II —

The objective of the Sixth Directive, as moreover of Articles 95, 96 and 97, is to establish competitive neutrality between undertakings (Article 3 (f) of the Treaty). To that end Article 2 of the directive, which has replaced Article 2 of the Second Directive, and the national laws adopted or amended to conform with it, makes subject to value-added tax: “(1) The supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such; (2) The importation of goods.” For trade between Member States and nonmember countries the common svstem of value-added tax remains based on the principle, which derives from current international practice, of applying the taxation of the “country of destination”, that is to say, the country of consumption. That principle is at the origin of the tax frontiers which exist within the Community. Importation, an operation which consists of bringing goods “within the country”, is subject to taxation at the frontier, with adjustments under Article 14 of the directive. On export, the remission of tax is also carried out at the frontier (Anieles 15 and 16). This Coun confirmed that principle in its judgment of 9 October 1980 in Case 823/79 Carciati ([1980] ECR 2773): “As regards the prohibition imposed by a Member State on persons resident in its territory on the use of vehicles imponed temporarily tax-free, it is an effective way of preventing tax frauds and ensuring that taxes are paid in the country of destination of the goods.” (Paragraph 10 of the decision at p. 2780.) Free movement of goods within the common market in no way means that they do not have to be taxed in the country of destination. The only principle which the Member States have to observe in that respect is the prohibition of discrimination between national and imponed goods (Article 95). In most cases the common system of value-added tax ensures that competition is not distoned in the common market. It thus contributes to the abolition of obstacles to the free movement of goods and makes recourse to the average rates provided for in Article 97 before the common system was introduced redundant. Since value-added tax involves taxation of the goods in exact proportion to their price the application to the value of imponed products of the rate to which they are subject in the country of importation ensures equality of treatment between national and foreign products. In the same way, since exponation is itself exempt from tax, repayment on exportation of the tax levied on the purchase of the exported products or of the products necessary for their manufacture means that there is in fact remission of tax on sales abroad. There remain however a cenain number of anomalies. That is so in the case of so-called “secondhand” goods. (1) Even the definition of secondhand goods is not simple. In a general way it may be said that secondhand goods are goods which may, if necessary after being reconditioned, be reused in the place of new goods serving the same purpose. But that description covers: — Durable consumer goods which lose value during successive periods of use; — “Registered” secondhand goods such as motor vehicles and boats; — Works of an and collectors' items, the value of which on the contrary mav increase with the passage of time. All such goods have the characteristic that once they have reached the ultimate consumer at the end of a series of trade transactions they may, after some use, be reintroduced into trade or use. No matter to what category they belong they may have moreover the characteristic, in contrast to new goods, of being able to be transferred without the intervention of a trader. Thus in the present case the boat which was bought was used, at least I assume so, in pan in France if it had been bought there new and had been registered there, and in pan in the Netherlands, the Member State into which it was then imponed. Let me say that with regard to the Netherlands turnover tax Mr Van Zanten is the taxable person whereas the Gaston Schul company is liable for the tax. When goods held by a private person, who is a nontaxable ultimate consumer, are acquired secondhand by a taxable person, a “residual” tax burden is contained in the purchase price paid by the taxable person. When in turn he resells the goods (possibly after repair) and he cannot deduct the amount of the tax burden borne at the previous stage, the value-added tax, in the absence of a special scheme, applies to the whole resale price and not simply the value which the reseller may have added. Goods exempt from the right of deduction are subjected to double taxation and for this reason the product sold to the new ultimate consumer is burdened with a tax “residue”. In the same way, when a pleasure boat belonging to a private person, a nontaxable ultimate consumer, is resold secondhand to another nontaxable private person, there is a tax residue in the price charged to the latter since the seller has not been able to deduct the value-added tax paid on the boat when it was new. The result is an aggregation of tax. Achievement of the objective of neutrality in taxation, and thus taxation of secondhand goods, is difficult, since in the trading of such goods a whole range of very different persons may be involved. The goods may have been sold by the first user who may have been able to deduct value-added tax, or bv a private person who has not been able to deduct it if he is not a taxable person or if there is some special provision prohibiting such deduction even bv taxable persons (cf. Article 13 (B) (c) of the directive). The goods may be sold to a mere private person or to a taxable person, being an occasional or fulltime dealer, who in turn resells the goods, possibly after reconditioning them. When the use of the goods continues not in the country of origin (France) but in another Member State (the Netherlands) as a result of imponation into that State, ihe importation amounts, from the tax point of view, to bringing the goods back into circulation. It is as if from the time they crossed the tax frontier the goods were brought back into circulation. The private person, Mr Van Zanten, becomes a taxable person within the meaning of Article 4 of the directive simply because the secondhand goods which he has acquired crossed a frontier. (2) The problem of the absence of taxation, or on the contrary, that of double taxation in relation to value-added tax within the Community, had already been raised when the First Council Directive was in the course of preparation. A Community system for alleviating taxation on importers' turnover tax and excise duty was established by a Council Directive of 28 May 1969 in connection with international travel. Another Council Directive of 19 December 1974 allows tax reliefs on the importation of goods in small consignments of a noncommercial character within the Community. The Sixth Directive itself provides that where movable tangible property (including motor vehicles) has undergone in another Member State work or repair which has been taxed without the right to deduction it may be re-imported free from further tax into the Member state from which it has been temporarily exported (Article 14 (1) (f))- However, as regards “secondhand goods” none of the suggested solutions has been adopted and Article 32 of the Sixth Directive is confined to stating: “The Council, acting unanimously on a proposal from the Commission, shall adopt before 31 December 1977 a Community taxation system to be applied to used goods, works of art, antiques and collectors' items. Until this Community system becomes applicable, Member States applying a special system to these items at the time this directive comes into force may retain that system.” On 11 January 1978 the Commission submitted to the Council a proposal for a seventh directive on a “common system of value-added tax to be applied to works of art, collectors' items, antiques and used goods”. On 16 May 1979 it made certain amendments to that proposal. The proposal relates in particular to pleasure boats (Article 4 (1)), but the Council has not yet issued a directive. In any event, for the purpose of eliminating any tax residue, the proposal is intended to allow only taxable persons to deduct the value-added tax contained in the sale price of the secondhand goods sold to them by a private person. It does not cover the passing of such goods from one private person to another. The fact that the time-limit of 31 December 1977 fixed by the Council has passed in no way allows private persons to rely on any kind of “effectiveness” of the provision. (3) The free movement of secondhand goods is. it is true, affected by this double taxation. “Whereas, in order that the people of the Member States should be made more aware of the existence of the European Community, further measures to benefit the individual should be taken in order to create similar conditions in the Community to those in a domestic market” (first recital in the preamble to the proposal for a directive on tax exemption applicable to personal property of individuals on permanent importation from another Member State submitted by the Commission to the Council on 30 October 1975). Nevertheless, contrary to what counsel for the company Gaston Schul suggests, that situation results not from oversight but is intended. There is in that kind of taxation a choice of economic policy corresponding in my opinion to the present state of Community law. It must first of all be observed that such taxation on importation does not specifically benefit secondhand goods sold in the Netherlands. It works in the same way to the advantage of secondhand goods sold in all the Member States and to the detriment of secondhand goods bought in other Member States. In that respect all private persons of all the Member States who impon secondhand goods are on an equal footing with regard to public charges. The case-law of the Court does not consider all inequality of treatment as arbitrary discrimination but only differences which cannot be objectively justified. Some degree, at least, of taxation of the boat imported into the Netherlands in any event remains justified by the principle of taxation in the country where the use of the boat continues. There might be reason to fear circumvention of the normal commercial channels if it were possible, without paying value-added tax, to import into a Member State secondhand goods (a motor vehicle for example) bought from a private person in another Member State and not charged with value-added tax on that occasion whereas the expon of the same goods purchased from a taxable person would not create a right to deduction. To obtain goods at the lowest rate of value-added tax it would be sufficient for a person to buy them secondhand in the Member State where that rate is in force and then impon them into his own country. As is known the rates of value-added tax are still not unified. Moreover, the turnover tax of 18% levied in the Netherlands is not calculated on the purchase price of the boat new but on the invoice price charged by Mr Nanni to Mr Van Zanten. That price in principle ought to take account of the depreciation of the goods and the fact that the residuary tax burden contained in the sum paid by Mr Van Zanten was not deductible by him. If the sale price paid by Mr Van Zanten was correctly calculated by Mr Nanni the taxation on imponation is not more than the pan of the value-added tax passed on in the Netherlands by a private person who sells a secondhand boat to another private person. (4) Mr Van Zanten and the company Gaston Schul appear to maintain, in shon, that in the absence of complete exemption from turnover tax on imponation into the Netherlands an abatement should have been allowed at least to the extent of the indirect residue of turnover tax and that the boat could benefit, upon being exported from France, from a repayment of the tax charged on it there. To share that point of view it would be necessary that instead of applying the system of “tax less tax” deduction provided for by the directive (the tax is based on the difference between the tax on sale and the tax on purchase) there would have to be applied the system of “price less price” deduction according to which the tax would be charged on the difference between the purchase price and the selling price. The supplier's invoice would thus serve as proof for the purposes of deduction at the following stage. However that invoice does not show the part of value-added tax contained in the price paid by the buyer. Further such a system of repayment would assume taxation on delivery of the boat by Mr Nanni to Mr Van Zanten: any grant of exemption necessarily presupposes proof of previous taxation. Let me observe that private persons who confine themselves to trading in secondhand goods within one and the same Member State would not be in favour of such taxation which in addition, in the present state of Community law, is impossible, for the directive requires (Article 13 (B) (c)) Member States to exempt the supply of goods where value-added tax was paid on their acquisition and did not become deductible (Article 17 (6)). To grant even a partial repayment of value-added tax on the exponation from France, where the boat was also used, it would have been necessary, on the occasion of the sale by Mr Nanni, to determine on the one hand the “residue” of tax incorporated in the price paid by Mr Nanni and on the other hand to levy and recover the turnover tax corresponding to the subsequent use of the boat by Mr Van Zanten in the Netherlands. Both the States and the institutions which have submitted written or oral observations in the present proceedings have stressed the administrative complications which this would entail and which would in certain cases be out of proportion to the interests involved. Private persons who engage in such transactions would have to become accountants and collectors of taxes. Apart from such exacting administrative problems there is a much more serious difficulty. It has to do with the manner in which the product of the value-added tax levied on the use of secondhand goods is distributed between the Member States. The way in which this is done depends on whether such use is confined to the State of origin of the goods or. as in the present case, continues in another Member State and the procedures of taxation in the State of origin do not fall within the jurisdiction of the State of importation and conversely. The first recital of the preamble to the Commission's proposal on the Community system of taxation applicable, in relation to used goods puts the problem in clear terms: this s\strm “should avoid deflection of trade within the Community, and ensure that the application of the Community rate to such transactions produces equitable results in all Member States, for the purposes of the Community's own resources”. (5) I would join with the Italian Government in adding that as regards any effect of double taxation in the case of exportation to another Member State it was held bv the Court in its judgment of 29 June 1978 in Case 142/77 Larsen ([1978] ECR 1543): “... the EEC Treaty contains no provisions prohibiting effects of double taxation of this type. Although the abolition of such effects is doubtless desirable in the interests of the freedom of movement of goods, it can however only result from the harmonization of the national systems under Article 99 or possibly Article 100 of the Treaty.” (Paragraphs 33 and 34 the decision). To eliminate the difference in treatment of which Mr Van Zanten and the company Gaston Schul complain it would be necessary: — To eliminate the exemption from value-added tax from which occasional sales between private persons benefit in the Member States; — To provide for an appropriate rate of value-added tax for such sales; To allow, where such goods are exported to a Member State other than the State where they were acquired secondhand, a refund on exportation. — All this presupposes complete unification of the basis of assessment to tax and an approximation or indeed even a unification of the rates. It cannot be maintained that the Sixth Directive is unlawful because it has not provided for all these procedures. It is not possible to make up for the absence of a special Community system for secondhand goods merely by declaring that Article 2, point 2, of the directive is invalid, when there are various procedures which could supply this omission. The only way possible is recource to Article 99 of the Treaty. In answer to the questions raised I propose that the Court should hold: — Article 2, point 2, of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes is valid inasmuch as it provides that each Member State is to subject to value-added tax the importation by a private person of a secondhand boat coming from another Member State, even though the supply of such goods would not be subject to that tax if it had taken place under the same conditions within one or the other of those States.