Keywords

Summary



Keywords

1 Tax provisions - Internal taxation - Excise duty on electricity - System of taxation applying rates varying according to the method of production to electricity of domestic origin and a flat rate to imported electricity - Classified as internal taxation and not as a charge having equivalent effect to a customs duty

(EC Treaty, Arts 9, 12 and 95)

2 Tax provisions - Internal taxation - Differentiated system of taxation - Permissible - Conditions - Differentiated system of taxation on electricity - Rate applicable varying according to the method of production - Differentiation based on considerations of protection of the environment - Permissible

(EC Treaty, Art. 95)

3 Tax provisions - Internal taxation - Excise duty on electricity - System of taxation applying rates varying according to the method of production to electricity of domestic origin and a flat rate to imported electricity - Not permissible

(EC Treaty, Art. 95)

Summary

4 An excise duty which is charged on electricity of domestic origin at rates which vary according to its method of production, while being levied on imported electricity at a flat rate which is higher than the lowest rate but lower than the highest rate applicable to electricity of domestic origin, constitutes internal taxation within the meaning of Article 95 of the Treaty, not a charge having equivalent effect to a customs duty within the meaning of Articles 9 and 12, where it forms part of a general system of taxation which is levied not only on electrical energy as such but also on several primary energy sources, and where both imported electricity and electricity of domestic origin form part of the same tax system and the duty is levied by the same authorities under the same procedures, whatever the origin of the electricity.

The fact that imported electricity is taxed at the moment of import and electricity of domestic origin at the moment of production makes no difference for the classification of such a duty, since in view of the characteristics of electricity those two moments correspond to the same marketing stage, namely that when the electricity enters the national distribution network.

5 Community law does not, at its present stage of development, restrict the freedom of each Member State to establish a tax system which differentiates between certain products, even products which are similar within the meaning of the first paragraph of Article 95 of the Treaty, on the basis of objective criteria, such as the nature of the raw materials used or the production processes employed. Such differentiation is compatible with Community law, however, only if it pursues objectives which are themselves compatible with the requirements of the Treaty and its secondary legislation, and if the detailed rules are such as to avoid any form of discrimination, direct or indirect, against imports from other Member States or any form of protection of competing domestic products.

Article 95 of the Treaty therefore does not preclude the rate of an internal duty on electricity from varying according to the manner in which the electricity is produced and the raw materials used, in so far as that differentiation is based on environmental considerations. Protection of the environment constitutes one of the essential objectives of the Community. The Community's task includes the promotion of sustainable and non-inflationary growth respecting the environment and its activities include a policy in the sphere of the environment. Furthermore, compatibility with the environment of methods of producing electrical energy is an important objective of the Community's energy policy.

6 The first paragraph of Article 95 of the Treaty precludes an excise duty which forms part of a national system of taxation on sources of energy from being levied on electricity of domestic origin at rates which vary according to its method of production while being levied on imported electricity, whatever its method of production, at a flat rate which, although lower than the highest rate applicable to electricity of domestic origin, leads, if only in certain cases, to higher taxation being imposed on imported electricity.

Article 95 of the Treaty is infringed by a system of internal taxation where the taxation on the imported product and that on the similar domestic product are calculated in a different manner on the basis of different criteria which lead, if only in certain cases, to higher taxation being imposed on the imported product.

The fact that, because of the characteristics of electricity, it may prove extremely difficult to determine precisely the method of production of imported electricity and hence the primary energy sources used for its production cannot justify such a system of taxation, since practical difficulties cannot justify the application of internal taxation which discriminates against products from other Member States. Although in principle Article 95 of the Treaty does not require Member States to abolish objectively justified differences which national legislation establishes between internal taxes on domestic products, it is otherwise where such abolition is the only way of avoiding direct or indirect discrimination against the imported products.