5.

In its second question, the Corte d'Appello, Milan, asks the Court to determine “whether, after the commencement of the second stage referred to in the third paragraph of Article 95 as being the final date for the abolition of national rules conflicting with the principle of equal tax treatment laid down in the first and second paragraphs of the said article, it is permissible by way of exception for Italy to continue a pre-existing discrimination in respect of the importation of potable spirits distilled from wine”. It is so abundantly clear that the third paragraph of Article 95 is binding that no comment is called for. Not later than at the beginning of the second stage, the Member States were required to repeal or amend any provisions existing when the Treaty entered into force which conflicted with the rules laid down in the first and second paragraphs of that article. Therefore, “pre-existing discrimination” (to use the precise wording employed by the national court) affecting the importation of potable spirits should have been abolished: no possibility of an exception is envisaged by Article 95. That being granted, it only remains to be seen whether other rules of the Treaty may permit non-compliance with the principle of non-discrimination in tax matters and that possibility makes it necessary to examine more closely the argument of the Italian Government that certain tax advantages granted in respect of domestic products and taking the form of aids to domestic production should be appraised in the light not of Article 95 but of Articles 92 and 93 of the EEC Treaty. It is true that the Corte d'Appello, Milan, has made no allusion whatsoever to those rules, thus allowing the inference that it has not considered their interpretation to be relevant to the solution of the cases before it. However, it is preferable in my opinion, giving a wide interpretation to the above-mentioned question, to complete the examination of the point of view taken by the Italian Government in these proceedings. According to that point of view, in a case such as the one in point, it might be argued that there is an aid to domestic production not because the revenue from the higher tax imposed on imported products is earmarked for the support of domestic production but rather by the very fact that the latter is subject to a lower tax burden. Consequently, the circumstances here are different from those considered by the Court in its judgment of 21 May 1980 in Case 73/79 Commission v Italian Republic [1980] ECR 1533 in which it stated that “discriminatory tax practices are not exempted from the application of Article 95 by reason of the fact that they may at the same time be described as a means of financing a State aid”. I should like to observe in this connexion that to allow the Member States to escape the prohibition contained in Article 95 by classifying differential taxation as a measure implementing a policy of support for a sector of the national economy might make an objective classification of those systems of taxation which are contrary to Article 95 impossible. The distinction between fiscal discrimination aimed exclusively at protecting domestic production against outside competition and systems of differential taxation designed to support a given sector of the market in the context of national economic policy as a whole is so blurred as to give rise to serious dangers of abuse. It is clear that any discriminatory taxation to the detriment of certain imported products automatically confers an advantage on competing domestic products and may therefore be considered as being an aid to domestic production. If therefore the discriminatory fiscal practices which a Member State describes as aspects of its sectoral support policy were to be considered as falling outside the scope of application of Article 95, the applicability of that article would be severely restricted. The objections which I have raised are, in my opinion, supported by the case-law of this Court. In the first place, I recall that in its judgment of 22 March 1977 in Case 74/76 Iannelli v Meroni [1977] ECR 557, this Court had occasion to state that since Article 95 of the Treaty refers to internal taxation of any kind “the fact that a tax or levy is collected by a body governed by public law other than the State or is collected for its benefit and is a tax charge which is special or appropriated for a specific purpose cannot prevent its falling within the field of application of Article 95 of the Treaty”. Since the particular case on which the Court gave its ruling concerned certain charges forming part of a system of State aids, it may be inferred from the above-mentioned judgment that a link between a discriminatory fiscal burden and a system of aids is not sufficient to preclude the application of Article 95. More recently, in its judgment of 10 October 1978 in Case 148/77 Hansen [1978] ECR 1787, the Court held that “where national tax legislation favours certain classes of producers or the production of certain types of spirits by means of tax exemptions or the grant of reduced rates of taxation, even if such advantages benefit only a small proportion of domestic production or are granted for special social reasons, those advantages must be extended to imported Community spirits which fulfil the same conditions...” (paragraph 20 of the decision, p. 1807). I observe that in the same judgment the Court considered it preferable to examine the problem from the point of view of Article 95 rather than in the light of the provisions on aid contained in Articles 92 to 94 “since the latter also rest on the same basic idea as Article 95, namely the elimination of State interventions — including tax abatements — which might have the effect of distorting the normal conditions of trade between Member States” (paragraph 14 of the decision). Those precedents place in its proper perspective the above-mentioned judgment of 21 May 1980 in Case 73/79 Commission v Italian Republic which confirms that if an aid is incompatible with Article 95, such incompatibility may constitute a valid ground for abolishing the measure. That is necessarily the case where the method of financing the aid is such as to impose a burden on competing foreign products which do not benefit from the aid or where revenue from a tax imposed in a non-discriminatory fashion on domestic products and on imported products is earmarked for the financing of the aid allocated to the same domestic products. In the case with which we are concerned, the aid to domestic production is said to have consisted quite simply in applying a system of tax advantages (exemptions or reduced rates) which in practice benefit domestic products alone. Therefore, even if the allocation of an aid to the products themselves were permissible, the fact that it is granted by means of discriminatory taxation to the detriment of imported products would be sufficient to render the aid incompatible with, and therefore prohibited by, Article 95.