Staatssecretaris van Financiën v B.G.M. Verkooijen.
Date: 2000-06-06
29 Moreover, since, in the main proceedings, the company distributing dividends has its seat in a Member State other than the Kingdom of the Netherlands and is quoted on the stock exchange, receipt of dividends on shares in that company by a Netherlands national may also be linked to Acquisition by residents of foreign securities dealt in on a stock exchange as referred to in Heading III.A(2) of the nomenclature annexed to Directive 88/361, as Mr Verkooijen, the United Kingdom Government and the Commission contend. Such an operation is thus indissociable from a capital movement.
32 It must be borne in mind at the outset that, although direct taxation falls within their competence, the Member States must none the less exercise that competence consistently with Community law (Case C-80/94 Wielockx [1995] ECR I-2493, paragraph 16; Case C-264/96 ICI v Colmer (HMIT) [1998] ECR I-4695, paragraph 19; and Case C-311/97 Royal Bank of Scotland [1999] ECR I-2651, paragraph 19).
33 Second, Directive 88/361, which applied at the material time, brought about complete liberalisation of capital movements and to that end Article 1(1) thereof required the Member States to abolish all restrictions on such movements. The direct effect of that provision was recognised by the Court in Joined Cases C-358/93 and C-416/93 Bordessa and Others [1995] ECR I-361, paragraph 33.
34 A legislative provision such as the one at issue in the main proceedings has the effect of dissuading nationals of a Member State residing in the Netherlands from investing their capital in companies which have their seat in another Member State. It is also clear from the legislative history of that provision that the exemption of dividends, accompanied by the limitation of that exemption to dividends on shares in companies which have their seat in the Netherlands, was intended specifically to promote investments by individuals in companies so established in the Netherlands in order to increase their equity capital.
35 Such a provision also has a restrictive effect as regards companies established in other Member States: it constitutes an obstacle to the raising of capital in the Netherlands since the dividends which such companies pay to Netherlands residents receive less favourable tax treatment than dividends distributed by a company established in the Netherlands, so that their shares are less attractive to investors residing in the Netherlands than shares in companies which have their seat in that Member State.
43 In addition, the possibility granted to the Member States by Article 73d(1)(a) of the Treaty of applying the relevant provisions of their tax legislation which distinguish between taxpayers according to their place of residence or the place where their capital is invested has already been upheld by the Court. According to that case-law, before the entry into force of Article 73d(1)(a) of the Treaty, national tax provisions of the kind to which that article refers, in so far as they establish certain distinctions based, in particular, on the residence of taxpayers, could be compatible with Community law provided that they applied to situations which were not objectively comparable (see, in particular, Case C-279/93 Schumacker [1995] ECR I-225) or could be justified by overriding reasons in the general interest, in particular in relation to the cohesion of the tax system (Case C-204/90 Bachmann v Belgian State [1992] ECR I-249 and Case C-300/90 Commission v Belgium [1992] ECR I-305).
44 In any event, Article 73d(3) of the Treaty states specifically that the national provisions referred to by Article 73d(1)(a) are not to constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments, as defined in Article 73b.
45 Furthermore, the argument that the measures and procedures referred to in Article 73 (d) (3) of the Treaty do not relate to Article 73 (d) (1)(a), in which the term provisions is used, is irrelevant. Apart from the fact that it is difficult to distinguish between measures and provisions, the term measures and procedures does not appear at all in paragraph 2 even though Article 73d(3) refers expressly to that paragraph.
46 Accordingly, it is necessary to examine whether the restriction on capital movements arising from a legislative provision such as that at issue in the main proceedings may be objectively justified by any overriding reason in the general interest.
47 The United Kingdom Government submits, first, that a legislative provision such as the one at issue in the main proceedings may be objectively justified by the intention to promote the economy of the country by encouraging investment by individuals in companies with their seat in the Netherlands.
48 In that connection, it need merely be pointed out that, according to settled case-law, aims of a purely economic nature cannot constitute an overriding reason in the general interest justifying a restriction of a fundamental freedom guaranteed by the Treaty (Case C-120/95 Decker v Caisse de Maladie des Employés Privés [1998] ECR I-1831, paragraph 39, and Case C-158/96 Kohll v Union des Caisses de Maladie [1998] ECR I-1931, paragraph 41).
56 As regards the need to preserve the cohesion of the Netherlands tax system, although the Court has held that the need to ensure the cohesion of a tax system may justify rules liable to restrict fundamental freedoms (Bachmann and Commission v Belgium, cited above), that is not the position here.
57 In Bachmann and Commission v Belgium, a direct link existed, in the case of one and the same taxpayer, between the grant of a tax advantage and the offsetting of that advantage by a fiscal levy, both of which related to the same tax. In those cases, there was a link between the deductibility of contributions and the taxation of sums payable by insurers under old-age insurance and life assurance policies, which it was necessary to preserve in order to safeguard the cohesion of the tax system at issue.
58 No such direct link exists in this case between the grant to shareholders residing in the Netherlands of income tax exemption in respect of dividends received and taxation of the profits of companies with their seat in another Member State. They are two separate taxes levied on different taxpayers.
59 As regards the arguments concerning the loss of revenue for the Kingdom of the Netherlands that would result from exemption of dividends received by its residents who are shareholders of companies with their seat in other Member States, it need merely be pointed out that reduction in such tax revenue cannot be regarded as an overriding reason in the public interest which may be relied on to justify a measure which is in principle contrary to a fundamental freedom (see, to that effect, in relation to Article 52 of the Treaty, the ICI judgment cited above, paragraph 28).
61 As regards, finally, the argument based on a possible tax advantage for taxpayers receiving in the Netherlands dividends from companies with their seat in another Member State, it is clear from settled case-law that unfavourable tax treatment contrary to a fundamental freedom cannot be justified by the existence of other tax advantages, even supposing that such advantages exist (see to that effect, in relation to Article 52 of the Treaty, Case 270/83 Commission v France [1986] ECR 273, paragraph 21; Case C-107/94 Asscher [1996] ECR I-3089, paragraph 53; and Case C-307/97 Saint-Gobin ZN [1999] ECR I-6161, paragraph 54; see, in relation to Article 59 of the EC Treaty (now, after amendment, Article 49 EC), Case C-294/97 Eurowings Luftverkehrs [1999] ECR I-7447, paragraph 44).