CELEX: 61981CC0004
Language: en
Date: 1981-10-15
Title: Opinion of Mr Advocate General Reischl delivered on 15 October 1981. # Hauptzollamt Flensburg v Hermann C. Andresen GmbH & Co. KG. # Reference for a preliminary ruling: Bundesfinanzhof - Germany. # Fiscal system for spirits. # Case 4/81.

OPINION OF MR ADVOCATE GENERAL REISCHL
      DELIVERED ON 15 OCTOBER 1981 (
            1
         )
      
         Mr President,
      
      
         Members of the Court,
      
      My opinion today concerns yet another case on the German Spirits Monopoly and the related provisions on imports in force at the beginning of 1976. I do not need at this point to give an account of the details thereof as the Court is undoubtedly familiar with them from a series of earlier cases. I shall return to them later in so far as it is necessary to do so for a decision in this case.
      In January 1976 the respondent in the main proceedings applied for customs clearance of blended spirits from Belgium consisting of 90% ethyl alcohol of agricultural origin and 10% spirit derived from wine for storage in its own spirits warehouse. The Hauptzollamt [Principal Customs Office] levied a duty amounting to DM 80 per hectolitre of ethyl alcohol, which was referred to as the “Monopolausgleichspitze” [margin contained in the monopoly equalization duty] and was calculated by deducting the tax on spirits (at the time DM 1500) from the difference between the normal selling price of the monopoly spirit (at the time DM 1833) and the basic price of the spirit, that is to say the monopoly's representative buying price (at the time DM 253).
      The objection lodged against that assessment was rejected. However, the importer successfully brought an action before the Finanzgericht [Finance Court] Hamburg, which took the view that the imposition of a duty equal to the Monopolausgleichspitze was incompatible with Article 95 of the EEC Treaty. The court effected separate comparative calculations for the constituent parts of the products, namely ethyl alcohol of agricultural origin and spirit derived from wine. The former, in so far as it was domestically produced, had to be sold to the monopoly under Anicie 58 of the Law on the Spirits Monopoly [Branntweinmonopolgesetz] in the version of January 1976 and, if intended for the spirits industry, could be obtained only at the monopoly's normal selling price. Spirits derived from wine, on the other hand, like other types of spirit produced from certain raw materials or by certain distilleries, did not have to be sold to the monopoly but were subject to the so-called “Branntweinaufschlag” [surcharge on spirits]. That charge wa calculated, on a production of 60 hectolitres or more, essentially from the difference between the selling price of the spirit and its basic price reduced by an average amount in respect of the administrative costs which the monopoly saved by not acquiring the spirit, which at the relevant time was fixed by order at DM 31.
      The Finanzgericht took the view that in the case of ethyl alcohol of agricultural origin only the tax on spirits amounting at that time to DM 1500 contained in the selling price could be regarded as comparable internal taxation. It considered that other elements of the purchase price, and in particular the fixed amount of DM 80 included to cover the monopoly's administrative costs, had to be disregarded because the selling price of the spirit, although fixed by administrative act, constituted a claim governed by private law and therefore could not have the standing of a fiscal claim comparable to an excise duty. Consequently, imported ethyl alcohol of
         agricultural origin was taxed more highly by DM 80, the amount of the Monopolausgleichspitze.
      With regard to spirit derived from wine, which if domestically produced is subject to the Branntweinaufschlag, the Finanzgericht considered decisive the fact that according to the case-law of this Court it is not permissible to tax imported products to a higher fixed rate amount than is borne, even if only in certain cases, by similar domestic products by reason of graduated taxation. However, in view of the fact that at the relevant time the Branntweinaufschlag on spirit derived from wine produced by Stoffbesitzer [owners of raw materials] within the production limit of four hectolitres of ethyl alcohol came to only DM 1301 per hectolitre, on importation that product constituent was also taxed more highly than the similar domestic product by at least DM 80.
      The Hauptzollamt appealed to the Bundesfinanzhof [Federal Finance Court] against the judgment of the Finanzgericht. The appeal court takes the view that for the purpose of comparing the tax charges it is immaterial that spirits are taxed through the monopoly by means of civil law transactions. Far more significant is the fact that the Spirits Monopoly is administered as an instrument of government by a fiscal authority and that by means of the normal selling price, an amount determined by the authority of the Finance Minister, it raises revenue for the Federal Treasury in the form of the tax on spirits and income for financing the monopoly. The latter can be determined only in a very general way by working on the basic price as the monopoly's representative acquisition price. However, since the Monopolausgleichspitze can also be calculated by using the formula: normal selling price minus basic price of the spirit minus tax on spirits, there can be no infringement of Article 95 in the case of the constituent product “ethyl alcohol of agricultural origin”. With regard to the constituent product “spirit derived from wine”, it must be conceded that if the lowest possible rate for domestic distilleries is applied, the equivalent domestic product must bear a surcharge margin amounting not to DM 80 but only to DM 16.05, which necessitates a corresponding correction to the assessment of the tax liability in respect of the imported product. However, the Bundesfinanzhof considers that at the last-mentioned rate the Monopolausgleichspitze is certainly not discriminatory since it is not possible to assume an even lower rate of surcharge, first because spirit derived from wine, which comes from Abfindungsbrennereien [distilleries for which production is estimated at a standard level for tax purposes on the basis of the amount of raw materials used]. Stoffbesitzer and Obstgemeinschaftsbrennereien [bonded distilleries, operated by cooperatives and producing spirit exclusively from fruit grown by the members of the cooperative], is not on the market and, secondly, because it cannot be accepted that the imported product has been produced by comparable foreign Kleinbrenner [small distillers] or Kleinbrennereigemeinschaften [small distiller's cooperatives].
      By order of 2 December 1980 the Bundesfinanzhof stayed the proceedings and referred the following questions to the Court for a preliminary ruling under Article 177 of the EEC Treaty:
      “Does the expression ‘taxation imposed on a similar domestic product’, within the meaning of the first paragraph of Article 95 of the Treaty establishing the European Economic Community cover a charge arising from the selling price fixed by the Spirits Monopoly Administration for monopoly spirit used in the manufacture of such a product?
      Is such a charge to be regarded as taxation within that meaning only in so far as concerns that part of the selling price which the Spirits Monopoly Administration is bound under statutory provisions to remit to the State Treasury as a tax on spirits, or does that part of the selling price which is retained by the Spirits Monopoly Administration to cover its costs also constitute such taxation?”
      My opinion on that question is as follows:
      
               1. 
            
            
               As is clear from the wording of the question raised and from the grounds of the judgment making the reference, the Bundesfinanzhof considers separately the two constituent parts of the imported blended spirit (ethyl alcohol of agricultural origin and spirit derived from wine) and takes the view that the only question on which an interpretation is required is whether ethyl alcohol of agricultural origin, which at the relevant time could be obtained in the Federal Republic of Germany only through the monopoly, was subject to a tax levied by an authority equal at least to the Monopolausgleichspitze. On the other hand, the Bundesfinanzhof considers that no particular problems arise in relation to the constituent product “spirit derived from wine”, which if domestically produced is exempt from the obligation to sell to the monopoly and is therefore subject to a special form of tax, namely the Branntweinaufschlag. The relevant law has already been expounded in the case-law of the Court, which makes a question of interpretation unnecessary.
            
         
               2. 
            
            
               The first part of the question — whether the expression “taxation imposed on a ... domestic product” covers a charge arising from the selling price fixed by the administration of the Spirits Monopoly — does not raise any particular difficulties because at that stage it draws no distinction between the individual elements of the selling price.
               I do not need to consider in detail the principal arguments of the parties to the main proceedings. It is of no importance that the monopoly is required by law to apply commercial principles in carrying on its trade, that it concludes purchase contracts under private law with its customers and that claims for recovery of the purchase price are brought before the Zivilgerichte [civil courts]. Nor is it material that the Spirits Monopoly — as is clear from the decisions of the Bundesverfassungsgericht [Federal Constitutional Court] — is a fiscal monopoly and therefore a special form of taxation; it is, moreover, not decisive that the Federal Monopoly Administration is a Bundesfinanzbehörde [Federal tax authority] and that legal proceedings concerning it are heard by the Finanzgerichte [finance courts], that the selling prices and acquisition prices of the monopoly are fixed by authority, that in cases of insolvency claims for the purchase price rank pari passu with fiscal claims and are recovered in the same manner as taxes or that a Monopolhinterziehung [fraud on the monopoly] carries the same penalty as a tax fraud.
               The only decisive point is that the purchase price includes inter alia the tax on spirits, which is accepted by all parties clearly to be taxation for the purposes of Article 95 of the EEC Treaty. Consequently, the fact that a purchase price must be paid in order to obtain domestic monopoly spirit certainly does not warrant the view that payment has none of the characteristics of taxation within the meaning of Article 95 or justify a negative answer to the general question whether a charge arising from the selling price fixed by the monopoly must also be regarded as taxation within the meaning of the above-mentioned provision.
            
         
               3. 
            
            
               The second part of the question, however, which clearly deals with the real point at issue in this case, presents considerably greater difficulties. It asks whether, besides the tax, that part of the selling price fixed by the monopoly which serves to cover the costs of the monopoly administration also constitutes taxation. The element in question is the amount of DM 80 which is mentioned at the beginning of this opinion and is sometimes referred to as the “Preisspitze” [price margin].
               
                        (a)
                     
                     
                        It can be stated in principle that the fiscal nature of this price component cannot be denied on account of the purpose which it serves, namely to cover the monopoly's administrative costs. I do not need to consider in detail the argument put forward by the defendant in the main proceedings that this part of the selling price in fact constitutes nothing more than a price element calculated on the basis of commercial principles of a kind also to be found in the case of private suppliers. On the contrary, it is sufficient to refer to the judgment of 17 February 1976 in Case 45/75 Rewe-Zentrale des Lebensmittel-Großhandels GmbH ν Hauptzollamt Landau/Pfalz [1976] ECR 181; the submissions in these proceedings disclose no reason to question the principal dicta in that case. That case also concerned the payment of the Branntweinaufschlag on imports, the “margin” contained in which served to contribute towards the monopoly's costs. The Court held that it did not constitute an infringement of Article 95 if taxes were imposed on domestic products which were in part allocated for the purposes of financing a monopoly whereas an equivalent charge was levied on similar imported products, the revenue from which was allocated to the general budget of the State.
                        The only conclusion to be drawn in fact from that case is that the mere fact that the margin contained in the monopoly's selling price is intended to cover the monopoly's administrative costs does not preclude the possibility that it is in the nature of taxation.
                     
                  
                        (b)
                     
                     
                        However, it seems doubtful whether there is any justification for the view that the whole of the Preisspitze constitutes taxation for the purposes of Article 95 and that consequently it was permissible to levy the full Monopolausgleichspitze also on imported spirit.
                        Those doubts certainly cannot be dispelled by relying on the uniformity of arithmetic formulae, which shows that both the Preisspitze and the Monopolausgleichspitze are governed by a specific relationship of value fixed by authority.
                        Instead, reference must once again be made to the judgment in Case 45/75, in which the Court emphasized that only a tax which was introduced and quantified by the public administration came within the scope of Article 95 and held, moreover, that that article did not allow other changes of, for example, an economic nature, such as are borne by domestic products, to be compensated by taxes on imported products.
                        Furthermore, the following considerations are relevant:
                        
                                 —
                              
                              
                                 The Preisspitze is arrived at by deducting from the monopoly's selling price not only the tax but also the purchase price. The deduction of the latter is certainly essential in the context of Article 95 since there can clearly be no question of a tax equal to the value of the goods, such value being the consideration for the selling price.
                                 However, as the Court has heard, the basic price of the spirit, which must be deducted under the formula, is merely a fixed amount. For reasons of agricultural policy the Spirits Monopoly buys at prices which vary according to the size of the distilleries and the raw materials used for producing the spirit, so that at the relevant time actual acquisition prices ranged from DM 27.39 to DM 629.32 and included DM 176.38, DM 231.12 and DM 257.48. If it were considered appropriate to reflect correctly the value of the goods, that is to say to proceed on the basis of the average acquisition prices actually paid by the monopoly, it would be necessary for the year 1975/76 — as the Commission has shown — to take into account an average acquisition price of DM 257.10 and therefore to reduce the Preisspitze by the difference between the acquisition price actually paid and the basic price of the spirit, unless it is thought — on the basis of considerations appearing in the judgments in a number of cases, for example in the judgment of 30 October 1980 in Case 26/80 Schneider-Import GmbH & Co KG ν Hauptzollamt Mainz [1980] ECR 3469 — that the taking into account of the basic price as an average representative purchase price is unavoidable and therefore permissible use of a fixed amount.
                              
                           
                                 —
                              
                              
                                 The Commission pointed out that the monopoly's administrative costs include the costs of transporting and storing the spirit and, in certain cases, of purifying and denaturing it. Those costs should indeed be excluded from the above-mentioned computation for the purpose of determining the fiscal nature of the monopoly's administrative costs because they are elements which correspond to genuine economic services on the part of the monopoly and are therefore correctly imposed only on those who benefit from them, that is to say on purchasers of monopoly spirit.
                              
                           
                                 —
                              
                              
                                 Finally, since the monopoly's selling prices are fixed at quite different levels depending on the purpose for which the spirit is intended, it may be asked whether that part of the monopoly's administrative costs which serves to compensate the losses “incurred by the monopoly administration through the sale at less than the cost price of certain products intended for other purposes” (paragraph 2 of the decision in Case 45/75) must not also be left out of account.
                                 All this in fact leads to the conclusion that the full amount of the Preisspitze may not in any event be regarded as a tax for the purpose of the comparison of charges required by Article 95. It seems to suggest further, with regard to the remaining part to be considered, that there is no tax determined as to amount and therefore that the entire Preisspitze must be left out of account. In fact the size of the deductions necessary for the reasons which I have just mentioned varies and it can be stated precisely only at the end of each financial year and not, as seems to be required by Article 95, at the time of any given import what part of the administrative costs is a genuine tax and what part must be deducted for the various reasons set out above.
                              
                           
                  
         
               4. 
            
            
               At this stage, however, before coming to any final conclusions, I must consider a point which is made in the grounds of the order for reference and is also thought to be appropriate by the Commission, namely whether it is not legitimate simply to deduct from the Preisspitze, that is to say from the monopoly's administrative costs, the amount which is also left out of account in calculating the so-called “Branntweinaufschlag” in connection with the taxation of domestic spirit exempt from the requirement to sell to the monopoly. That would mean that since the Branntweinaufschlag is reduced by administrative costs saved by the monopoly amounting to DM 31, the imposition of the Monopolausgleichspitze would have been permissible, in any event át a rate of DM 49 (DM 80 minus DM 31).
               In that regard the Commission drew attention to the system and structure of the German Spirits Monopoly. The fact that a distinction is drawn thereunder between spirit which is subject to the requirement to sell to the monopoly and spirit which is exempt from that requirement suggests that imported spirits should be equated with those domestic products which likewise do not pass through the monopoly. Moreover, in its view that solution is the most apt to avoid distortions of competition, which, as the Commission demonstrated by means of a number of examples, might otherwise occur. Moreover, to justify that conclusion it made a number of points which I shall consider in detail later.
               
                        (a)
                     
                     
                        My first impression in this matter is that it is scarcely possible to justify in principle the imposition of the Monopolausgleichspitze at the rate arrived at after deducting the administrative costs saved by the monopoly, as fixed generally for the purposes of the Branntweinaufschlag.
                        The defendant rightly doubts whether the above-mentioned arbitrary figure is sufficient to actually cover the administrative costs saved, let alone elements such as the variance from the average acquisition prices actually paid, the losses incurred by the sale of spirits at reduced prices and the costs of storage, transportation and purification. Indeed, it must not be overlooked that the Preisspitze also contains the monopoly's profit, which must be remitted to the Federal Treasury and that, for example in the financial years 1973 and 1975 substantial amounts were involved (DM 32 million and DM 60 million respectively).
                        References to the structure and system of the Spirits Monopoly and to the danger which would otherwise exist of distortions of competition would in any event not seem to provide sufficient reason simply to equate for the purposes of taxation imported spirits with domestic spirits exempt from the requirement to sell to the monopoly. In any case, in so far as the alleged distortions of competition are concerned, Article 95 does not preclude discrimination against domestic products, as was correctly emphasized during the procedure.
                     
                  
                        (b)
                     
                     
                        Consequently, the solution which the Commission considers to be correct may be accepted only on condition — and this brings me to the further points which it made — that the similarity of the imported product and the domestic spirit exempt from the requirement to sell to the monopoly can be assumed. In that case there would be no need to consider further the difficult question of the extent to which the costs of the monopoly administration cannot be regarded as taxation; instead, it may be thought appropriate to extend to imported spirits the more favourable tax rules — because of the deduction of the administrative costs — applicable to domestic spirit which is exempt from the requirement to sell to the monopoly.
                        It must be remembered in that regard that according to the judgment of 27 February 1980 in Case 168/78 Commission of the European Communities v French Republic [1980] ECR 347 the term “similar” must be interpreted widely and flexibly. In any event, the Court stated that it was sufficient for the purposes of the application of Article 95 that the products in question should be in partial, indirect or potential competition and that it should be possible to establish those competitive conditions by reference to one or several economic uses to which the products might be put. Accordingly, it held in that judgment that in the case of spirits there was an indeterminate number of beverages which might be regarded as similar within the meaning of the first paragraph of Article 95 and that, because all spirits possessed common characteristics, it could be accepted that there was at least partial or potential competition, sufficient in any event for the application of the second paragraph of Article 95 (paragraph 12 of the decision, at p. 362). In view of what the Commission pointed out during the procedure — namely that in the case of pure alcohol the raw materials used (wine, cereals, fruit, potatoes) can be identified only at considerable expense and that when the alcohol is used to manufacture spirits such as those in question in the main proceedings, the raw materials lose all significance — there can scarcely be any doubt that imported ethyl alcohol of agricultural origin is similar to domestic alcohol derived from wine and fruit which is exempt from the obligation to sell to the monopoly.
                        Consequently, it does in fact seem to be justified to charge in principle an equivalent amount of tax on such imported spirit, that is to say, to levy, instead of the Monopolausgleichspitze at a rate of DM 80, a tax equal to the Branntweinaufschlagspitze [spirits surcharge margin] (DM 49). In that connection, no problem arises, moreover, from the fact — here I have in mind the term “quantified” used in the judgment in Case 45/75 — that the Branntweinaufschlagspitze as such is not fixed but is calculated from basic values laid down by authority.
                     
                  
                        (c)
                     
                     
                        Accordingly, it remains to be considered only — and not least with regard to the arguments put forward by the Hauptzollamt before the Bundesfinanzhof — whether any reservations or further comments should be added to the points which I have made so far because the Branntweinaufschlag was not a uniform tax but — by means of additional charges or deductions taking the form of percentages of the basic price — differed according to the size of the distilleries and the raw materials used. As the Court has heard, the result was that at the relevant time surcharge rates ranging from DM 1149.20 to DM 1599.54 applied and, in exceptional cases, could be even higher.
                        There is probably no reason to do so because in the oral procedure the defendant stated that it was unable to ascertain where the imported spirit was produced and that it was therefore not in a position to verify that the product was one which had to be equated with a quite specific domestic product produced by a favoured small distillery. This matter must of course be resolved finally not within the context of proceedings for a preliminary ruling but, if necessary, by the national court.
                        However, for the sake of completeness, there is still a further point to be considered for the purpose of the preliminary ruling concerning the differential rates applied in the case of the Branntweinaufschlag. Reference may be made in that connection to dicta in the judgment in Case 45/75, where it was stated that it was incompatible with Article 95 to tax imported products according to a method of calculation or manner of imposition which differed from those applying to the tax imposed on domestic products — imposition of a uniform amount in one case and a graduated amount in the other — and was stressed that it was sufficient to constitute an infringement of Article 95 if imported products were taxed more highly only in a minority of cases. The judgment of 10 October 1978 in Case 148/77- H. Hansen jun. & O. C. Balle GmbH & Co ν Hauptzollamt Flensburg [1978] ECR 1787 should also be recalled. In that case it was emphasized that Article 95 did not allow distinctions to be made for reasons social or otherwise or according to the relative importance of any special systems as compared with the ordinary taxation system; on the contrary, it was necessary to extend preferential systems in national tax provisions to products coming from other Member States, if the provisions of the first and second paragraphs of Article 95 were to be complied with.
                     
                  
         
               5. 
            
            
               For all those reasons I propose that the question raised by the Bundesfinanzhof should be answered as follows :
               
                        (a)
                     
                     
                        The expression “taxation imposed on a similar domestic product” within the meaning of the first paragraph of Article 95 of the EEC Treaty also covers a charge arising from the selling price fixed by the administration of the Spirits Monopoly for monopoly spirit used in the manufacture of that product. However, such a charge is to be regarded as taxation within that meaning only in so far as that part of the selling price which the monopoly administration is bound to remit as a tax on spirits is concerned, whereas that part of the selling price which is retained by the monopoly administration to cover its costs cannot constitute taxation for that purpose because it must partly be regarded an “economic charge” and because the remaining part which may be considered for the purposes of a comparison of tax charges is not precisely determined as to amount.
                     
                  
                        (b)
                     
                     
                        However, spirits imported from other Member States might, under the rules in force in the Federal Republic of Germany at the beginning of 1976, be subjected to a tax equal to the surcharge applicable to spirits exempt from the obligation to sell to the monopoly, if they were similar products as defined in the judgment of 27 February 1980 in Case 168/78 [1980] ECR 347. However, in that connection it was necessary to ensure that advantages enjoyed by domestic spirit were extended to imported spirit in the same situation.
                     
                  
         (
            1
         )	Translated from the German.