The European Union (EU) has made enormous progress in its attempt to create a harmonious economic system whereby the economic activities taking place in the region are for the benefit of all the member states. The EU Customs Union removes the customs barriers between all the member states of the EU to prevent direct or indirect discrimination of the goods imported from other member states and defines a common customs policy towards the goods produced outside the union. But the establishment of a uniform tax regime to implement the principle of freedom of movement of goods as one of the four fundamental freedoms for the entire region has not been smooth and the European Court of Justice (ECJ) has tried to deal with conflicts related to taxes, charges, and duties.
The discriminatory tax provisions run from Article 110 through article 113 in the Treaty for the Functioning of the European Union (TFEU). The same provisions appear in the Treaty of the European Community from section 90 through section 93. Being aimed at harmonizing the indirect taxation on the territory of the EU and ensuring an effective operation of the internal market, ECJ faced several difficulties caused by the enforcement of these regulations. Law concerning the discriminatory tax provision contains controversial moments due to which difficult questions arise in particular cases. The European Court of Justice (ECJ) must be involved in investigating every case and have the final say in the decision.
The first of the topical issues deal with the similarity and substitutability of national and imported products. The application of article 110 TFEU presupposes that the competing products are to be compared based on their similarity instead of identity, though there is no restriction for differentiation approach towards taxation of goods based on objective criteria, such as manufacturing processes, for example. The problem is determining and evaluating these criteria. Two products are to be taxed identically if they possess the same objective characteristics from the consumers’ and fiscal points of view. If the taxation criteria chosen by the state result in higher taxation of the imported goods in particular cases, ECJ considers this case to be an infringement of article 110 TFEU.
The other theme that arises from the provisions is their inconsistency in balancing the priorities of the Treaty against the needs of each member state limiting its opportunities for creating taxation regimes compatible with further national policies. The regulations proclaiming the freedom of movement of goods presupposes certain exceptions justifying certain barriers in case if their complete abolition results in the threatening of commercial property, health, or security of the country. The issue of environmental protection and wastes handling is an example of such an exception. Because recycling wastes are treated as goods, this process is incompatible with the principle of freedom of movement of goods. Another example of reasonably violating this basic principle is creating trade barriers during the mad cow disease to prevent the health threat.
In an attempt to strike a balance between the member states’ national interests and the overall European Union objective, the European Court of Justice (ECJ) has worked with other organs of the union to ensure that there is a consideration for the special cases of the members. Still, a lot of questions remain unsolved while further development of jurisprudence is required for clarifying the most controversial moments of the discriminatory tax provisions to harmonize the priorities of effective operation of the internal market with the needs of an individual member state.
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