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Europe > Ireland > EU Law > General > Article > The Art 110 and Article 30 relationship poses considerable difficulties for fiscal charges

Article: The Art 110 and Article 30 relationship poses considerable difficulties for fiscal charges

It has been stated that "the relationship between Art 110 TFEU and Article 30 TFEU poses a considerable difficulty… This is so, because Article 110 and 30 TFEU are complementary as they both deal with fiscal charges but are mutually exclusive in that the same fiscal charge cannot belong to both categories at the same time."

Articles 30 and 110 of The TFEU are indeed complementary. Both articles deal with the issue of fiscal charges, however where they differ is in the situations in which they are applied. The objective of these articles is to ensure the operation of a single market within the EU, without barriers to trade. The relationship between these articles may be deemed to be difficult, as it is not always clear which article will apply, however it is a relationship which is needed in order to ensure the overall objective that goods can move freely within the EU without restrictions.

Where the articles differ, is in the fiscal situations to which they apply. Article 30 deals with the imposition of charges at frontiers or borders which stand to restrict trade. It essentially prohibits customs duties or charges having equivalent effect. The case of Diamonds v Chougol Diamond Co1. defines what kind of charges will be caught by article 30;

‘’Any pecuniary charge…imposed on…goods by reason of the fact that they cross a frontier’’

The only saving grace which will allow a member state to escape liability for charges of this kind are charges which are required by EU law, or charges which are for a service rendered at the border which are of direct benefit to the importer, and are proportionate to the cost of carrying out the service. This was evidenced in the case of Commission v Germany (Health Inspection Service)2. It is imperative that a benefit be passed on to the importer for a service charge to fall outside of Article 30. In Commission v Italy (Statistical Levy)3, the fact that no clear benefit could be discerned from the charge meant that it constituted a breach of Article 30. This goes to show how strict the courts are in implementing Article 30, as a more lenient approach would hinder their quest towards a single market.

This leads to Article 110, which is tied to Article 30, as without it the objectives of Article 30 would not be achieved. Article 110 also deals with fiscal charges, however it differs from Article 30 as it prohibits discriminatory or protectionist taxes which are present within a member state’s fiscal system, as opposed to charges present at their borders. In this regard, 110 and 30 can be seen to be mutually exclusive. The aim of Article 110 is quite simply ‘’to prevent the objectives of Article 30 from being undermined by discriminatory taxation’’4. It would be detrimental to the single market if member states were only scrutinised over charges imposed at frontiers and not over charges in place inside their borders.

Article 110 fills in for Article 30 by prohibiting both direct and indirect taxes which discriminate against importers. This is required so that no gaps exist which would restrict the single market. The Humblot5 case demonstrates this prohibition whereby a tax on engine size indirectly discriminated against importers. However, it should be noted that a member state can justify discrimination if it can be shown that the discrimination is necessary to achieve a legitimate economic or policy objective, as shown in the case of Chemial Farmaceutici6.

In determining if taxes are discriminatory in nature, there are two sections to Article 110. 110(1) scrutinises taxes which are levied on similar products which is determined by way of formal and economic tests, viewing their characteristics, production and marketing techniques, and consumer needs met. For example, the John Walker7 case involving the similarity of fruit wine and whisky.

110(2) on the other hand, catches discriminatory taxes applying to products which may not be similar, but are in competition. In these cases, 110(2) prohibits taxation which gives an advantage or protection to a domestic product over an imported product. The case of Commission v United Kingdom8 illustrates this quite well. A higher tax on imported wine compared to domestically produced beer was found to be protectionist in nature towards the domestic product. 110(2) recognized that whilst the products were not similar, they were in fact in competition and could be substituted for one another. As a result, there was a clear breach in Article 110(2).

Having illustrated the differences in applicability between Articles 30 and 110, it is necessary to briefly discuss the difficulty in this mutually exclusive relationship.

Problems can sometimes arise in determining which of the two articles is to apply in a given situation. For example, in the Denkavit9 case, a charge imposed at a frontier was found to breach 110 rather than 30. This was due to the fact that similar charges were in effect for domestic producers. Equally, in the case of Michailidis10 the same situation arose.

This mild difficulty aside, Articles 30 and 110 are vital to the operation of the single market. Without the relationship between the two existing as it currently does, the ‘’pursuit of the internal market would be fatally undermined"11. Mario Monti in his report to the European Commissioner stresses the importance in maintaining the single market in referring to the fact that ‘’trade in goods is a major driver of growth in EU industries’’12.

As illustrated above, both articles operate in different fiscal matters, however they are complimentary in that they both work towards the same objective. Without them, the goal of attaining a single market without barriers to trade would never be met.

1.Diamonds Social Fonds voor de Diamantarbeiders v Chougal Diamond Co (Cases 2&3/69) [1969] ECR 30
2.Commission v Germany (Case 18/87) [1988]ECR 453
3.Commission v Italy (Case 24/68) [1969] ECR 193
4.Paul Craig and Grainne De Burca, EU Law Text, Cases, and Materials (4th edition, Oxford Press, 2008)
5.Humblot v Directeur des Services Fiscaux (Case 112/84) [1985] ECR 1367
6.Chemial Farmaceutici SpA v DAF SpA (Case 140/79) [1981] ECR 1
7.John Walker v Ministeriet for Skatter (Case 243/84) [1985] ECR 481
8.Commission v United Kingdom (Excise Duties on Wine) (Case 170/78) [1980] ECR 417
9.Dansk Denkacit ApS v Danish Ministry of Agriculture (Case 29/87) [1988} ECR 299
10.Kapniki Michaïlidis AE v IKA (Case 442/98) [2000] ECR 49
11.Joseph McMahon, ‘Current Developments in European Union Law: Free Movement of Goods’ (2012), International and Comparative Law Quarterly
12.Mario Monti, ‘A New Strategy for the Single Market’ (2010)

Last Update: 2015-May-24 Jamie Murphy - Business & Law Student University College Dublin
The contents of this page do not constitute legal advice or create an attorney- client relationship with the contributor. Do not apply anything you read here without contacting a professional.
Author: Jamie Murphy
Law Firm: Business & Law Student University College Dublin