Commission of the European Communities v Italian Republic.
Date: 2003-01-16
13.  It is also clear from the Court's case-law (see,   inter alia  , Case C-3/88   Commission   v   Italy   [1989] ECR 4035, paragraph 8) that the principle of equal treatment, of which Article 49 EC embodies a specific instance, prohibits not only overt discrimination by reason of nationality but also all covert forms of discrimination which, by the application of other criteria of differentiation, lead in fact to the same result.
14.  That is true, in particular, of a measure under which a distinction is drawn on the basis of residence, in that that requirement is liable to operate mainly to the detriment of nationals of other Member States, since non-residents are in the majority of cases foreigners (see,   inter alia  , Case C-224/97   Ciola   [1999] ECR I-2517, paragraph 14). In that context, it is immaterial whether the contested measure affects, in some circumstances, nationals of the State in question resident in other parts of the national territory as well as nationals of other Member States. In order for a measure to be treated as being discriminatory, it is not necessary for it to have the effect of putting at an advantage all the nationals of the State in question or of putting at a disadvantage only nationals of other Member States, but not nationals of the State in question (see, to that effect,   inter alia  , Case C-281/98   Angonese   [2000] ECR I-4139, paragraph 41).
19.  First of all, to the extent that the advantageous rates at issue provide for a distinction on the basis of nationality, it should be recalled that such advantages are compatible with Community law only if they can be covered by an express derogating provision, such as Article 46 EC, to which Article 55 EC refers, namely public policy, public security or public health. Economic aims cannot constitute grounds of public policy within the meaning of Article 46 EC (see,   inter alia  , Case C-484/93   Svensson and Gustavsson   [1995] ECR I-3955, paragraph 15).
22.  As regards, first, the economic grounds put forward by the Italian Government, suffice it to note that they cannot be accepted, since aims of a purely economic nature cannot constitute overriding reasons in the general interest justifying a restriction of a fundamental freedom guaranteed by the Treaty (see,   inter alia  , Case C-35/98   Verkooijen   [2000] ECR I-4071, paragraph 48).
23.  As regards, second, the necessity to preserve the cohesion of the tax system, which, in Case C-204/90   Bachmann   [1992] ECR I-249, was acknowledged as capable of justifying rules restricting the fundamental freedoms guaranteed by the Treaty, it should be recalled that, in the cases which led to the judgment in   Bachmann   and to the judgment delivered on the same day in Case C-300/90   Commission   vBelgium   [1992] ECR I-305, there was a direct link between the deductibility of contributions and the taxation of sums payable by insurers under pension and life assurance contracts, and that link had to be maintained to preserve the cohesion of the tax system in question (see, in that regard,   inter alia  ,   Svensson and Gustavsson  , paragraph 18; Case C-107/94   Asscher   [1996] ECR I-3089, paragraph 58; Case C-264/96   ICI   [1998] ECR I-4695, paragraph 29, and Case C-55/98   Vestergaard   [1999] ECR I-7641, paragraph 24).
27.  In that regard, suffice it to recall that a Member State cannot plead conditions existing within its own legal system in order to justify its failure to comply with obligations arising under Community law. While each Member State may be free to allocate areas of internal legal competence as it sees fit, the fact still remains that it alone is responsible towards the Community under Article 226 EC for compliance with its obligations (see,   inter alia,   Case C-33/90   Commission   v   Italy   [1991] ECR I-5987, paragraph 24).