, the period
during which the disputed tax was in force.
In the opinion of the plaintiff, the Italian
consumption tax is in breach of Community
law and on that ground should not be paid.
* Original language: German.
1 — Introduced by Article 4 of the Decree Law of 30 Decem­
ber 1982, which was converted with amendments into Law
No 53 of 28 February 1983 and supplemented by the imple­
menting provisions of the Ministerial Decree of 23
March 1983.
2 — Judgment in Case 130/92 OTO v Ministero dell Finanze
[1994] ECR I-3281.
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OPINION OF MR LENZ — CASE C-68/96
2. According to information from the Com­
mission, the tax applies to 12 categories of
audiovisual and photo-optical instruments,
such as cameras, lenses, binoculars, tele­
scopes, cine-cameras, record players and
television sets. The tax is levied at a uniform
rate of 16% of the value of the equipment.
(Television sets are subject to a reduced rate
of 8%.) The taxable amount is calculated in
different ways, however, depending on
whether the product is of domestic manufac­
ture or imported. According to the national
court, the taxable amount in the case of
domestic products is the total cost of manu­
facture, including preparation and packaging
costs; transport and distribution costs, inter­
mediaries' expenses and all other expenditure
relating to release for consumption on the
domestic market are not included. Domestic
producers are entitled to indicate as the tax­
able value the invoiced sales price of the
products less a flat-rate deduction of 35% of
the price. The Minister for Finance can set a
flat-rate deduction of a different percentage
for certain categories of products after
assessing the impact of internal marketing
costs on the usual price of the product.
Recourse to the flat-rate deduction precludes
any other deduction from the price for the
purpose of determining the taxable value.
The tax offices must recognise the taxable
value arrived at in this way as appropriate
unless the price charged differs from the nor­
mal value of the products sold.
3. In the case of imported products, by con­
trast, the taxable value is the value at the Ital­
ian frontier, which is determined on the basis
of the customs value as defined by Regu­
lation (EEC) No 1224/80 3plus any costs
and charges for customs presentation at the
Italian frontier, including duties payable for
release into free circulation in the Commu­
nity, less any components of the price paid
or payable that relate to the transportation
and marketing of the products within the
national customs territory. There is no possi­
bility of making a flat-rate deduction for
imported goods.
4. In addition, there are different procedures
for collecting the tax, depending on whether
the products are of domestic manufacture or
imported. Domestic manufacturers are
required to make a quarterly return contain­
ing the essential details needed for assess­
ment of the tax, which has to be paid within
the month following the relevant calendar
quarter.
5. For importers, by contrast, the tax is
assessed and collected at the time of import
through customs. According to the national
court, this leads to different payment times
for the same tax.
6. The national court considers that, as a
preliminary to any other questions raised by
the parties, it is necessary to determine
whether or not the provisions introducing
3 — Council Regulation (EEC) No 1224/80 of 20 May 1980 on
the valuation of goods for customs purposes (OJ 1980 L 134,
p. 1).
I - 3778
GRUNDIG ITALIANA v MINISTERO DELLE FINANZE
and applying the national consumption tax at
issue are incompatible with Community law.
It states further that there is reasonable
doubt as to the possibility of a conflict with
Community law, so that it is necessary to
seek a preliminary ruling from the Court of
Justice under Article 177 of the Treaty.
Accordingly, it refers the following question
to theCourt of Justice for a preliminary rul­
ing:
'Must Article 95 of the EC Treaty be inter­
preted as prohibiting a Member State from
introducing and collecting a national con­
sumption tax of the kind provided for by
Article 4 of the Decree Law of 30 Decem­
ber 1982, converted into law by Law No 53
of 28 February 1983, and further governed
by the Decree of the Ministry of Finance of
23 March 1983, in so far as different taxable
amounts are determined for domestic prod­
ucts and for those imported from other
Member States and different procedures are
laid down for collection of the tax on the
same products?'
B — Analysis
I. Article 95
7. As stated in the OTO judgment, 4 the dis­
puted tax has to be examined in the light of
Article 95 of the EC Treaty. In the grounds
of that judgment the Court noted that it had
already held that a tax such as the national
consumption tax must be regarded as being
an integral part of a general system of inter­
nal taxation within the meaning of Article 95
of the Treaty and that its compatibility with
Community law must be assessed on the
basis of that article. 5 As regards the Italian
tax to be examined in the present case, the
Court went on to hold that it is a tax within
the meaning of Article 95 in so far as it is
applicable to goods imported from other
Member States and, where appropriate, to
goods originating in non-member countries
which are in free circulation in the Member
States. The Court has consistently held that
Article 95 of the Treaty applies only to the
products mentioned above. 6
8. According to Article 95 of the EC Treaty,
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'.
9. The first paragraph thus deals with similar
products. Where such similarity does not
exist, the second paragraph provides that 'no
Member State shall impose on the products
of other Member States any internal taxation
4 — Case C-130/92, cited above (footnote 2), paragraph 15 et seq.
5 — Case C-130/92, cited above (footnote 2), paragraph 11.
6 — Case C-130/92, cited above (footnote 2), paragraph 18 et seq.
I - 3779
OPINION OF MR LENZ — CASE C-68/96
of such a nature as to afford indirect protec­
tion to other products'.
10. According to established case-law, the
aim of Article 95 of the Treaty is 'to ensure
free movement of goods between the Mem­
ber States in normal conditions of compe­
tition by the elimination of all forms of pro­
tection which result from the application of
internal taxation which discriminates against
products from other Member States'. 7 It is
therefore intended to ensure equality of
treatment in internal taxation. 8
11. In the view of the Court, the similarity
required under the first paragraph of Article
95 exists if at the same stage of production or
marketing the products have similar charac­
teristics and meet the same needs from the
point of view of consumers. Whether or not
the domestic product and the imported
product are classified under the same head­
ing in the Common Customs Tariff consti­
tutes an important factor in this assessment. 9
12. It appears from the Commission's obser­
vations that 12 categories of audiovisual and
photo-optical products are subject to the
consumption tax under Article 4(1) of Law
No 53 of 1983. Cameras, lenses, binoculars,
telescopes, cine-cameras, record players and
television sets are mentioned by way of
example. As the description of the products
is extremely precise, it is undoubtedly safe to
assume that the necessary similarity exists
between products of Italian manufacture and
those imported from other Member States.
Leaving aside the question of quality, from
the consumer's point of view there is likely
to be no difference between the properties
and purpose of an Italian television set and
those of one manufactured in another Mem­
ber State.
13. If such similarity does not exist, the sec­
ond paragraph of Article 95 prohibits the
protectionist effect of the tax, which would
occur in particular if internal taxation were
to impose a heavier burden on an imported
product than on a domestic product with
which the imported product is, by reason of
one or more economic uses to which it may
be put, in competition. 10 As the tax in
question is levied on audiovisual and
photo-optical equipment in the categories of
cameras, lenses, cine-cameras, and so on,
it is undeniable that domestic and imported
products are in competition with one
another.
7 — Case C-130/92, cited above (footnote 2), paragraph 16.
8 — Judgment in Case 54/72 FOR v VKS [1973] ECR 193, para­
graph 5.
9 — Judgment in Case 45/75 REWE v Hauptzollamt Landau
[1976] ECR 181, paragraph 12.
10 — Judgment in Case 27/67 Fink-Frucht v Hauptzollamt
München [1968] ECR 223, especially at 232.
I - 3780
GRUNDIG ITALIANA v MINISTERO DELLE FINANZE
14. Article 95 is therefore applicable here in
any event. In the light of the information
available, the products would appear to be
similar within the meaning of the first para­
graph of Article 95. In case of doubt, it is for
the national court to make a product classi­
fication.
15. It must be stated, however, that
Article 95 is applicable in any case and that
the remainder of this examination will relate
to the level of taxation on the various prod­
ucts.
II. The individual taxation procedures
1. The different basis of assessment
16. As can be seen from the order for refer­
ence, the national court casts doubt on the
compatibility of the Italian consumption tax
with Community law on several grounds. It
refers first to the different basis of assess­
ment for domestic and imported products. In
the case of goods produced in Italy, this is the
ex-works price of the product plus the cost
of preparation and packaging. Transport and
marketing costs within Italy are not
included. This means that for such products
manufactured and marketed in Italy, abso­
lutely no transport and marketing costs are
taken into account when determining the
taxable amount.
17. According to the national court, the
basis of assessment for imported products
from other Member States is the value of the
goods at the Italian frontier, determined on
the basis of the valuation for customs pur­
poses within the meaning of Regulation
No 1224/80, 1 1plus any costs and charges for
customs presentation at the Italian frontier.
Hence transport and marketing costs up to
the Italian frontier form part of the taxable
value. In addition, the cost of release into
free circulation in the Community must be
taken into consideration, although this has
no relevance here as Article 95 does not
apply to goods imported direct from non-
member countries. The only deductions that
can be made from the value so determined
are in respect of the price components relat­
ing to transport and marketing costs in Italy.
Any components representing costs incurred
before the frontier cannot be deducted. 12
This means that for imported goods the tax­
able amount is the price at the frontier,
including transport and marketing costs up
11 — Under the first paragraph of Article 3 of Regulation
No 1224/80, the customs value of imported goods is the
price actually paid or payable for the goods when sold for
export to the customs territory of the Community. Under
paragraph 1(e) of Article 8, the cost of transport and insur­
ance of the imported goods to the place of their introduc­
tion into the customs territory of the Community, among
other costs, is to be added to that price.
12 — The Commission points out that in such a case the trans­
port costs are counted twice, since Article 8 of the regu­
lation expressly states that they are to be added to the price.
I - 3781
OPINION OF MR LENZ — CASE C-68/96
to the Italian border, less price components
representing transport and marketing costs
in Italy.
18. The Commission has given an example
to show what this means in practice: an Ital­
ian manufacturer who delivers a consign­
ment of television sets from Rome to Bol­
zano can deduct the entire transport costs
from the taxable amount. A German pro­
ducer who has delivered a consignment of
television sets of the same value to the same
customers in Bolzano from Essen or Lübeck,
for example, can deduct from the taxable
amount only the transport costs incurred
within Italy, that is to say for the leg from
the Brenner Pass to Bolzano, a distance of 75
kilometres. As the transport costs as far as
the Italian border are included in the calcula­
tion, the customs value of a product of equal
value used for determining the taxable
amount and hence the tax is correspondingly
higher than the value used for Italian prod­
ucts, namely the ex-works value. The basis
of assessment for imported goods is there­
fore higher than it is for domestic goods,
leading to higher taxation on the former,
despite the tax rate being the same. In the
opinion of all the parties to the proceedings
with the exception of the Italian Govern­
ment, this constitutes discrimination prohib­
ited by Article 95.
19. The Italian authorities dispute the exist­
ence of such discrimination. They contend
that all goods — whether imported or manu­
factured in Italy — are accorded equal treat­
ment. In both cases, they point out, the
transport and marketing costs incurred in
Italy are deducted from the taxable amount.
They emphasise again in particular that in
their view there is no difference between the
wording used for imported goods ('price
components paid or to be paid in respect of
carriage and marketing within national cus­
toms territory') and the 'costs of dispatch,
distribution, intermediate costs and all other
expenditure relating to release for consump­
tion on the national market', which can be
deducted from the price of Italian goods. On
that basis, they contend, there is complete
equality of treatment between imported and
domestic products. In their view, the claim
that in the case of imported goods the costs
incurred up to the Italian border should also
be deducted is entirely without foundation.
They justify their stance on the grounds that
the tax at issue is an internal consumption
tax, the levying of which requires that the
product be intended for consumption. As it
is an internal tax, the conditions to be met
for its application can stem only from facts
relating to the national tax system, that is to
say primarily the intended use of a product
for consumption on the domestic market. In
the case of a product manufactured in Italy,
it can be assumed, according to the Italian
Government, that the product is released for
consumption on the Italian market when it
leaves the factory. In the case of imported
goods, this occurs at the time of importation
at the Italian frontier.
20. According to the Italian Government,
the application of the tax also demonstrates
that the essential prerequisite for liability to
the tax is that the products be intended for
I - 3782
GRUNDIG ITALIANA v MINISTERO DELLE FINANZE
consumption on the Italian market. Accord­
ingly, goods in transit and goods intended
for export are exempt from the tax.
21. As it is an internal consumption tax on
products for consumption on the Italian
market, the value of the product at the
moment at which it is made available to the
Italian consumer is, according to the Italian
Government, the deciding factor. In the case
of imported goods, this is the value free at
frontier (including transport costs incurred
up to the frontier), which, in the view of the
Italian Government, is the value at which the
product comes on to the Italian domestic
market, and hence it is also the value used as
the basis of assessment. Domestic products
come on to the Italian market at their
ex-works value, for which reason here too
the packaging and preparation costs are
included.
22. In the opinion of the Italian Govern­
ment, such an approach is compatible with
Community law, as different national tax
systems continue to exist that have not yet
been harmonised. For that reason, it con­
tends, a system of internal taxation, includ­
ing a consumption tax, is lawful. According
to Italy, there are no provisions of Commu­
nity law that require Member States to disre­
gard certain price components when deter­
mining the value of imported goods on the
sole ground that domestic products do not
bear corresponding costs, for objective eco­
nomic reasons. By way of example, the Italian
Government compares a product from Italy
with one from Japan in free circulation in
Portugal. According to the Italian Govern­
ment, it is obvious that the additional costs,
which affect the customs value, are far higher
in the case of the Japanese product than in
that of the product from Italy. It contends
that this is an elementary economic fact and
certainly not the result of discrimination on
the part of the importing country.
23. As far as the latter example is concerned,
it cannot be denied that the transport costs
for a product from Japan may be higher than
those for a product manufactured in the
country in which it is to be sold. It does not
necessarily follow, however, that this elemen­
tary economic fact may be used as a basis for
higher taxation.
24. As I have already stated, imported prod­
ucts are subject to higher taxation than
domestic products because of their higher
taxable value. This is not contested by Italy
either. Indeed, the Italian Government con­
siders that it must be accepted that imported
products have a higher price than domestic
products when they cross the frontier
because of the transport costs that have
already been incurred. On the basis of that
difference in price, the taxable amount is
then determined equally for domestic and
imported products — according to the
I - 3783
OPINION OF MR LENZ — CASE C-68/96
Italian Government — less transport and
marketing costs incurred in Italy.
25. But this too can lead to higher taxation
on imported products which is prohibited
under Article 95 of the Treaty. In accordance
with consistent case-law of the Court, it is
necessary, for the purposes of the application
of the prohibition on discrimination laid
down in Article 95, to take into consider­
ation the provisions relating to the basis of
assessment and the detailed rules for levying
the various duties in addition to the rate of
tax. In that regard, the decisive criterion of
comparison is the actual effect of each tax on
domestic production, on the one hand, and
on imported products on the other. Even
where the rate of tax is the same, the effect of
that tax may vary according to the detailed
rules governing the basis of assessment and
collection applied to domestic production
and imported products respectively. 13 The
provisions of Article 95 give a Member State
the option of applying to the imported prod­
uct a system of taxation different from that
to which the similar domestic product is
subject, but only if the charge to tax on the
imported product remains at all times the
same as or lower than the charge applicable
to the similar domestic product. As the
Court has held, the first paragraph of Article
95 would be infringed 'if the tax on the
imported product and that applied to the
similar domestic product were calculated in a
different way and in accordance with differ­
ent rules, leading, even if only in certain
cases, to lower taxation of the domestic
product'. 14
(a) Different initial value
26. Such a difference in taxation, in other
words higher taxation for imported prod­
ucts, stems in the present case from the fact
that, even on the assumption that the scope
for deducting costs is truly the same, the
Italian rules are based on different initial val­
ues. The taxable amount is different if the
calculation — even be it the same — is based
on a different initial value. That is true of the
Italian rules in the present case in that it adds
to the actual value of the imported product
at the Italian frontier the transport and mar­
keting costs incurred up to the frontier. In
accordance with the case-law of the Court in
the Iannelli case, 15 this infringes Article 95.
That case related to levies charged on home-
produced wallpaper and imported wallpaper.
In the case of domestic products, the basis of
assessment was the price of paper regarded
solely as a raw material, whilst the basis for
the imposition of the levy upon the corre­
sponding imported product was derived
from its overall value. The overall value was
to be understood as the cost of the finished
product shown on the invoice (composed
13 — Case 55/79 Commission v Ireland [1980] ECR 481, para­
graph 8 and the references it contains.
14 — Case 127/75 Bobie v Hauptzollamt Aachen-Nord [1976]
ECR 1079, paragraph 3.
15 — Case 74/76 Iannelli v Meroni [1977] ECR 557.
I - 3784
GRUNDIG ITALIANA v MINISTERO DELLE FINANZE
therefore of the cost of the original raw
material together with the value added),
increased by the expenses of loading, ship­
ping, commission, insurance, transport and
so on as far as the frontier, even if those
expenses were not included in whole or in
part in the seller's invoice. The Court again
stated that in order to apply Article 95, the
basis of assessment and detailed rules for
levying the tax must also be taken into con­
sideration. As soon as any differences in that
respect result in the imported product being
taxed at the same stage of production or
marketing at a higher rate than the similar
domestic product, the prohibition in Article
95 is infringed. According to the Court, this
would happen 'if a tax is assessed on the
value of a product and in the case of the
imported product factors for assessment are
taken into consideration which are likely to
increase the value of the imported product
vis-à-vis the corresponding domestic prod­
uct'. 16
27. The Italian consumption tax at issue in
the present case is also a tax assessed on the
value of a product. It therefore infringes
Article 95 if the value of the imported prod­
ucts is higher than that of domestic products
because transport costs as far as the frontier
form part of the taxable amount. 17
28. As regards Italy's contention that the
disputed consumption tax is legitimate as it
is part of the domestic tax system which has
not hitherto been harmonised, the Court has
held that obstacles to the free movement of
goods may be eliminated by applying the
procedure for the harmonisation of tax legis­
lation, but the harmonisation of the provi­
sions relating thereto cannot be laid down as
a condition for the application of Article 95,
which imposes on Member States with
immediate effect the duty to apply their tax
legislation without discrimination even
before there is any harmonisation. 18
29. The Commission cites in this connection
the case-law of the Court regarding Regu­
lation No 1408/71 and direct taxation. In the
area of direct taxation, for example, in the
absence of more specific Community rules,
reliance has been placed on the general prin­
ciples of Community law in order to prevent
discriminatory taxation. This comparison
confirms the conclusion reached earlier that
prior harmonisation is not a precondition for
the application of directly applicable provi­
sions of the Treaty. Recourse to the general
provisions on discrimination is unnecessary
in the present case, however, as the Treaty
contains a specific provision on that point,
namely Article 95.
16 — Case 74/76, cited above (footnote 15), paragraphs 20 and
21.
17 — In this connection, attention is again drawn to the example
of television sets imported into or transported within Italy;
see point 18 above. 18 — Case 55/79, cited above (footnote 13), paragraph 12.
I - 3785
OPINION OF MR LENZ — CASE C-68/96
30. Accordingly, it must be held that the
Italian legislation on the consumption tax
infringes Article 95 in so far as it bases the
calculation of the taxable amount on a differ­
ent, higher value. Such higher taxation is
likely to hinder the free movement of goods
between Member States.
(b) Other aspects
31. Although a breach of Article 95 has
already been established, therefore, I would
like to consider the other aspects raised by
the parties to the proceedings. They lead me
to conclude that even the Italian Govern­
ment's claim that all products are treated
equally as regards the deduction of costs
within Italy does not stand up to scrutiny. In
this connection, the plaintiff and the Com­
mission point out that a common market
now exists, especially in the audiovisual and
photo-optical field. In their view, this means
that undertakings sell their products in sev­
eral Member States. In order to do so, they
attempt to centralise their distribution sys­
tem, with the result that transport costs are
incurred at only one place, usually the loca­
tion of the parent company. The parties con­
tend that the same applies to marketing
costs. After-sales service networks are cen­
tralised in order to provide a uniform guar­
antee in all Member States, which, as the
plaintiff observes, is required by the Com­
munity rules.
32. Advertising costs must also be counted
among these various marketing costs. Conse­
quently, they too are paid centrally at one
place, namely the head office of the parent
company. If that office is located outside
Italy, under the Italian arrangements no
transport or marketing costs at all can be
deducted from the taxable amount.
33. In the view of the Commission, Italy has
regulated this tax as though the common
market did not exist and as though it could
be assumed that the transport and marketing
costs incurred with respect to Italy could be
determined precisely and were also to be
defrayed in Italy itself, for the Italian Gov­
ernment stated in the oral procedure that in
the case of imported goods only costs arising
and paid in Italy itself can be deducted.
34. For the sake of clarity, I refer once again
to the example given in the oral procedure.
Grundig, among other companies, advertises
its products at an important football match
involving an Italian team, which is played in
Germany and broadcast in many Member
I - 3786
GRUNDIG ITALIANA v MINISTERO DELLE FINANZE
States, including Italy. According to the Ital­
ian Government, the cost of such advertising
cannot be deducted from the taxable amount
because it was incurred in Germany and was
paid there. Nothing would change even if the
cost relating to Italy could be established
precisely. Even if at that football match
Grundig specifically advertises a product
that it wishes to sell exclusively in Italy,
those costs cannot be deducted from the tax­
able amount.
35. It is therefore quite possible to conceive
of instances in which none of the transport
and marketing costs relating to sales in Italy
can be deducted in full. The fact that this
may not hold true in all cases is immaterial
since, in accordance with the case-law of the
Court, Article 95 is infringed if higher taxa­
tion is imposed in some cases.19
36. Hence, from that point of view it would
no longer be possible to deduct any trans­
port and marketing costs for imported
goods, either because they could no longer
be quantified owing to the centralisation of
costs or because they were no longer
incurred or paid in Italy itself. The basis for
assessing the consumption tax would there­
fore be the customs value including costs as
far as the frontier without any deduction.
Even if costs have been centralised and can
therefore no longer be shown individually
for each Member State, this does not mean
that they are not included in the price in
some form or other. The customs value at
the frontier is thus higher than the net value
of the product, but the transport and mar­
keting costs incurred cannot be deducted. In
this case the inequality of treatment is even
more pronounced, as not only is a higher ini­
tial value used to calculate the taxable
amount but it is also no longer possible to
deduct any costs.
37. The inequality of treatment becomes
even greater if, going a stage further, it is
assumed that Italian manufacturers have also
centralised their sales and marketing costs
and that — as the Italian Government stated
at the hearing — in the event of distribution
and marketing systems having been centra­
lised, the costs can be deducted in the coun­
try in which they have been incurred. This
would mean that an Italian manufacturer
could deduct not just the costs relating to
Italy but also the costs incurred in Italy, in
other words a large part of the costs of the
entire distribution and marketing system,
whereas in the case of imported goods such
costs can no longer be deducted.19 — Case 45/75, cited above (footnote 9), paragraph 15.
I - 3787
OPINION OF MR LENZ — CASE C-68/96
38. The plaintiff and the Commission refer
to another circumstance that can give rise to
discrimination against imported products. In
their opinion, it is not possible to deduct
transport and marketing costs relating to
Italy — even if they can be quantified —
because only the price components relating
to such costs can be deducted. In the view of
the plaintiff and the Commission, this means
in practice that those price components have
to be shown separately on the invoice. As in
practice this is neither usual nor possible,
since only an overall price is ever stated, for
that reason too it would be impossible to
deduct transport and marketing costs for
imported products.
39. In my view, it does not appear from the
documents that separate invoicing is really
required. According to the Italian Govern­
ment, costs are deducted on the basis of the
customs declaration made at the frontier.
From this the conclusion could be drawn
that in order to claim the deduction it is suf­
ficient for costs to be broken down accord­
ingly on the customs declaration, always on
the assumption of course that a breakdown
of costs is possible. Further clarification of
this issue is a matter for the national court,
which has the necessary information. Even if
separate invoicing were necessary, however, I
see no reason why such a breakdown could
not be made on the invoice form. (The ques­
tion whether such a breakdown is still pos­
sible, given centralization, has already been
discussed). 20
40. The Commission and the plaintiff cite
yet another reason why no costs can be
deducted in the case of imported products.
They point out that, contrary to the situation
for domestic goods, no quarterly return is
submitted for imported goods. From this
they conclude that in the case of imported
goods no return can be made in which the
costs to be deducted can be declared. The
Italian Government disputes this, pointing
out that all costs to be deducted can be
entered in the customs declaration.
41. I see no reason why the deduction of
certain costs for imported goods should be
impossible merely because only a customs
declaration and no quarterly tax return is to
be submitted for such goods. As the customs
declaration serves to determine the customs
value, which may include transport costs, a
breakdown of costs has to be made in any
case. Since the calculated value thus consti­
tutes the taxable value, no further calcula­
tions are necessary. However, this question
too must ultimately be decided by the
national court, which has more precise infor­
mation on the content of the customs decla­
ration. Should it transpire that the costs to be
deducted cannot be shown on the customs
declaration, Article 95 would have been
infringed in that respect as well.20 — See points 31 to 34 above.
I - 3788
GRUNDIG ITALIANA v MINISTERO DELLE FINANZE
42. There is therefore discrimination against
imported goods not only on account of the
different values used to calculate the taxable
amount but also because of the differing
extent to which transport and marketing
costs relating to Italy can be deducted from
those values.
43. As regards the increase in the value on
which the tax is levied to include transport
costs up to the Italian frontier, Italy has also
submitted that this is based on the Commu­
nity's regulation on the valuation of goods
for customs purposes and for that reason can­
not infringe Community law. It must be said
in that connection that the regulation in
question is designed to govern trade with
non-member countries. 21 Calculation of the
customs value including transport costs up
to the frontier cannot contravene Article 95
in the case of imports from non-member
countries, as Article 95 does not apply in this
instance. This does not mean, however, that
if the provisions of that regulation are trans­
posed to a completely different case —
namely the importation of goods from other
Member States — such an increase in the
basis of assessment is not in breach of the
prohibition on discrimination laid down in
Article 95.
44. Finally, the Italian Government cites my
Opinion in the OTO case as evidence that
inequality of treatment between imported
and domestic products does not exist. It
refers in that regard to the observation that
there are no grounds for concluding that
goods from other Member States (whether
manufactured there or released into free cir­
culation) are treated less advantageously than
products manufactured in Italy. 22 As the rel­
evant footnote clearly indicates, that state­
ment relates to a previous paragraph in the
Opinion dealing with the interpretation of
the wording of the question referred in that
case, which involved imports from non-
member countries. The observation referred
to by the Italian Government should there­
fore be understood to mean that the question
submitted by the national court gave no
grounds for concluding that there was dis­
crimination against products manufactured
within the Community and that the question
therefore did not need to be examined.
2. Possibility of making a flat-rate deduction
in respect of products manufactured in Italy
45. In the opinion of the national court, fur­
ther discrimination may result from the fact
21 — Articles l(l)(g) and 3(1) of Council Regulation (EEC)
No 1224/80.
22 — Opinion in Case C-130/92 OTO v Ministero dell Finanze
[1994] ECR I-3281, paragraph 15.
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OPINION OF MR LENZ — CASE C-68/96
that the option of calculating the taxable
amount on a flat-rate basis is available only
for domestic products.
46. The Italian Government disputes the
existence of such discrimination. It maintains
that the purpose of the facility to make a
flat-rate deduction is not to reduce the tax­
able amount. The flat-rate amount of 35% is
deducted not from the ex-works value of the
product but from the selling price, on the
assumption that 35% reflects the impact of
transport and marketing costs within Italy
on the price of the product. The Italian Gov­
ernment points out that those costs can also
be deducted from the taxable amount for
imported goods. It also observes that it is
possible to adjust the amount of the flat-rate
deduction to suit general economic condi­
tions or to products for which the impact of
the said costs on the price does not corre­
spond to 35%. In addition, it points out that
the price of the product declared by the
manufacturer, from which the flat-rate
deduction is made, must correspond to the
normal value of the goods defined in accord­
ance with Italian legislation. The competent
authorities verify whether that is the case.
The Italian Government concedes that if a
manufacturer opts to make a flat-rate deduc­
tion his figures must initially be treated as
correct, but this does not mean that the
authorities are tied to the extent that they
can no longer verify them.
47. For that reason, in the view of the Italian
Government, the flat-rate deduction is only
an alternative to the calculation of the tax­
able amount. It does not alter the costs
deducted, hence the taxable amount does not
change either. That is why the possibility of
making a flat-rate deduction does not, in the
view of the Italian authorities, give domestic
manufacturers an advantage. Accordingly,
imported goods are not placed at a disadvan­
tage either.
48. The Italian Government does not dis­
pute the fact that the taxable amount can be
calculated far more rapidly and easily for
domestic products on the basis of the flat-
rate deduction. It considers, however, that
this merely restores comparability between
domestic and imported products, and that
without the possibility of making a flat-rate
deduction it is far more difficult to calculate
the taxable amount for domestic products
than for imported ones.
49. The Italian Government maintains that
in the case of imported products all that is
required is to determine the customs value in
accordance with Regulation No 1224/80, a
value that can be established formally and
objectively. The taxable values derive from
the same formalities as are required for the
customs declaration. According to the Italian
Government, the ex-works value of domestic
products is much more difficult to deter­
mine. Accounting and tax documents
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GRUNDIG ITALIANA v MINISTERO DELLE FINANZE
(e. g. invoices, which include all incurred
costs in the price, without specifying them)
cannot be used directly for this purpose.
Whereas the importer does not need to sub­
mit more forms and declarations than for the
normal border crossing, in order to deter­
mine the taxable amount of domestic prod­
ucts additional documents and evidence must
be produced for the return.
50. In my view, that reasoning cannot be
fully endorsed. For imported goods as well,
it is not sufficient to state the value free at
frontier. On the contrary, in that case too,
the transport and marketing costs incurred in
the Italian market must be quantified pre­
cisely in order to be capable of deduction. It
is therefore difficult to see why those costs
should be easier to determine for imported
goods than for domestic products, all the
more so as in the case of imported goods
transport and marketing costs are incurred
both up to the frontier and within Italy.
Unlike the domestic manufacturer, therefore,
the importer may also have to break down
the costs according to the territory in which
they are incurred. It is far from clear why the
importer requires fewer documents and less
evidence for this than the domestic producer,
unless the deduction of such costs is entirely
prohibited for importers, which would
undeniably constitute discrimination within
the meaning of Article 95.
51. For that reason, the possibility of mak­
ing a flat-rate deduction cannot be deemed
to place the different circumstances of
importers and domestic producers on an
equal footing. Indeed, the latter are in a com­
parable position. The flat-rate calculation of
the taxable amount does in any event sim­
plify the calculation. Contrary to the conten­
tion of the Italian Government, there is no
objective reason why that facility should not
be extended to imported products as well.
52. The Italian Government contends, how­
ever, that the possibility of making a flat-rate
deduction constitutes merely a formal sim­
plification which gives rise to no higher bur­
den of taxation on imported goods.
53. The Court has consistently held that the
first paragraph of Article 95 prohibits the
levying of a tax on a product imported from
another Member State in accordance with
different methods of calculation or rules —
for example a flat-rate amount in one case
and a graduated amount in the other — lead­
ing, even if only in certain cases, to higher
taxation of the imported product. 23 In the
view of the Commission, such unequal treat­
ment of imported products amounts to 35%.
The flat-rate calculation, which is permitted
only for domestic products, is the only way
of deducting marketing and transport costs
23 — Case 127/75, cited above (footnote 14), paragraph 4, and
Case 45/75, cited above (footnote 9), paragraph 15.
I - 3791
OPINION OF MR LENZ — CASE C-68/96
incurred within Italy. In that regard, the
Commission reiterates its assertion that there
is discrimination on the basis of different
taxable amounts. It maintains that the price
components relating to transport and mar­
keting costs incurred in Italy cannot be
deducted as they are not stated separately on
the invoice, which shows a single price.
Moreover, the Commission argues, there is
no known procedure whereby importers can
declare and deduct those costs. Finally, it
restates the view that, because of centralisa­
tion, it is not possible to break down the
price either according to particular types of
cost or according to the particular Member
States in which those costs arise. Such a
demand on the part of the Italian Govern­
ment is, in the Commission's opinion, noth­
ing short of 'diabolical'. Thus, the Commis­
sion contends, it can be assumed that
marketing and transport costs within Italy
cannot be quantified and hence deducted
unless the possibility of a flat-rate deduction
is provided for. Since that option is available
only to domestic producers, however, and at
a rate of 35%, the Commission maintains
that the tax on imported goods is 35%
higher as there is no possibility of such a
flat-rate deduction in the case of such goods.
54. It is doubtful whether it can really be
argued that no costs at all can be deducted
by means of the 'normal method'. If neces­
sary, this is a matter for the national court to
decide. Moreover, when calculating the price,
each undertaking must determine the extent
to which the price includes transport and
marketing costs. Those amounts should also
be evident from accounting documents.
Whether such figures are sufficiently precise,
however, and hence meet the requirements
for allowing the deduction of such costs, is
questionable, particularly since in the age of
centralised distribution networks it could be
extremely difficult to quantify precisely the
costs incurred in Italy.
55. Given those circumstances, the possibil­
ity cannot at any rate be ruled out that
undertakings from other Member States may
not be able to quantify their costs with suf­
ficient precision and hence deduct them in
full. The Italian Government itself has stated
how difficult it is for Italian producers to
quantify deductible costs using the 'normal
method'. Since, as I have already said, there
is no difference in relation to imported prod­
ucts in that regard, it may in certain cases be
more difficult, if not impossible, for foreign
manufacturers to deduct their transport and
marketing costs incurred in Italy. That in
itself is sufficient for a finding of discrimi­
nation under Article 95. It is therefore not
merely a question of the convenience of
undertakings from other Member States, as
the Italian Government maintains. Even if
such undertakings found a way of deducting
their costs, it would undoubtedly entail far
greater effort — and financial expense —
than for domestic producers. Even in that
I - 3792
GRUNDIG ITALIANA v MINISTERO DELLE FINANZE
case, however, there would still be a risk of
imported products being treated less favour­
ably. That risk can be excluded only if the
possibility of making a flat-rate deduction is
also extended to imported goods. Since, as I
have already stated, the situation is the same
for both imported and domestic products,
there is no evident impediment to granting
such a concession.
56. Finally, the Italian Government asserts
that the possibility of making a flat-rate
deduction places domestic producers at a
disadvantage, as the possibility of opting for
simplified calculation always has its counter­
part in slightly higher taxation for those ben­
efiting from it. However, that too is not an
obstacle to extending the flat-rate arrange­
ment to imported goods. The possibility of
flat-rate calculation could be allowed for
imported goods on exactly the same terms as
for domestic products. The fact that it may
entail slightly higher taxation does not con­
stitute unequal treatment of imported goods
and hence discrimination.
57. Finally, the EFTA Surveillance Autho­
rity points to a further possibility of
unequal treatment of imported products
under the flat-rate calculation procedure. It
states that domestic products could enjoy
more advantageous treatment by virtue of
the fact that in the case of a product on
which the profit margin is less than 35%, it
is nevertheless possible to deduct 35% of the
normal value. In that way, the producer
could reduce the taxable amount of the
product below the value that would be
regarded as the basis of assessment for tax if
the 'normal method of calculation' were
used.
58. I cannot entirely accept that calculation,
inasmuch as the flat-rate deduction of 35%
should correspond not to the profit margin
but to the price component relating to trans­
port and marketing costs in Italy. The situa­
tion might be different if the observations of
the EFTA Surveillance Authority related to
those costs.
59. In conclusion, it should nevertheless be
held that the Italian legislation governing the
consumption tax is in breach of Article 95 in
so far as it does not provide for the possibil­
ity of making a flat-rate deduction in respect
of imported goods.
3. Differences in the procedures for collect­
ing the tax
60. The national court also expresses doubts
as to the compatibility of the tax with
Article 95 of the EC Treaty because of the
different procedures for its collection. In the
case of imported goods, the obligation to pay
the tax arises at the time of importation of
the goods at the customs frontier. That is
also when the tax becomes due and must be
I - 3793
OPINION OF MR LENZ — CASE C-68/96
paid by the importer. The situation is differ­
ent for domestic products. Here the tax obli­
gation arises when the product is released on
to the Italian market for consumption, but
the tax does not become payable until later,
that is to say when the domestic producer
has to submit the tax return to the tax
authorities, which he must do every quarter
during the month following the end of the
quarter. This means that the tax becomes due
and thus has to be paid up to four months
after the release of the goods for consump­
tion.
61. In the opinion of the Commission, the
plaintiff and the EFTA Surveillance Autho­
rity, that constitutes further discrimination
against imported goods, which is prohibited
under Article 95 of the Treaty. They cite in
this regard the case-law of the Court,
according to which the effect of a tax may
vary according to the detailed rules for levy­
ing the tax applied to domestic products and
imported products respectively. 24 Such dif­
ferences in the rules for levying a tax exist
where facilities for deferred payment are
granted for domestic products but denied for
imported products. In that case Article 95 is
infringed even if the benefit of that deferred
payment facility is small. 25
62. In the present case as well, payment of
the consumption tax is deferred by up to
four months for domestic products. If
account is also taken of the substantial sums
claimed by the plaintiff in the main proceed­
ings, the benefit in favour of domestic prod­
ucts can no longer be described as small.
Article 95 has therefore been infringed.
63. The Italian Government defends this
method of tax collection on the ground that
effective tax control would otherwise be
impossible. It states that in the case of
imported products, an entire consignment is
cleared for customs at the frontier and simul­
taneously taxed. The situation is different for
domestic products, which are marketed item
by item. In its view, effective tax control can­
not be exercised item by item. For that rea­
son, the situation has to be harmonised with
that for imported products. That is achieved
by accumulating during a given period the
instances in which a producer releases a
product on to the market and thus becomes
liable to tax. A collective tax return is then
submitted for that set of instances, which can
then be verified by the tax authorities.
64. In that way, the Italian Government
explains why it is necessary for domestic
producers to submit a tax return not for each
product but for a specified period. It has not,
however, successfully explained why the
related possibility of deferring payment is
not granted for imported goods. In that case,
an infringement of Article 95 can be avoided
24 — Case 55/79, cited above (footnote 13), paragraph 8.
25 — Case 55/79, cited above (footnote 13), paragraph 9.
I - 3794
GRUNDIG ITALIANA v MINISTERO DELLE FINANZE
only by granting the deferred payment facil­
ity for imported goods as well. However, it
is doubtful whether the existing possibility
of paying the tax, upon request, up to 30
days after importation is sufficient. That is a
question that must be decided by the
national court, which must also examine
whether the need to make such a request
constitutes an obstacle for imported prod­
ucts.
65. The objective must be to prevent
imported products from being treated less
favourably than domestic products.
66. The Italian Government has requested
the Court, should it find that the differences
in the procedures for collecting the tax con­
stitute discrimination, to lay down criteria
for calculating the heavier taxation of foreign
products in such a case. It is not, however,
the function of the Court to resolve the dis­
pute in the national proceedings. It can only
provide the national court with criteria for
interpreting Community law. The precise
calculation of the sum to be paid to the
plaintiff must be left to the national court.
Equally, it is for the national court to decide
within the framework of its own legal sys­
tem whether internal taxation which is dis­
criminatory within the meaning of Article 95
is to be regarded as not payable in its
entirety or only in so far as it exceeds the tax
assessed on the domestic product. 26
67. It should therefore be held that
Article 95 of the EC Treaty is to be inter­
preted as meaning that a consumption tax
such as that in dispute, which lays down dif­
ferent taxable amounts and different collec­
tion procedures for domestic products and
those imported from other Member States
and allows the possibility of making a flat-
rate deduction only for domestic products, is
in breach of that article.
C — Conclusion
68. I therefore propose that the Court give the following answer to the question
submitted by the national court:
Article 95 of the EC Treaty must be interpreted as prohibiting a Member State
from introducing and collecting a national consumption tax of the kind provided
26 — Case 74/76, cited above (footnote 15), paragraph 22.
I - 3795
OPINION OF MR LENZ — CASE C-68/96
for by Article 4 of the Decree Law of 30 December 1982, converted into law by
Law No 53 of 28 February 1983, and further governed by the Decree of the Min­
istry of Finance of 23 March 1983, in so far as different taxable amounts are deter­
mined for domestic products and for products imported from other Member
States, different procedures are laid down for collection of the tax and the possibil­
ity of making a flat-rate deduction for calculating the taxable amount is reserved
for domestic products.
I - 3796