19.

In the Schumacker case, previously cited, the Court considered a number of questions referred to it for a preliminary ruling as to whether national provisions, under which taxable persons were treated differently according to whether they were resident in the Member State in question, might be regarded as compatible with Article 48 of the Treaty. The situation in that case was that the Belgian national Roland Schumacker lived in Belgium but was in paid employment in the Federal Republic of Germany. His wife also lived in Belgium where, however, she had no income. In these circumstances Mr Schumacker requested the German tax authorities to calculate the taxes deducted at source from his earnings in accordance inter alia with the ‘splitting’ system, but the request was refused on the ground that his wife did not reside in Germany. In its judgment the Court of Justice first considered the question of whether the prohibition of discrimination in Article 48 of the Treaty was applicable also to national provisions of tax law and declared that: ‘Article 48 of the Treaty must be interpreted as being capable of limiting the right of a Member State to lay down conditions concerning the liability to taxation of a national of another Member State and the manner in which tax is to be levied on the income received by him within its territory, since that article does not allow a Member State, as regards the collection of direct taxes, to treat a national of another Member State employed in the territory of the first State in the exercise of his right of freedom of movement less favourably than one of its own nationals in the same situation’ (paragraph 24). The Court then considered when discrimination existed and declared that: ‘The Court has consistently held that the rules regarding equal treatment forbid not only overt discrimination by reason of nationality but also all covert forms of discrimination which, by the application of other criteria of differentiation, lead in fact to the same result’ (paragraph 26), and that: ‘It is ... settled law that discrimination can arise only through the application of different rules to comparable situations or the application of the same rule to different situations’ (paragraph 30). With regard to the question whether there was discrimination in a situation such as that described, the Court replied: ‘In the case of a nonresident who receives the major part of his income and almost all his family income in a Member State other than that of his residence, discrimination arises from the fact that his personal and family circumstances are taken into account neither in the State of residence nor in the State of employment’ (paragraph 38). The Court did not find that that discriminatory treatment could be justified with a view to ensuring the cohesion of the applicable tax system: ‘In a situation such as that in the main proceedings, the State of residence cannot take account of the taxpayer's personal and family circumstances because the tax payable there is insufficient to enable it to do so. Where that is the case, the Community principle of equal treatment requires that, in the State of employment, the personal and family circumstances of a foreign nonresident be taken into account in the same way as those of resident nationals and that the same tax benefits should be granted to him’ (paragraph 41). The Court further took the view that the discriminatory treatment could not be justified by administrative difficulties on the part of the State of employment in obtaining information with regard to the income which a nonresident was receiving in his State of residence: ‘Council Directive 77/799/EEC ... concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation ... provides for ways of obtaining information comparable to those existing between tax authorities at national level’ (paragraph 45). On those grounds the Court decided: ‘Article 48 of the Treaty must be interpreted as precluding the application of rules of a Member State under which a worker who is a national of, and resides in, another Member State and is employed in the first State is taxed more heavily than a worker who resides in the first State and performs the same work there when, as in the main action, the national of the second State obtains his income entirely or almost exclusively from the work performed in the first State and does not receive in the second State sufficient income to be subject to taxation there in a manner enabling his personal and family circumstances to be taken into account.’