EU Single Market: Free Movement of Goods & Taxation

Posted on Feb 12, 2025 in Law

The European Single Market

Creation and Goals: The European Single Market, established in 1993, is one of the EU’s greatest achievements. It creates a territory without internal borders or regulatory obstacles for the free movement of goods and services. The Single Market promotes competition, improves efficiency, raises product quality, and reduces prices, benefiting businesses and consumers alike. The estimated economic benefits are €985 billion annually.

Legal Basis and Historical Background

  • Key Articles: Articles 4(2)(a), 26, 27, 114, and 115 TFEU.
  • 1958 – Treaty of Rome: Introduced the common market, aimed at removing trade barriers and fostering closer economic and social ties.
  • 1986 – Single European Act: Defined the internal market as an area without internal borders, ensuring the free movement of goods, people, services, and capital.

Development and Milestones

  1. Common Market (1958): Achievements included the customs union (1968), elimination of quotas, and partial tax harmonization (VAT in 1970). However, anti-competitive practices and trade barriers persisted.
  2. Internal Market (1980s): The Single European Act (1987) set a 1992 deadline to complete the internal market and introduced qualified majority voting to expedite decisions on trade, capital movement, and harmonization.
  3. 2003-2010 Strategy: Focused on facilitating goods movement, integrating services markets, reducing tax obstacles, and simplifying regulations. Progress was made in sectors like transport, telecommunications, energy, and postal services.
  4. 2010 Relaunch – Single Market Acts I & II: These Acts prioritized business mobility, the digital economy, and consumer confidence. Actions targeted growth drivers, including integrated networks, labor mobility, and cohesion.
  5. Digital Era: Since 2015, the Digital Single Market Strategy has driven modernization. During the COVID-19 pandemic, digitalization became a key recovery pillar.

Free Movement of Goods

Fundamental Principles

Free movement of goods eliminates customs duties, quotas, and measures having equivalent effects. It is supported by:

  • Mutual recognition of products.
  • Removal of physical and technical barriers.
  • Promotion of standardization.

Legal Basis

  • Articles 26 and 28-37 TFEU: Establish free movement of goods as a fundamental EU principle.
  • Article 28 TFEU: Goods originating in or legally imported into an EU Member State must circulate freely without internal barriers.

Achievements

  1. Customs Union (1968): Customs duties and quotas were abolished.
  2. Harmonization Efforts: Gradual removal of technical and legal barriers continued to strengthen the single market.

Prohibitions

  1. Charges Equivalent to Customs Duties:
    • Article 30 TFEU: Bans any financial charge imposed when goods cross borders, even if it is not technically a customs duty.
    • Exemptions: Charges are allowed only if they cover actual costs of EU-mandated inspections or voluntary services.
  2. Measures Equivalent to Quantitative Restrictions (MEQRs):
    • Articles 34-35 TFEU: Prohibit rules that hinder trade directly or indirectly.
    • Landmark Cases:
      • Dassonville Judgment: Defined MEQRs broadly as any rule capable of hindering trade.
      • Cassis de Dijon: Introduced the principle of mutual recognition, requiring Member States to accept goods legally produced in others unless justified.
      • Keck Judgment: Excluded non-discriminatory selling arrangements from the scope of Article 34.

Exceptions

  • Article 36 TFEU: Allows restrictions justified by public morality, public policy, security, or health. Measures must be proportional and not discriminatory.
  • Mandatory Requirements: Recognized in Cassis de Dijon for consumer protection, fiscal supervision, and public health.

Definition of Goods

  • Broadly defined in Commission v Italy (7/68) as products that have monetary value and can be subject to commercial transactions.
  • Includes: Electricity, waste, slot machines.
  • Excludes: Intellectual property, fishing rights, lotteries, and currency (e.g., banknotes).

Customs Duties and Internal Taxation

Prohibition of Customs Duties

  • Article 30 TFEU: Prohibits customs duties and equivalent charges.
  • Exceptions: Limited to costs for inspections required by EU law or voluntary services.

Internal Taxation

  • Article 110 TFEU: Prohibits discriminatory or protective taxation that hinders free movement of goods.
    • Direct Discrimination: Taxes explicitly targeting imported goods.
    • Indirect Discrimination: Neutral-looking taxes that disproportionately affect foreign goods (e.g., Humblot case on car taxes in France).

Coordination of Articles 30 and 110 TFEU

A financial charge must fall under either Article 30 (if tied to border crossings) or Article 110 (if part of internal taxation), but never both.