OPINION OF ADVOCATE GENERAL

MENGOZZI

delivered on 16 November 2006 1( )

Case C‑383/05

Raffaele Talotta

v

Kingdom of Belgium

(Reference for a preliminary ruling from the Cour de cassation (Belgium))

(Freedom of establishment – Income tax – Tax basis – Discrimination between resident and non‑resident taxpayers)

I – Introduction

1. These proceedings concern a reference for a preliminary ruling submitted to the Court under Article 234 EC by the Cour de cassation (Court of Cassation), Belgium, concerning the interpretation of Article 43 EC.

2. In essence, the national court asks the Court of Justice to make clear whether the Belgian national legislation laying down minimum tax bases only for non-resident taxpayers conflicts with the principles governing freedom of establishment.

II – Legal background

A – The relevant Community law

3. The dispute in this case calls for an examination of the Treaty provisions on freedom of establishment. The focal point of those rules is Article 43 EC, which upholds the right of establishment of Community citizens both on a primary basis (second paragraph) and on a secondary basis (first paragraph).

4. That article provides as follows:

‘Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.

Freedom of establishment shall include the right to take up and pursue activities as self‑employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 48, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the chapter relating to capital.’

5. With reference to the grounds on which measures restricting freedom of establishment may be justified, Article 46(1) EC provides:

‘The provisions of this chapter and measures taken in pursuance thereof shall not prejudice the applicability of provisions laid down by law, regulation or administrative action providing for special treatment for foreign nationals on grounds of public policy, public security or public health.’

B – National law

6. Article 342 of the Belgian Income Tax Code 1992 (Code des impôts sur les revenus 1992; ‘the 1992 Code’) provides as follows:

‘1. In the absence of evidence provided by the interested parties, or by the administration, the profits or earnings referred to in points (1) and (2) of Article 23(1) shall be determined, for each taxpayer, by reference to the normal profits or earnings of at least three similar taxpayers and having regard, as appropriate, to the capital invested, the turnover, the number of workers, the source of power used, the rental value of land used, and any other relevant information.

The administration may, for that purpose, determine, in agreement with the relevant professional associations, flat-rate tax bases.

The flat-rate tax bases referred to in the foregoing paragraph may be determined for three successive tax years.

…

2. The King shall lay down, having regard to the factors indicated in the first subparagraph of paragraph 1, the minimum taxable profits of foreign undertakings operating in Belgium.’ ( )

7. Article 182 of the Royal Decree of 27 August 1993, implementing the 1992 Code, provides in particular:

‘1. The minimum taxable profits of foreign undertakings operating in Belgium which are to be taxable in accordance with the comparison-based procedure laid down in the first subparagraph of Article 342(1) of the Income Tax Code 1992 shall be as follows:

...

(3) undertakings in the commercial and services sectors:

(a) ... horeca ( ) ...: BEF 100 per BEF 1 000 turnover, subject to a minimum of BEF 300 000 per employee (average number for the year under review);

...

2. In no case may the amount of the taxable profits determined in accordance with paragraph 1 be less than BEF 400 000.’ ( )

III – The facts, the preliminary question and the proceedings before the Court

8. Mr Talotta, who resides in Luxembourg, runs a restaurant business in Arlon, Belgium. Pursuant to Articles 227 and 228 of the 1992 Code, he is subject in Belgium to the tax on non‑resident natural persons only in respect of income obtained there, not having established his tax domicile or asset base within Belgian territory.

9. For the tax year 1992, Mr Talotta was late submitting his statement of income to the Belgian tax authority. Moreover, the latter had decided that Mr Talotta’s accounts could not be relied on because of certain inconsistencies and it therefore gave him notice of its intention to subject him to flat-rate taxation pursuant to Article 342(2) of the 1992 Code, on the basis of minimum taxable profits under Article 182 of the Royal Decree implementing that provision.

10. The tax authority established that Mr Talotta had six employees. The tax in respect of which he was assessed as liable was determined by reference to the minimum bases for the hospitality trade, as referred to in Article 182 of the implementing Royal Decree, in particular on the basis of BEF 300 000 per employee, giving a total of BEF 1 800 000.

11. Mr Talotta lodged an objection to that assessment but did not produce supporting documentation; nor did he subsequently produce any documents to substantiate his position despite two requests to that effect made to him by the tax authority.

12. Mr Talotta appealed to the Cour d’appel (Court of Appeal), Liège, against the decision of the Directorate-General for Taxation rejecting his objection.

13. His appeal was dismissed, whereupon Mr Talotta brought the matter before the Belgian Cour de cassation which, entertaining doubts as to the interpretation of Article 43 EC, stayed proceedings and referred the following question to the Court of Justice for a preliminary ruling:

‘Is Article 43 (formerly Article 52) of the EC Treaty to be interpreted as prohibiting a provision of national law, such as Article 182 of the [Belgian] Royal Decree of 27 August 1993 implementing Article 342(2) of the Income Tax Code 1992, whereby minimum tax bases are applied only in the case of non‑residents?’

14. Under Article 23 of the Statute of the Court of Justice, written observations were submitted by Mr Talotta, the Belgian Government and the Commission.

IV – Legal analysis

A – Preliminary considerations

15. The question on which a ruling is sought concerns direct taxation. It should be observed in that connection that the power to legislate in relation to direct taxation is vested in the Member States, although the exercise of the power must nevertheless respect basic Community principles, including the fundamental freedoms on which the establishment and functioning of the internal market are based. ( )

16. It is undisputed that in the present case the fundamental principle of freedom of establishment, with which Article 43 EC is concerned, is applicable, in so far as it is clear from the judgment of the referring court that Mr Talotta has availed himself of that freedom by carrying on business as a self‑employed person in a Member State other than that of his residence. It is thus in relation to Article 43 EC that the compatibility of the Belgian legislation in question falls to be considered.

17. Article 43 EC guarantees freedom to take up and pursue an activity as a self‑employed person under the same conditions as apply to nationals of the country of establishment (‘national treatment’) for any citizen who establishes himself, even on a secondary basis, in another Member State in order to work there as a self‑employed person, and prohibits all discrimination, whether overt or covert, on grounds of nationality. ( )

18. It should be noted that the legislation at issue in the main proceedings applies regardless of the nationality of the taxpayer concerned. Nevertheless, unequal treatment based on residence or place of origin may, in certain circumstances, produce a result equivalent to discrimination on grounds of nationality.

19. According to settled case‑law of the Court, not only overt discrimination on grounds of nationality but also any discrimination which, although based on other grounds, produces the same result, is prohibited. Discrimination is taken to mean the application of different rules to comparable situations or the application of the same rules to different situations, to be compared by reference to objective data. ( )

20. As regards the concept of differing treatment that is liable to give rise to discrimination, I would observe that a situation characterised by different treatment does not give rise to unlawful discrimination if the person concerned is not placed at a disadvantage as compared with nationals of the host State. ( )

21. By the same token, there must also be such a disadvantage in the case of different treatment based on residence, if that treatment is to give rise to indirect discrimination on grounds of nationality.

22. In relation to direct taxation, the Court has stated that a difference in treatment based on residence is not in itself discriminatory because, in principle, that criterion is indicative of a link between the taxpayer and his country of origin and may, therefore, justify different tax treatment. ( )

23. In that connection, the Court has conceded that the situations of residents and non‑residents in a given State are not as a rule comparable, in so far as they display objective differences regarding both the source of their income and their personal capacity to pay and also the possibility of taking account of their personal and family circumstances. ( )

24. The Court has also made it clear that, where there is a tax advantage that is unavailable to non-residents, a difference in treatment between those two categories of taxpayers may be regarded as discrimination within the meaning of the Treaty where there is no objective difference in circumstances such as to justify the difference in treatment on that point between the two categories of taxpayer. ( )

25. According to the Court’s reasoning, discrimination may exist between residents and non‑residents only if, notwithstanding their residence in different Member States, it is established that, having regard to the content and purpose of the relevant national provisions, the two categories of taxpayers are in comparable situations. ( )

26. As regards the substantive issues, it is clear from the observations made so far that, in determining whether the provisions under review give rise to discrimination prohibited by Article 43 EC, it is necessary to verify whether, through the application of minimum flat-rate bases only to non-residents, those provisions give rise to different treatment which places the latter at a disadvantage, and whether such difference in treatment constitutes indirect discrimination on grounds of nationality (via the criterion of residence) in possibly comparable situations of resident and non-resident taxpayers.

B – Appraisal of the national legislation at issue

1. Unfavourable treatment

27. Article 342(1) of the 1992 Code envisages various presumptive methods for determining the taxable amount for the purposes of the tax on natural persons, both resident and non‑resident, which are to be applied in the absence of evidence produced by the taxpayer or, in any event, of relevant information available to the tax authority. In accordance with Article 342(2), the ‘minimum taxable profits of foreign undertakings operating in Belgium’ ( ) which may be taxed in accordance with the comparison-based procedure laid down in Article 342(1) (‘the comparison‑based procedure’) was laid down by royal decree. That measure identifies certain indices (for the sector at issue in this case, turnover or size of workforce) for application of the criteria used to calculate the minimum tax bases, and there is a fixed minimum taxable amount in each case.

28. The parties to the proceedings before the national court have reached conflicting conclusions as to whether there is a difference in treatment detrimental to non-residents resulting from the Belgian legislation at issue, and they put forward different interpretations of that legislation.

29. Mr Talotta refutes the views of the Belgian Government, contending that, although optional, minimum tax bases are not used only as a last resort, that is to say, when the tax authority finds it impossible to use the other presumptive methods for determining the tax basis because it lacks the information needed for that purpose. He contends that those bases in fact constitute minimum sums that are taken into consideration whenever they are higher than the tax basis determined by the various presumptive methods set out in Article 342(1) of the 1992 Code.

30. Although the last word on the interpretation to be given to the legislation in question is a matter for the national court, Mr Talotta’s observations in that regard are not without foundation, as it does not seem possible to infer from the text of Article 342(2) of the 1992 Code or from Article 182 of the implementing Royal Decree, considered together, that that method of determining the taxable amount is merely a secondary alternative, to which recourse may be had only as a last resort. In the same way, it does not seem possible to infer from the text of the provisions at issue that application of the minimum flat‑rate bases is optional.

31. In fact, Article 182 of the implementing Royal Decree does no more than determine the ‘minimum taxable profits of foreign undertakings’, ( ) which may be assessed in accordance with the comparison-based procedure, without indicating whether recourse to those minimums is optional, and without making it clear whether those minimums are to apply as part of the comparison‑based procedure, or only where recourse to the latter is impossible.

32. Consequently, it would seem that the minimum taxable amount must be taken to mean a minimum taxation level, that is to say, an amount which must be taxed regardless of all the other circumstances and which must, therefore, be taken into consideration if it is higher than the taxable amount arrived at by reference to the normal calculation methods of the comparison-based procedure. It is thus an instrument intended to operate within the framework of that procedure. It does not therefore seem to be an independent method of determining the tax base which the tax authority may use at its discretion, and merely on a subsidiary basis, when it is not possible to have recourse to the comparison-based procedure.

33. Such minimum flat‑rate bases applicable only to non-residents, in so far as they may – other conditions being equal – entail for the latter higher taxation than for residents, give rise to a disadvantageous difference in treatment for non-residents.

34. Furthermore, the fact that the application of that regime does not systematically prove unfavourable to non‑resident taxpayers does not mean that it is not disadvantageous. In fact, to consider compatible with the principle of freedom of establishment a tax regime which proves only on occasion to be disadvantageous to non-resident taxpayers, on the basis that the disadvantage, being occasional, is of limited scope, would be equivalent to tolerating so‑called ‘minor’ discrimination, thereby frustrating the general prohibition laid down in Article 43 EC. ( )

35. I consider, moreover, that a difference in treatment that is disadvantageous to non‑resident taxpayers would arise from the legislation at issue even if it were interpreted in the sense contended for by the Belgian Government.

36. Whilst, when ascertaining the taxable amount for non-residents, the tax authority, finding it objectively difficult to apply the comparison-based procedure, may limit itself to applying the minimum tax bases at issue when determining the taxable amount of residents, it is, in contrast, required to obtain the information necessary to determine the taxable amount using a presumptive method. Consequently, it is only for non-residents that the tax authority will, at a particular stage in the process of determining the taxable amount, be relieved of the burden of determining, albeit by way of presumption, the income that is subject to taxation and so be able to apply the minimum tax bases.

37. The Belgian Government maintains, moreover, that the difference in treatment in question is not discriminatory in so far as it does not give rise to disadvantageous treatment for non‑residents as a category. In its view, the criteria laid down by the implementing Royal Decree for determination of the minimum tax bases are no longer in harmony with economic reality and the application thereof would therefore prove favourable to the taxpayers in question, in that they would be taxed by reference to smaller amounts than those adopted under the procedure based on comparison with similar resident taxpayers.

38. However, as regards criteria which do not appear inherently likely to lead to the fixing of flat‑rate minimum bases which are negligible, the Belgian Government has not provided information, notably with regard to the taxable amounts which may be determined for resident taxpayers using the comparison-based procedure, from which it might be inferred that those taxable amounts would systematically be higher than those resulting from the application of Article 182 of the implementing Royal Decree.

2. The existence of objectively comparable situations

39. Now that it has been ascertained that there is different and more unfavourable treatment for non-resident taxpayers (as compared with resident taxpayers) in determining the taxable basis, in view of the application to the former of minimum tax bases, it is necessary to determine whether the legislation at issue gives rise in practice to discrimination contrary to Article 43 EC, ( ) even though it applies regardless of the nationality of the taxpayer concerned.

40. As noted in points 16 and 17 above, Article 43 EC prohibits not only discrimination on grounds of nationality but also discrimination which, although based on other criteria, produces a comparable result.

41. In the light of the foregoing, the unfavourable treatment caused by the rules at issue, applied as it is only to non-residents, may constitute indirect discrimination by reason of nationality. ( )

42. However, as observed in points 19 to 23 above, in the field of direct taxation, if a difference in treatment by reason of residence is to give rise in practice to discrimination, that connecting factor must be wholly unrelated to the tax provisions at issue; in other words, it is necessary that resident and non-resident taxpayers should be in a comparable situation as regards the purpose and content of those provisions, such that the difference in treatment cannot be justified.

43. In comparing the situation of the non-resident with that of the resident, in order to determine the possibly discriminatory nature of tax legislation, it is therefore necessary to make a comparison that focuses only on the effects of a given case that are taken into account by that legislation, and not on those of the overall treatment from a taxation point of view of non‑residents who, from that standpoint, will never be in the same situation as resident taxpayers, except where they receive all, or almost all, their income in that country. ( )

44. It is therefore necessary to determine whether, with reference to the determination, for the purposes of taxation, of profits made in Belgium, the situation of residents and that of non‑residents displays objective differences such as to justify the application of minimum tax bases only to non‑residents.

45. It should be remembered, as a preliminary point, that in the present case Mr Talotta was taxed in Belgium on the basis of his income arising there. In particular, he was subjected to flat-rate taxation by reference to a specific category of income, comprising profits achieved in Belgian territory as a self‑employed person.

46. From the documents before the Court, it is apparent that the Belgian rules take account of profits of that kind for the purposes of taxing both resident and non-resident natural persons and that that category of income is taxed under similar conditions in each of those two cases.

47. It follows that, so far as concerns the classification of income and the procedures for taxing it, the Belgian rules do not create an objective distinction between the taxpayers concerned by reference to their residence. In other words, those rules place resident and non‑resident taxpayers on the same footing regarding the category of income being taxed, that is to say the taxable basis, and as regards calculation of the tax, that is to say the conditions for taxing such profits. Seen in that light, therefore, those categories of taxpayers, who carry on similar self‑employed activities, are in wholly comparable circumstances.

48. It is also clear from the file that resident and non-resident taxpayers are in comparable situations also as regards the obligation to submit returns and the type of controls and checks to which they are subjected by the Belgian tax authority.

49. The application of minimum tax bases only to non-resident taxpayers gives rise, on the other hand, to different treatment as regards the methods used to determine the tax base, for two categories of taxpayers whose circumstances, as observed earlier, are wholly analogous as regards other aspects of tax treatment.

50. Such a difference in treatment could be regarded as not being discriminatory only if there were objective differences regarding the fiscal profile used to determine the tax basis that were attributable to the fact that the taxpayers concerned had different tax domiciles.

51. In that connection, the Belgian Government alleges objective difficulties in determining the tax base of a taxpayer resident outside Belgian territory, ascribable to the territorial limits of the investigatory and monitoring powers of the tax authority. It argues, with reference to the situation of a taxpayer not resident in Belgium, that the only information relevant to determination of the tax basis is in Belgium, and that is generally insufficient to identify points of comparison with comparable taxpayers for the purposes of the comparison-based procedure. As an example of relevant information which is difficult to obtain because it is located abroad, the Belgian Government refers to the purchase of raw materials in the taxpayer’s country of residence, or the registration in that country of the vehicle used for the business carried on in Belgium.

52. According to that argument, the existence outside Belgium of information relevant to determination of the taxable amount makes it impossible to arrive at the non-resident’s deemed taxable amount under the comparison‑based procedure, thus making it necessary to have recourse to minimum tax bases.

53. With reference to the present case, the Belgian Government states that it is impossible for the tax authority, given that Mr Talotta resides in another Member State, to obtain the information needed to make the estimate on which to base the comparison‑based procedure.

54. In particular, according to the Belgian Government, in the present case the tax authority was not able reliably to obtain factual information on which to base its estimate of Mr Talotta’s turnover and that figure was in turn necessary for the purposes of applying the comparison‑based procedure. Since the essential figure for annual turnover was lacking and the only reliable item of information, namely the number of persons employed by Mr Talotta, was not in itself sufficient to allow recourse to the comparison‑based procedure, it became necessary to resort to minimum flat-rate bases.

55. Difficulties of that kind, which the tax authority usually encounters in estimating the taxable amount for non-residents, do not, according to the Belgian Government, extend to the situation of residents, regarding whom it is always possible to determine the taxable amount by the comparison‑based procedure, without resorting to flat-rate tax bases.

56. The Belgian Government goes on to argue that, even admitting that in certain circumstances recourse to the comparison‑based procedure might prove impossible regarding the situation of a resident as well, it is not, however, necessary to apply minimum tax bases to residents because it is possible to calculate taxation on the basis of income indicators (signes et indices).

57. According to the Belgian Government, that method is not, on the other hand, applicable to non-resident taxpayers, for whom it is impossible to distinguish between the part of the income determined by reference to income indicators that is attributable to their activities located in Belgium and the part attributable to activities carried out in their country of residence.

58. On the basis of those arguments, the lack of an alternative method to the comparison‑based procedure, for the purposes of determining taxable amounts for non-residents, makes it necessary to resort to minimum flat-rate taxation only for that category of taxpayers.

59. In the light of the alleged objective difficulties encountered in ascertaining the taxable amount for non‑resident taxpayers, the latter and resident taxpayers are not, according to the Belgian Government, in a comparable situation. Consequently, the difference in treatment regarding determination of the tax base for a business located in Belgium as between those categories of taxpayers, who are not in objectively comparable situations, cannot be regarded as discriminatory.

60. I do not agree with that view.

61. In my opinion, a different place of residence does not in any way differentiate the situation of taxpayers regarding determination of a tax base which, it should be remembered, relates to income in Belgium.

62. I consider that the difficulties invoked by the Belgian Government, concerning the obtaining of factual information on the basis of which to arrive at a deemed taxable amount for the purposes of the comparison‑based procedure, exist regardless of where the taxpayer is domiciled for tax purposes.

63. In particular, I would point out that, with regard to the present case, the Belgian Government attributes recourse to minimum flat-rate taxation to the fact that it is impossible for the tax authority to determine Mr Talotta’s turnover. His real turnover could not be determined, it argues, because of a lack of reliable information regarding the purchase of raw materials and stock for his restaurant business; it is not possible to use that factual information because Mr Talotta’s suppliers are allegedly located outside Belgium.

64. That argument is not persuasive.

65. Whilst it may be true that the monitoring and investigatory powers of the tax authority are limited to Belgian territory and it is reasonable to conclude that the authority may encounter greater difficulties in obtaining certain factual information outside Belgium, the fact nevertheless remains that those limits or difficulties are not necessarily linked to the fact that the taxpayer in question resides abroad.

66. It must be observed that in principle the essential elements relevant to the comparison‑based procedure do not concern aspects relating to the taxpayer’s country of residence: under the comparison‑based procedure, account is taken of elements relating to activities carried on as a self‑employed person in Belgium.

67. Whilst it is true that the determination of such elements may involve taking account of factors extraneous to Belgian territory, that eventuality is not necessarily linked to the residence of the taxpayer in question. Regardless of his tax domicile, any taxpayer may use foreign suppliers, making it more difficult for his presumed turnover to be ascertained.

68. In any such case, the same difficulties regarding determination of the tax basis would arise in the case of a resident taxpayer as in the case of a taxpayer not resident in Belgium.

69. Also, whilst it is true, as the Belgian Government observes, that pursuant to Article 342(1) of the 1992 Code, under the comparison‑based procedure account is taken of ‘any other relevant information’ concerning the taxpayer’s position, and that such information may relate to the personal or family situation of the taxpayer, and in general to his lifestyle, I do not see why such data cannot be obtained by the Belgian administrative authorities under the provisions of Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation. ( ) That directive may be invoked by a Member State to obtain from another Member State any information which is relevant and appropriate for determining the ability to pay tax and the personal and family situation of a taxpayer who resides in another Member State.

70. Similarly unfounded appear to me to be the Belgian Government’s arguments concerning the alleged impossibility of using information concerning a non‑resident taxpayer’s lifestyle and personal and family situation because such information is too general and not capable of showing to what extent the information obtained, for the purposes of estimating the income of the taxpayer concerned, is attributable to activities carried on in Belgium, and to what extent it relates to activities located in his country of residence. In my opinion, such difficulties could also arise regarding the situation of a resident, making it necessary to apply flat-rate taxation to the latter as well. Indeed, it seems conceivable to me that, even for a resident taxpayer, his lifestyle could be attributed to income from diverse activities, including those located in countries other than that of his residence, in which case it would prove difficult to identify, for the purposes of taxation on the basis of income indicators, profits attributable only to activities carried on as a self‑employed person in Belgian territory.

71. The above reasoning makes it possible also to dismiss the second argument put forward by the Belgian Government, to the effect that, when it is impossible to apply the comparison‑based procedure, the tax authority can rely on the presumptive method based on income indicators (signes et indices) only in relation to the situation of resident taxpayers, with the result that it is unnecessary to apply minimum tax bases to residents.

72. As we have seen, the difficulty in relying on a taxpayer’s lifestyle in order to arrive at deemed taxable amounts for activities of self‑employed persons arises regardless of the tax domicile of that person, and the difficulty of resorting to taxation by reference to signes et indices may also arise in relation to a taxpayer residing in Belgium who conducts some part of his business outside Belgian territory.

73. From the observations made so far, it is clear that, with regard to determination of income arising in Belgium, the situation of residents and that of non-residents may present the same difficulties. It follows that, in relation to that aspect of taxation, the two categories of taxpayers are in objectively comparable situations and that, therefore, the difference in treatment deriving from the application of minimum tax bases only to non‑resident taxpayers constitutes a form of indirect discrimination on grounds of nationality.

3. Grounds of justification

74. That said, it is nevertheless necessary to ask whether there is any justification for the difference in treatment thus established in the light of the Treaty provisions on freedom of establishment.

75. The distinction, in the field of national measures restricting freedom of establishment, between measures of a discriminatory nature and measures which apply without distinction is essential for the purpose of identifying the grounds on which Member States may contend that restrictions on the freedom of establishment referred to in Article 43 EC are justified.

76. In the case of national measures of a discriminatory nature, exceptions to freedom of establishment are allowed solely where there are grounds for the derogations exhaustively set out in Article 46 EC. ( ) In contrast, in the case of measures which apply without distinction to nationals and to citizens of other Member States, it is possible to invoke imperative requirements, which differ from and are additional to the grounds of justification set out in Article 46 EC, provided that the measures in question are suitable for securing attainment of the aims pursued and do not go further than is necessary for that purpose. ( )

77. As I observed earlier, in the present case we are concerned with a form of indirect discrimination on grounds of nationality, resulting in fact from recourse to the criterion of residence. The difference in treatment deriving from the provisions in question could therefore be allowed only by reference to the grounds of justification provided for in Article 46 EC.

78. I shall now consider whether the preconditions for applying Article 46 EC are satisfied.

79. Then, and only in the alternative, in case the Court should consider that, contrary to my view, the legislation in question is applicable without distinction, I shall consider, on the assumption that it involves a difference in treatment which is unfavourable to non‑residents and restricts their freedom of establishment, to what extent it may be justified on the basis of imperative requirements in the general interest.

– Grounds of justification under Article 46 EC

80. According to Article 46 EC, discriminatory measures may be justified only on grounds of public policy, public security and public health. It should also be observed that, since that provision involves a derogation from a fundamental Treaty principle, the exceptions for which it provides must be interpreted restrictively and will be applied, as the Court has held, only where there is a genuine and sufficiently serious threat affecting one of the fundamental interests of society. ( )

81. In the present case, the need to guarantee the effectiveness of fiscal supervision, invoked by the Belgian Government, does not fall within the grounds listed in Article 46 EC. Moreover, it does not appear to me in any event that there is a present and sufficiently serious threat to one of the fundamental interests of society.

82. The Belgian legislation in question does not therefore seem to me to be justifiable under Article 46 EC.

83. It therefore contravenes the Treaty provisions on freedom of establishment.

– Grounds of justification attributable to imperative requirements in the general interest

84. The Belgian Government invokes the need to guarantee the effectiveness of fiscal supervision.

85. Whilst it is true that the Court has held that the effectiveness of fiscal supervision may be invoked to justify restrictions on the exercise of fundamental freedoms guaranteed by the Treaty, ( ) in order for such restrictions to be justified they must, as pointed out earlier, be consistent with the principle of proportionality.

86. With reference to the present case, I consider that such a justification could be invoked only in the face of real difficulties in ascertaining the tax base caused by the fact that the taxpayers in question reside outside Belgian territory.

87. If we interpret the legislation in question in the sense suggested by Mr Talotta, application of the minimum tax bases takes no account of the existence of any difficulty regarding determination of taxable amounts for non‑residents using the comparison‑based procedure. If that approach is taken, the justification invoked by the Belgian Government cannot be accepted.

88. If, on the other hand, the interpretation to be preferred is the one proposed by the Belgian Government – to the effect that the minimum bases are used as a secondary alternative to the other methods of determining taxable amounts for non‑residents, that is to say, when it proves impossible to make such an assessment by another means, despite the possibilities offered by the procedures provided for by Directive 77/799 – the legislation in question could be regarded as necessary in order to guarantee satisfaction of the imperative requirement of the effectiveness of fiscal supervision. For such legislation to be proportionate to that objective, however, non‑resident taxpayers must be sure of being able to avoid flat-rate taxation by producing the relevant documents or other evidence suitable for demonstrating the real amount of their tax liability.

89. It does not seem to me that the answers given by the parties to a specific question on that point put to them by the Court showed to what extent that possibility is effectively guaranteed to non‑resident taxpayers by the Belgian rules. In particular, it does not seem clear by what type of evidence such a taxpayer could defeat the presumption inherent in the flat-rate determination of his taxable amount.

90. Therefore, in the event that the Court considers that the legislation in question is not discriminatory but applies without distinction, it will be for the national court, which may decide to uphold the interpretation of that legislation contended for by the Belgian Government, to ascertain in the light of the relevant provisions of domestic law whether a non‑resident taxpayer has a genuine opportunity of avoiding, by producing adequate evidence, the application of flat-rate minimum bases. Only if the answer is affirmative may that court conclude that the legislation at issue does not go further than is necessary to satisfy the imperative requirement invoked by the Belgian Government.

V – Conclusion

91. In the light of the foregoing considerations, I propose that the Court give the following answer to the question referred to it by the Cour de cassation, Belgium:

Article 43 EC precludes legislation of a Member State such as Article 182 of the Belgian Royal Decree of 27 August 1993, implementing Article 342(2) of the Code des impôts sur les revenus 1992 (Income Tax Code), which provides for the application of minimum tax bases only for non-resident taxpayers, in that it is a measure entailing indirect discrimination on grounds of nationality which is not justifiable on the basis of the derogations provided for in Article 46 EC.