OPINION OF MR ADVOCATE GENERAL REISCHL

DELIVERED ON 28 NOVEMBER 1979 ( 1 )

Mr. President,

Members of the Court,

This procedure for a declaration that a Member State has failed to fulfil its obligations under the Treaty is directed against the Irish system of taxation which provides with regard to the imposition of excise on spirits, beer and what is known as “made-wine”, in other words with regard to wine not made from grapes, a different method of payment, in spite of rates of tax which are formally the same, according to whether the products are homeproduced or imported. In detail, the Imposition of Duties No 221 (Excise Duties) Order, 1975, Statutory Instrument No 307, 1975, which, under Article 38 (2) of the Act concerning the Conditions of Accession and the Adjustments to the Treaties, was intended to replace the customs duty of a fiscal nature or the fiscal element of any such duty by an internal tax, contains the following rules with effect from 1 January 1976: under Paragraph 4 (3) (b) of the Order, where domestic spirits are delivered from a bonded warehouse, the Revenue Commissioners may, subject to compliance with such conditions for securing payment of duty as they may think fit to impose, permit payment of the said duties to be deferred to a day not later than:

“(i) in case the spirits are so delivered in the month of February in any year, the 25th day of March in the same year, or

(ii) in any other case, the last day of the month succeeding the month in which the spirits are so delivered”.

Under Paragraph 4 (3) (c) these rules do not apply to domestic spirits which are delivered from a bonded warehouse in the month of March. Paragraph 4 (4) of the Order then provides further that in the event of payment being deferred an additional excise duty of £0.033'4 per proof gallon of spirits shall be charged. In contrast to these rules there is however no deferment concession in the case of imported spirits.

Under Paragraph 6 of the Order excise duty on Irish-produced made-wine is charged on delivery for home consumption, but payment may be deferred until the 15th day of the month following delivery from the factory. No such deferment concession is however provided in the case of imported made-wine.

Paragraph 7 of the Order declares the provisions of Section 8 of the Finance Act 1914 (Session 2) applicable to beer brewed in Ireland; under those provisions the duty is calculated by reference to the specific gravity of the worts before fermentation. In this connexion provision is made for a deferment concession which depends upon how long the individual types of beer have to be stored in the brewery premises. Thus in the case of beer requiring two months' storage, payment may be deferred to a date not later than the 25th day of the second month following that in which the duty was charged. In the case of beer requiring three months' storage in the brewery premises, payment may be deferred to a date not later than the 25th day of the fourth month after the month in which the duty was charged and, finally, in the case of other beer, to a date not later than the eighth day of the second month following that in which the duty was charged. In the case of imported beer, on the other hand, the excise duty is payable as from the date of import or of delivery from the warehouse and there is no deferment concession.

The Commission drew the attention of the Irish Government several times to the fact that these rules constituted tax discrimination against beverages imported from other Member States in relation to domestic beverages, which was incompatible with the EEC Treaty, by granting a deferment of payment in respect of the excise duties on the latter whereas such deferment was not provided for in respect of the excise duties imposed on the imported beverages.

Since the Irish Government adopted the viewpoint in its reply at the time that the rules in question were compatible with the EEC Treaty, the Commission initiated a formal procedure by letter of 11 June 1976 in accordance with Article 169 of the EEC Treaty. It complained to the Irish Government that the system of taxation described was incompatible with the first paragraph of Article 95 of the EEC Treaty in so far as, by not granting a deferment of payment of the excise duty imposed on imported spirits, beer and made-wine, it in fact imposed higher taxation on those beverages than on similar domestic products. In the alternative the Commission claimed that the rules in question infringed Article 30 of the EEC Treaty which laid down a prohibition on quantitative restrictions on imports and measures having an equivalent effect. In its reply of 12 July 1976 the Irish Government informed the Commission that it would examine the legislation in question with a view to introducing any necessary amendments.

Since this was not done, the Commission delivered under Article 169 of the EEC Treaty a reasoned opinion to the Irish Government by letter of 28 April 1978 in which it found that there had been a breach of the first paragraph of Article 95 or at least of Article 30 of the EEC Treaty, and requested the Irish Government to take the measures necessary to comply with the reasoned opinion within one month. On the contrary, the Irish Government adhered in its reply of 31 July 1978 to its view that the rules complained of did not violate its obligations under the EEC Treaty. As a result, the Commission lodged an application to the Court of Justice, which was received at the Court on 9 April 1979, claiming that the Court should declare that Ireland was in breach of Article 95 or Article 30 of the EEC Treaty by failing to repeal or amend the disputed provisions and/or refrain from continuing the disputed practices with regard to the collection of excise duty on spirits, beer and made-wine. In addition it claimed that the Court should order the Goverment of Ireland to pay the costs of the proceedings. Ireland contends on the contrary that the Court should dismiss the application and order the Commission to pay the costs of the proceedings.

According to the application and the oral observations the Commission bases its application primarily on the first paragraph of Article 95 of the EEC Treaty and only claims in the alternative that there has been a breach of Article 30 of the EEC Treaty. It is therefore necessary first of all to deal with the question whether the Irish system of taxation described is in breach of the prohibition on discrimination laid down in the first paragraph of Article 95 of the EEC Treaty.

The present case differs from the procedures brought against the French Republic (Case 168/78), the Italian Republic (Case 169/78) and the Kingdom of Denmark (Case 171/78) for declarations that they have failed to fulfil their obligations under the Treaty, on which I gave my views just now, in that in those cases it was clear that a different tax burden was imposed on domestic and imported products and within the context of the examination of the first paragraph of Article 95 of the EEC Treaty the only important factor in addition was the similarity of the products in question. In the present case, on the other hand, it is not in dispute that an equal rate of tax applies both to imported beverages and to the corresponding domestic products. Accordingly it is necessary to consider whether the method of payment provided for by the Irish system of taxation comes within the scope of the first paragraph of Article 95 of the EEC Treaty at all, in spite of the rate of tax which is formally the same, whether, within the context, of the abovementioned provision, it may be justified by special circumstances and whether the deferment of payment provided for with regard to the taxation of domestic products in fact leads to tax discrimination against the identical imported products.

The Irish Government points out that the imported products and the national products were subject, on account of the rules in question, to the same rate of tax and the same conditions. The only difference was that as regards the method of payment a distinction could be made for a limited period in the case of the duty on the national products. According to the case-law of the Court of Justice however the decisive consideration as regards the application of Article 95 is whether internal taxation is imposed on the imported goods in excess of that imposed on similar domestic products; in the present case it is impossible to state this. In any case it is necessary to take into consideration the fact that the national producers, when availing themselves of the deferment of payment, are burdened with other factors such as an additional excise duty and the provision of a security for the payment of the excise duty. In addition in particular in the case of whisky British manufacturers have a cost advantage owing to the rate of exchange between the Irish and United Kingdom pound. In addition the problems raised by the Irish system in the view of the Commission can only be solved by the harmonization of taxes.

As I have already shown in my opinions in Cases 168/78, 169/78 and 171/78, discrimination through differentiating national provisions, to begin with the latter argument, is covered in the field of taxation by Article 95 and not by the harmonization provisions laid down in Articles 99 and 100 of the EEC Treaty. In addition I have also explained in those cases that from its wording, meaning and purpose, Article 95 contains a prohibition directed towards the Member States on placing products imported from other Member States directly or indirectly in a less favourable position from a tax point of view than similar or competing domestic products. It follows from this that taxation borne by products does not only mean the abstract tax burden on products according to the statutory rate of tax but the actual burden as created by the tax legislation. I do not need to emphasize in particular the fact that different treatment in the system of payment of a tax with regard to the rates of interest on capital or credit may have economic consequences in the form that the price of imported products to which no deferment of payment is granted as regards the taxation of them is increased. For this reason the Court of Justice also emphasized in Case 74/76 (Iannelli & Volpi S. p. A. v Firma Paolo Meroni, judgment of 22 March 1977 [1977] EĆR 557) that “in order to apply Article 95 of the Treaty not only the rate of direct and indirect internal taxation on domestic and imported products but also the basis of assessment and detailed rules for levying the tax must be taken into consideration”. The Court of Justice continued: “As soon as any differences in this 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 of Article 95 is infringed”. It also follows clearly in addition from the case-law of the Court of Justice in Case 45/75 (REWE-Zentrale des Lebensmittel-Großhandel GmbH v Hauptzollamt Landau/Pfalz, judgment of 17 February 1976 [1976] ECR 181) that within the context of the first paragraph of Article 95 it is necessary not only to concentrate formally on the rate of taxation; it is made clear in that case that “the first paragraph of Article 95 is infringed 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”. It may be deduced from this in addition that, as distinct from the second paragraph of Article 95 of the EEC Treaty, it is necessary to regard the fact that higher taxation is imposed on imported goods than on similar domestic products, even if only very slightly so, as already sufficient for an infringement against the first paragraph of that article.

In my opinions in the abovementioned cases I explained in addition that both the wording and the purpose of Article 95 of the EEC Treaty prohibit defences of an economic or political nature from being taken into consideration in the case of unequal tax treatment since these circumstances are regarded differently by the Treaty. The Court of Justice also expressed that view quite clearly in Case 45/75 (REWE), according to which “the equality between the level of taxation imposed on the domestic and on the imported product, required by Article 95, is valid independently of the effect of factors other than taxation on the respective production costs on the products to be compared”. It follows from this that, contrary to the view of the Irish Government, different treatment of imported and domestic products for tax purposes may not be justified by a reference to the economic disadvantage of Irish goods in relation to other goods imported from the Member States.

As it is also impossible to deduce a different interpretation of the first paragraph of Article 95 of the EEC Treaty in this connexion from the case-law of the Court of Justice referred to by the Irish Government in Cases 74/76 (lanneli & Volpi), 31/67 Firma August Stier v Hauptzollamt Hamburg-Ericus, judgment of 4 April 1968 [1968] ECR 235), 27/67 (Firma Fink-Frucht GmbH v Hauptzollamt München-Landsberger Straße, judgment of 4 April 1968 [1968] ECR 223), 20/76 (Schöttle & Söhne OHG v Finanzamt Freudenstadt, judgment of 16 February 1977 [1977] ECR 247) and 148/77 (v. Hansen jun. & O. C. Balle GmbH v Hauptzollamt Flensburg, judgment of 10 October 1978 [1978] ECR 1787), it is only necessary in addition to deal below with the question whether the imported products in question were subject to higher taxation than the identical domestic products on account of the Irish system described.

To begin with made-wine, it is clearly necessary to state that in the imposition of the excise duty on that beverage the domestic products are given such preferential treatment. Whilst in the case of imported products the duty is payable when they are delivered from the warehouse, without provision being made for deferment, in the case of Irish products a deferment of payment may be granted until the 15th day of the month following delivery from the factory without any other duty or interest being payable in this respect. Irish producers therefore save interest of at least 15 days in relation to importers of the same products. It is quite certain that the importers are placed at a disadvantage in this respect without there being any need to deal with the question whether the quantity of imports of the product in question must be regarded as insignificant, as the Irish Government considers, or as considerable, as the Commission claims.

The imported spirits on which the tax is payable when they are delivered from the warehouse are also placed at a disadvantage in relation to the corresponding domestic products. In the case of the latter, as we have seen, a deferment of the payment of the excise duties payable to a day not later than the last day of the month succeeding the month in which the spirits are delivered may generally be granted after the goods have been delivered from the warehouse. Only where the spirits are delivered in the month of February is a somewhat shorter period provided for and where spirits are delivered in the month of March there is likewise no deferment concession for domestic products. Thus domestic producers can save one month's interest as compared to importers except in the two abovementioned months. This advantage is indeed, it is necessary to concede to the Irish Government, reduced by the fact that in availing themselves of the deferment concession an additional excise duty of £0.0334 per proof gallon of spirits is payable. In the case of a rate of duty of £31.0246 per proof gallon of spirits this however amounts, as the Commission correctly emphasizes, solely to a rate of interest of 1% per annum. Even taking into consideration in addition the fact that an additional charge of 3% per annum is payable where security is provided for the payment, the burden as a whole is considerably lower than the normal bank interest rates borne by importers during the period of deferment.

The situation is parallel where excise duties are imposed on beer. In the case of imported beer the duty is payable, as in the case of the other beverages, where the products are delivered from the warehouse. Since domestic beer is already taxed before fermentation by reference to the specific gravity of the worts, provision is made for deferment of payment in respect of this domestic production extending, according to the length of storage, to at least a date no later than the eighth day of the second month following that in which the duty was charged and at most to a date not later than the 25th day of the fourth month after the month in which the duty was charged. This period always covers ą longer period than is required for delivery to the final consumer. In the case or the types of beer which do not require very long storage the Irish Government permitted the products to be delivered from the brewery premises not later than 15 days after the duty was charged. This means that the duty is payable at the earliest three and at the latest seven weeks after delivery from the brewery premises. The result of this is that domestic producers save interest for that period as against importers.

It is therefore quite certain that Ireland has failed to fulfil its obligations under the first paragraph of Article 95 of the EEC Treaty by placing the imported products at a disadvantage in relation to similar domestic products in the imposition of the excise duties on beer, spirits and made-wine. It is consequently no longer necessary to deal with the question whether the corresponding system also constitutes an infringment of Article 30 of the EEC Treaty.

I therefore conclude that the Court of Justice should declare that Ireland has failed to fulfil its obligations under the first paragraph of Article 95 of the EEC Treaty by placing imported products at a disadvantage in relation to domestic products by the different method of imposing excise duties on spirits, made-wine and beer. In addition the Court should order Ireland to pay the costs.

( 1 ) Translated from the German.