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2 Intertax 1 (1974)

handle is hein.kluwer/intrtax0002 and id is 1 raw text is: In this issue The Reform of Direct Taxation in Italy Summary of the article by Dr. Mario Burgio, Brussels The author, an official in the tax division of the European Commission, reviews (in French) the reform of direct taxation in Italy and its effects on both business and labor. In his analysis of the circumstances leading to the reform, the author gives some indication of the extent of the tax avoidance under the old system; in 1968 only 848 individuals had declared an income in excess of $ 20,000,-. One special point to be noted is the introduction of the so-called classical system of corporate taxation in Italy with a minimum tax burden of 39.70% at the corporate level. Taxation of Equipment Manufactured in one Member State in the European Economic Community and Delivered and Assembled in Another State under the old German Turnover Tax Summary of the article by Kurt Ebentheuer, Brussels The European Court of Justice recently rendered an interesting decision involving the application of the previous German turnover tax to international transactions. While the turnover tax was replaced in 1968 by a tax on value added (TVA), the decision is still of interest for years in which final turnover tax liability has not yet been determined. The decision is commented on by Mr. Kurt Ebentheuer, Brussels. The case involved an Italian company (FOR) which produced in Italy equipment used in the textile industry. The equipment was imported into Germany where it was assembled and put on line by employees of the Italian company. At the time of importation, the equipment was subject to a turnover equalisation tax of 6%, which the Italian company was required to pay. under the terms of its contracts with its customers. The German tax authorities assessed an additional 4% turnover tax on the value of the installed equipment as a 'Werklieferung', i.e. a second tax treating the delivery and installation of the equipment as a second taxable transaction. In order to collect the second tax, the German tax authorities attached certain claims of FOR against its German customers. The customers made direct payment to the German authorities under the attachments and refused to pay FOR when requested. FOR then sued the German customers in Italy; the Italian court refered to the European Court of Justice the question as to whether the imposition of a second tax on the imported goods which had already been subjected to the turnover equalisation tax was a violation of art. 95 of the Rome Treaty which prohibits discrimination against impor- ted products FOR (and the Italian government) argued that the imposition of a second turnover tax on the value of the installed equipment discriminated against imported goods since competing German firms would not be subject to double tax but only to a single turnover tax on the value of the installed equipment. The German government in opposition argued that the 6% turnover equalisation tax simply reflected the fact that in a multi-stage cascade turnover tax previous domestic transactions involving the same type of equipment would have been subject to tax. The 6% border tax was intended to offset this previous tax burden on domestic goods. Interpreting the border tax in this way, the German government concluded that it was perfectly appropriate to impose an additional 4% tax the actual 'normal' turnover, i.e. the delivery and installation of the equipment. The German government indicated that the actual tax burden on similar domestically produced goods as a result of previously taxed transactions would have been approximately 5.7%. Intertax 1974/1 I

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