Direct Discrimination

EU states may not impose, directly or indirectly on the products of other states, any internal taxation of a kind in excess of that imposed directly or internally on similar domestic products.  They may not impose on products of other member states any internal taxation which affords indirect protection to other products.

Taxation barriers other than those arising from customs duties may hamper and distort trade within the EU.  This Treaty prohibition seeks to achieve neutrality of internal taxation in its effect on trade domestic and other EU goods and products. The article has direct effect.

The principle applies to goods coming from other EU states or which have been imported and are already in free circulation in other states.  There is no prohibition on discrimination in taxation against goods coming directly from outside the EU, although the common commercial policy provided for a uniform taxation on imports.

We\’ve domestic goods obtain preferential treatment, equivalent treatment must be given to other EU goods. Equality is also required if the effect of the taxation is discriminatory against domestic goods.

Indirect Discrimination

Discriminatory taxation may arise indirectly. An apparently neutral tax provision may, in fact, discriminate against non-domestic goods in practice. In this case, it is a question for assessment by the courts as to whether there is indirect discrimination. Where a provision appears to be non-discriminatory, but in fact applies exclusively or to a much greater extent to imported goods, it may be found to constitute indirect discrimination.

A tax may be discriminatory if it applies equally to domestic and other EU products, but more favourable terms are in fact allowed to the domestic producer.

This differing tax treatment may be permitted where it is justified on objective grounds.  The justification must be on another good public policy ground.

The provision applies to comparable goods.  Regard is had to their objective characteristics.  If they have common objective characteristics, the similarity is determined from the point of view of their use and the perspective of the consumer.

If the products are similar, states must equalise taxes.  If they are in competition, protectionist elements must be removed.  Products in competition need not be similar products.  The existing and future market developments and substitution of goods must be considered.  A potential market may be distorted by unfair taxation.

Where goods are unique and have no competitors or no similar goods, the prohibition does not apply.

Unlawful tax impositions must be repaid.  There must be the recovery of unjust enrichment arising which they have actually borne.  Accordingly, they may not recover the elements passed on to third parties.


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