C-324/82

JUDGMENT OF 10. 4. 1984 — CASE 324/82

In Case 324/82

COMMISSION OF THE EUROPEAN COMMUNITIES, represented by its Legal Adviser, David Gilmour, and Guido Berardis, a member of its Legal Department, acting as Agent, with an address for service in Luxembourg at the office of Oreste Montalto, Jean Monnet Building, Kirchberg, applicant, ν

KINGDOM OF BELGIUM, represented by the Minister for Foreign Relations, 2 Rue Quatre-Bras, 1000 Brussels, in the person of Robert Hoebaer, Director at the Ministry of Foreign Affairs, Foreign Trade and Co-operation with Developing Countries, and Frans J. Wauters, Adviser at the Ministry of Finance, acting as Agents, with an address for service in Luxembourg at the Belgian Embassy, Résidence Champagne, 4 Rue des Girondins,

defendant,

APPLICATION for a declaration that, by failing to comply with the provisions of Articles 11 and 27 of the Sixth Council Directive (77/388/ EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax: uniform basis of assessment — (Official Journal, L 145, 13. 6. 1977) as regards the calculation of the basis for charging tax on cars, the Kingdom of Belgium has failed to fulfil its obligations under Community law,

Facts and Issues

JUDGMENT OF 10. 4. 1984 — CASE 324/82

(b) As regards voitures de direction, the or 3 3 % applicable to motor cars (Article Belgian administration applies special 33 of the VAT Code). Under Article 45 rules under which the VAT charged (2) of the Code no more than 50% of varies according to the length of the the tax calculated and charged in that period for which they are appropriated way is deductible even if the vehicle was by a manufacturer or dealer for his own appropriated exclusively for the needs of use. Those rules are set out in Circular the undertaking. Tax is not deductible if No 4 of 12 January 1971 and Circular the vehicle was appropriated exclusively No 74 of 11 June 1972. They distinguish for private purposes. between three different stages of sale :

COMMISSION / BELGIUM

mission, may authorize any As regards the importation of goods, the Member State to introduce special taxable amount is: measures for derogation from the provisions of this directive, in order "(a) the price paid or to be paid by the to simplify the procedure for importer, where this price is the charging the tax or to prevent sole consideration defined in A. 1 certain types of tax evasion or (a); avoidance. Measures intended to simplify the procedure for charging the tax, except to a negligible (b) the open market value, where no extent, may not affect the amount price is paid or where the price paid of tax due at the final consumption or to be paid is not the sole stage. consideration for the imported goods. 'Open market value' of imported goods shall mean the amount which (5) Those Member States which apply an importer at the marketing stage on 1 January 1977 special measures at which the importation takes of the type referred to in paragraph place would have to pay to a (1) above may retain them pro­ supplier at arm's length in the viding they notify the Commission country from which the goods arc of them before 1 January 1978 and exported at the time when the tax providing that where such dero­ becomes chargeable under the con­ gations are designed to simplify the ditions of fair competition to obtain procedure for charging tax they the goods in question." conform with the requirements laid down in paragraph (1) above." According to Article 11 B. 2, Member States may adopt as the taxable amount Article 11A is concerned with har­ the value defined in Regulation (EEC) monizing the definition of "taxable No 803/68 on the valuation of goods amount". It provides that, within the for customs purposes (Official Journal, territory of the country, the taxable English Special Edition 1968 (I), p. 170). amount shall be:

The Belgian Government replied by Upon hearing the report of the Judge- letter dated 10 June 1980 sent by Rapporteur and the views of the Belgium's Permanent Representation to Advocate General the Court decided to the European Communities, to which open the oral procedure without any was annexed a letter from the Ministry preparatory inquiry. of Finance. It is clear from that letter that the Belgian Government does not dispute that the Belgian legislation is at The Commission claims that the Court variance with Article 11 of the Sixth should: Directive. In its view, however, the exception provided for in Article 27 (5) 1. Declare that, by retaining special rules of the directive is applicable in this case. governing the basis for charging VAT on new cars, either sold within the country or imported, and on voitures The arguments put forward by the de direction contrary to the specific Belgian Government in its letter did not provisions in the matter laid down by convince the Commission and, by a letter Article 11 of Directive 77/388/EEC, dated 20 March 1981, it commenced the the Kingdom of Belgium has failed to infringement procedure provided for by fulfil its obligations under the EEC Article 169 of the EEC Treaty and Treaty; requested the Belgian Government to submit to it any observations which it might wish to make within a period of 2. Order the defendant to pay the costs. two months starting from the date of receipt of its letter. The Kingdom of Belgium contends that the Court should: In its reply of 10 June 1981 forwarded by Belgium's Permanent Representation, 1. Declare the Commission's application the Belgian Government adhered to its inadmissible or alternatively unfoun- view stressing in particular that its ded; legislation came within Article 27 (5) of the Sixth Dircetive. 2. Order the Commission to pay the costs. After re-examining the arguments the Commission decided that it had no cause to change its view that the Belgian VAT I I I — S u b m i s s i o n s and a r g u m e n t s rules in question were contrary to the of t h e p a r t i e s Sixth Directive and on 15 April 1982 it consequently sent Belgium a reasoned opinion, requesting it to adopt the In its application the Commission con- measures needed to comply with that tends first of all that the Belgian rules opinion within two months of its are not compatible with Article 11 since notification. Having received no reply to its effect is to tax systematically supplies its reasoned opinion, the Commission or imports of new cars on the basis of lodged this application, which was a value generally higher than the con- received at the Court Registry on 20 sideration actually received by the December 1982. suppliers or the price paid by the private

As regards that provision, the Com- As regards new imported cars, the mission rejects the argument that the Belgian VAT rules are not compatible Belgian measures are justified on the with Article 11 A. 1 (a), A. 3 (b) and B. 1 grounds of the prevention of tax evasion and 2 of the Sixth Directive. They render or avoidance. Belgium wrongly refers, as purposeless practically the whole of a means of justifying its legislation, to Article 11 in an important sector of the the existence of widespread tax evasion economy and thus introduce a taxation in the car sector. The essential question system substantially different from that is the extent to which Article 27 (5) auth- envisaged by the directive. Measures of orizes Member States to retain any that scale are not justified at all by the system whatever or lay down any ex- problem to be dealt with, namely the risk ception whatever to the very principles of of false invoices and exaggerated as- the Sixth Directive. The crucial point of sessments of the value of cars accepted in law in this case is therefore the scope of part-exchange for new vehicles. Both Article 27 (5). risks can be controlled by cross-checking stocks of cars, either new or accepted in part-exchange by dealers, with dealers' sales. The retention of a minimum taxable base of a general and systematic character therefore goes well beyond the limits laid down by Article 27.

Member States are not absolved, even under Article 27, from observing the essential principles of the Sixth Directive, Moreover, cars arc normally accepted in especially those laid down in Article 11, part-exchange on the basis of a fixed which is the key provision of the entire scale, and an exaggerated assessment of harmonization system since it was that the value of a car accepted in part- provision which introduced the uniform exchange does not per se make tax basis of assessment for VAT. Even pre- evasion or avoidance possible. In view of existing measures must be compatible the provisions of Article 11 A. 1 (a) of with Article 11 in so far as they must be the Sixth Directive, VAT must be paid consistent with the "scheme" of the Sixth on the total price agreed between the Directive. parties. The value accorded to the goods

accepted in part-exchange has nothing to the catalogue price, which leads to a do with that price. The sole result of the higher tax charge. Belgian measures is to include in the basis of assessment certain elements such as price discounts and rebates which Article 11 A. 3 (b) of the directive ex- cludes. (ii) As to the fact that there is no charge to tax at the time when the car is appro- priated, the Commission maintains that the use of the vehicle must be considered a service provided for consideration; (b) Voitures de direction therefore, under Article 11 A. (c), the taxable amount is the full cost to the taxable person of providing the service. Even if Belgium had been entitled to In the Commission's view, the contested treat the transaction as a supply of Belgian rules are contrary to Article 11 goods, the Commission could not accept A. 1 (b) and (c) of the Sixth Directive. a system arranged on that basis. They do not involve simplification measures or measures concerning the charging of VAT as such. In particular, the fact that VAT is not charged at the time of the appropriation of the car is Article 10 (1) (a) is the relevant provision incompatible with the directive. Under as regards the charging of VAT on the Belgian rules a taxable person may goods appropriated by an undertaking immediately deduct all the VAT paid on for its own use and used partly for a voiture de direction which he has used private purposes. As regards the for his own personal needs just as if "chargeable event", it is clear from that the vehicle were intended to be sold article that VAT becomes chargeable normally and not used partly for private when the vehicle is first appropriated for purposes. Nor does the Commission such purposes. The taxable amount is the consider compatible with the directive purchase price of the goods (Article 11 the rules which provide that VAT is to A. 1 (b)) or, if the appropriation of the be charged in respect of the sale of car is treated as a supply of services, the voitures de direction on the basis of, or full cost to the taxable person of with reference to, the catalogue price in providing the services (Article 11 A. 1 force at the time when the tax becomes (c)). Under the Belgian rules, however, payable. no tax is payable at that stage.

system established by the Belgian legis- expressly stipulate any period in which lation is more complex than the rules the Commission must raise any ob- contained in the Sixth Directive. jections which it may have, the Member Moreover, in order for simplification State concerned should be informed of measures to come within the proviso in its reaction within a reasonable period Article 27, they must adapt tne system since, if the Court eventually gave laid down by the Sixth Directive and not judgment against it, it would cause the

adopted. Article 27 (5) of the Sixth disputed that the rules in question arc at Directive is merely a continuation of variance with the provisions of that Point 12 of Annex A to the Second article. The real issue is whether the Directive. The Commission, which was Belgian legislation is compatible with fully acquainted with the Belgian rules, Article 27 (5) of the directive, and never disputed its conformity with the therefore the Commission ought to have Community legislation. referred to that article in the conclusions set out in its application, identifying it as The Belgian Government also relies upon the subject-matter of the dispute. the minutes of the Council meeting of 25 March 1977 at which the draft Sixth Thirdly, the Belgian Government con- Directive was considered (Council siders the Commission's application Document No R/716/77 of 25. 3. 1977, inadmissible on the ground that the sub-

under Article 27 (5). However, it Government contends that the Com- considers that, since that article does not mission's submissions are unfounded,

both as regards the rules applicable to As regards the scope of the derogation new cars and as regards those applicable provided for in Article 27 (5), the to voitures de direction. Belgian Government contends that nothing in the wording of that article suggests that the scope of the exception is to be limited to certain articles of the (a) New cars directive. Otherwise, it would be vitiated in its entirety. Consequently, in order to prevent tax evasion, a Member State may even derogate from the taxable bases laid Whilst admitting that the method of down by Article 11.

into force. A second distinction concerns the nature of the derogating measures, which are designed either to prevent tax evasion or to simplify the procedure for charging tax. Simplification measures, both new and pre-existing, must meet In particular, the Belgian Government one requirement, namely that they must challenges the Commission's reference not affect the amount of tax due at the to the principle of proportionality. final consumption stage except to a Although that principle is expressly negligible extent. However, the directive mentioned in paragraph (1) of Article 27, lays down no limitation for national that does not apply to paragraph (5). provisions designed to prevent tax When that provision was adopted the

17 (5). Similarly, in invoking the There it was stated that "the Council principle of proportionality, the Com- and the Commission agree that the mission is adding to that article a measures to prevent tax evasion or requirement which it does not contain. avoidance and the simplification Finally, by excluding from the ambit of measures referred to in Article 27 may the derogations certain provisions which take various forms. For example, they it considers essential to the directive, the may consist in a suspension of tax at one Commission is acting contrary to the or more stages at which the tax, if it had wishes expressed by the Member States been charged, would in any case have and usurping their role in assessing a been deductible in full by the buyer or provision in a manner going beyond its customer, or in provisions designed to letter and spirit. prevent a decrease in the taxable amount

Finally, the Belgian Government main- tains that it wished to reconcile the need However, the principle of a minimum to prevent tax evasion with the need to taxable base was expressly accepted in take account of the actual price of the the Second Directive (Article 8 and Point transaction and that under the Belgian 12 of Annex A) and was applied by system the catalogue price comes as near Belgium in the seven years following the as possible to the actual price since it introduction of VAT in Belgium and corresponds to the normal commercial preceding the entry into force of the price. The system is, moreover, by no Sixth Directive without any objection means rigid and even takes account of from the Commission. promotional campaigns. The Belgian Government concludes that the problem raised by the Commission is not a genuine problem. Even if the principle of proportionality applies to the present case, the context is not at all the same as that of Article 36 of the Treaty, since this case does not (b) Voitures de direction involve an exception to a basic principle of the Treaty but solely a derogating measure, based on an undisputed ground of public policy, namely the prevention On the question of voitures de direction, of tax evasion. In any case, the contested the Belgian Government contends that Belgian provision meets the requirement the Belgian rules constitute a measure of proportionality, having regard to simplifying the rules recommended by the scale of the tax evasion and the the Community, coupled with a measure importance of preventing it. A Member to prevent fraud. It agrees with the State has full power and sole re- Commission that, as far as voitures de sponsibility for adopting the measures direction are concerned, the Community which it considers the most appropriate provisions governing the supply of ser- and effective for combating tax evasion. vices are more in keeping with reality

than those governing sales. Nevertheless, Dirctive whilst the directive had not been in order to apply those provisions, implemented in all the Member States. certain facts must be ascertained. This can only be done on a standard and approximate basis and necessitates As regards the alleged error in its simplification measures. Difficulties also conclusions, the Commission considers occur in determining the price actually that it was right to charge Belgium with agreed for a voiture de direction which is infringing Article 11 and not Article sold after being appropriated for a 27 (5), which, in its view, is more in the period of less than six months. nature of a procedural rule. Fraudulent practices are particularly widespread or likely in this area. Although the submissions and grounds Finally, the Belgian Government con- relied upon in the three stages of the tends that the departure from the rules infringement procedure must be the same governing the taxable amount is more in order to ensure that the State apparent than real.

sale. The Belgian Government also section, does not dispute that steps must challenges the Commission's view that be taken to prevent tax evasion. the Belgian system does not constitute a However, this cannot be done by any measure for simplifying the procedure means whatsoever, but only by means for charging VAT because if affects the consistent with the scheme of the Sixth taxable amount. There are no grounds Directive. Article 27 (5) therefore not for giving such a narrow interpretation only imposes on Member States a strict to the term "charging" and for re- obligation to give notice of such stricting it to "method of payment". The measures but also implies basic limits as charging of the tax encompasses all the regards the measures which may be elements by which it is established as retained.

In its view the procedure for establishing an infringement, as laid down in Article 155 of the Treaty, As with all derogating measures, the imposes upon it an obligation unlimited derogation in Article 27 (5) must be in time. The Commission did not con- interpreted narrowly. In the words of sider it appropriate to take proceedings that provision, national measures must against any infringements of the Sixth therefore be "special" and be aimed

only at "certain types" of tax evasion. therefore cannot warrant the adoption of All general measures which, instead of a general measure applying to all sales being directed against certain types and imports of new cars contrary to the of practices, tend systematically to rules of the Sixth Directive, especially as disregard an economic fact are excluded adequate checks can be carried out by from its scope. Contrary to the view held examining accounting records. by the Belgian Government, even the Council cannot authorize such measures. As far as imported cars are concerned, To derogate from Article 11 by the Commission maintains that the establishing a notional basis for the Belgian measure is not a measure charging of VAT is contrary to the very designed to prevent tax evasion, since it essence of the directive. The actual effect is not intended to stop particular to the Belgian system is to increase instances of evasion, but is a measure systematically the basis of assessment. designed to guarantee the Belgian State a The Commission acknowledges that by minimum revenue from taxation. Furth- using that system the Belgian State ermore, by requiring VAT to be paid on suppresses very effectively all tax evasion an amount other than the agreed price, or avoidance, but it is nevertheless totally the Belgian system reduces contractual disproportionate to the aim in view. freedom. As regards the technical details set out in the defence, the Commission makes the (b) Voitures de direction following supplementary observations: The Commission finds it unacceptable (a) New and imported cars that no proportion of the use of a voiture de direction is attributed to the under- In conformity with the minutes of the taking and that all the VAT payable in meeting of the Council held on 25 respect thereof is borne by the buyer of March 1977 cited by the Belgian the car. In both respects the practice Government, the Commission acknow- infringes the Sixth Directive. ledges that measures designed to combat tax evasion may take various forms in Moreover, Belgium's argument that its order to prevent the taxable amount system is a measure to prevent evasion from being reduced; however, it rejects was put forward for the first time measures which are expressly prohibited in its defence. There is, however, a and which have the opposite effect and contradiction between that argument and cause overtaxation. the grounds advanced in the letter of notification. As far as the evaluation of other measures adopted by Belgium, the The Commission also disputes that the Netherlands and Germany are con- Belgian measures simplify the procedure cerned, the Commission states that it has for charging VAT, since they treat cars always applied the same criteria in all the in three different ways depending on cases in which Article 27 is applied and their age, which is a rather complicated refers in this regard to Annex IV to the device. reply. Finally, the Commission maintains that As regards the extent of tax evasion in the term "charging" appearing in Article the case of part-exchange sales, the 27 (5) does not include the common Commission argues that this type of tax basis for assessing VAT, even if evasion occurs only in isolated cases and reference is made to other provisions of

the directive distinguishing between the are to be introduced, it must be identical charging of the tax and its collection. to the power expressly conferred upon the Commission by Article 27 (1) in relation to new measures, namely to present a proposal to the Council. In its rejoinder the Belgian Government Therefore the Commission's general again makes the point that the power under Article 155 of the Treaty is Commission ought to have examined the restricted to investigating whether the Belgian measures within a "reasonable conditions placed on the retention or period", which was recognized by the introduction of derogating measures are Court in the judgment which it delivered being complied with, that is to say on 11 December 1973 in Case 120/73 whether or not the measure in question ([1973] ECR 1481). Moreover, not- is justified by the need to prevent tax withstanding the Commission's obser- evasion and, if so, whether or not the vations on the entry into force of the derogation is a special measure. The Sixth Directive, the period laid down in Belgian Government explains in detail Article 27 (5) was not altered by the how those conditions are fulfilled in this Ninth Directive of the Council of case. Besides the classic tax frauds, VAT 26 June 1978 (Official Journal L 194, is the subject of specific fraudulent p. 16), so that the Commission could practices. However, the Belgian measures and ought to have protested to Belgium to combat such practices are very specific earlier. As regards the preparatory in so far as they are restricted to a documents relating to the Sixth particular area and concern only one Directive, the Belgian Government refers type of fraud. In any case, Article 27 is to Article 12.C.2 of the draft presented pointless unless it allows systematic and by the Commission, according to which, effective measures to be applied in the possibility of introducing and limited areas in order to detect, certain retaining standard or minimum bases of types of tax evasion. assessment for certain transactions as a measure for preventing evasion or simplifying the calculation and collection of tax were not excluded. That provision The Belgian Government also refers to was not formally accepted by the the measure adopted with the agreement Council but is embodied in Articles 24 of the Commission and Council in the and 27. construction industry, which is a relevant example of the form which a measure designed to prevent evasion of VAT must take. (a) New cars

all restrict the scope of the har- IV — O r a l p r o c e d u r e monization. At the sitting on 22 November 1983 the By referring to the actual price, Article Commission of the European Com- 11 is aimed at preventing any reduction munities, represented by its Legal in that price; a slight increase on the Adviser, D. Gilmour, acting as Agent, other hand, is less serious. During the and the Belgian Government, represen- Council discussions the representatives of ted by R. Hoebaer, and F. J. Wauters, the Belgian Government never concealed acting as Agents, presented oral their intention to retain a minimum basis argument. of assessment. In a reply to a question from the (b) Voitures de direction President of the Court, the Commission and the defendant stated that under Council Regulation No 1224/80/EEC Finally, the Belgian Government states (Official Journal 1980, L 134, p. 1) tax that it was so difficult, when a voiture de may be charged primarily on the invoice direction was sold, to assess the value to value or alternatively on an amount be placed on the private use of the virtually equivalent to the open market vehicle that that complication and the value in the country of exportation. risk of fraud in such cases had to be obviated by referring, when it was The Advocate General delivered his sold, to the catalogue price of the opinion at the sitting on 24 January vehicle. 1984.

Decision

1 By application lodged at the C o u r t Registry on 20 December 1982, the Commission of the E u r o p e a n Communities b r o u g h t an action before the C o u r t u n d e r Article 169 of the E E C T r e a t y for a declaration that, by retaining special rules governing the basis for charging value-added tax (hereinafter referred to as " V A T " ) on new cars, either sold within the c o u n t r y or imported, and on so-called "voitures de direction" contrary to Article 11 of the Sixth Council Directive of 17 M a y 1977 on the har- monization of the laws of the M e m b e r States relating to turnover taxes C o m m o n system of value-added tax: uniform basis of assessment — (Directive 7 7 / 3 8 8 / E E C , Official Journal 1977, L 145, p. 1), the Kingdom of Belgium had failed to fulfil its obligations u n d e r the E E C Treaty.

If the appropriated new car is sold more than six months and less than 18 months after it was first used, the VAT payable on account of its appro- priation is based on an amount equal to the difference between the catalogue price in force at the time of sale and the actual sale price. The sale of the car is subject to the rules governing the taxation of second-hand cars.

If the appropriated new car is not sold within 18 months after it was first used, VAT is charged according to the ordinary rules laid down in Article 12 (1) of the Belgium VAT Code; in that case the VAT payable on account of the appropriation of the car is calculated on the basis of the purchase price or the cost price of the appropriated new car.

COMMISSION / BELGIUM

5 According to Article 2 (3) of Royal Decree No 17, new cars are cars manu- factured within the country "which are supplied for the first time to a user, even if they have been used by the manufacturer or by a motor-car dealer established in Belgium for a period not exceeding six months" as well as imported cars "where there is no evidence that they have been used for six months before the time when the tax falls due".

6 Article 2 (2) of Royal Decree No 17 defines the catalogue price as the price freely fixed by the manufacturer for the sale to the user of new cars of the same type, including their equipment and accessories, or, if the manufacturer is established abroad, by the authorized agent empowered to fix that price.

7 Article 4 of the decree provides that the catalogue price and any changes made to it must be notified to the director general of the competent administration.

Directive does not expressly lay down a period within which objections must be raised, the Commission must act within a reasonable period as in the case of the procedures provided for by paragraphs (3) and (4) of Article 27 and Article 93 (3) of the EEC Treaty, as interpreted by the Court in its judgment of 11 December 1973 in Case 120/72 (Lorenz ν Germany, [1973] ECR 1471, at p. 1481).

12 That submission cannot be accepted. The period referred to in Article 27 (2) and (3) of the directive and the period resulting from the Court's interpret­ ation of Article 93 of the EEC Treaty concern very specific situtions. The first case involves the examination of an application to derogate from the provisions of the directive and the second a procedure which in part derogates expressly from the procedure laid down in Article 169 of the Treaty. In the absence of such a derogation for measures retained under Article 27 (5) of the directive, the rules contained in Article 169 of the Treaty must be applied and the Commission is not obliged to act within a specific period. The Commission has explained that in the present case, exercising the discretion accorded to it by Article 169 of the Treaty, it decided that it should postpone examining the compatibility of the Belgian measures in question until the directive was in force in all the Member States. In so doing it did not exercise its discretion in a manner contrary to the Treaty.

1 3 The Belgian Government's second submission is that the Commission was wrong to base its action on Article 11 of the Sixth Directive, as the real issue in whether the Belgian legislation is compatible with Article 27 (5) of the directive, which is the provision which the Commission ought to have mentioned as the subject-matter of the dispute in the conclusions set out in its application.

17 Since those submissions must be rejected, the substance of the case must now be examined.

The substance

18 In support of its application the Commission argues that, by retaining special rules governing the basis for charging VAT on new cars, either supplied within the country or imported into Belgium, and on voitures de direction, the Kingdom of Belgium has infringed Article 11 of the Sixth Directive.

19 It is common ground that the Belgian rules in question are at variance with Article 11 of the directive, which fixes the taxable amount. As regards supplies of goods and services within the country, that amount is principally composed of the consideration which has been or is to be obtained having regard inter alia to price discounts and rebates allowed to the customer and accounted for at the time of the supply. As regards the importation of goods,

JUDGMENT OF 10. 4. 1984 — CASE 324/82

it is composed of the price paid or to be paid by the importer or, if that price is not the sole consideration for the imported goods, the open market value or, if Member States wish, the customs value as defined in the Community- regulations.

COMMISSION / BELGIUM

23 Furthermore, the Commission disputes that the provisions at issue are justified by the desire to prevent tax evasion or avoidance or that they constitute genuine measures for simplifying the procedure for charging the tax. It argues that, as far as most taxable persons are concerned, those aims can in any case be achieved by less coercive measures, for example by carrying out cross-checks between stocks of cars, either new or accepted in part-exchange by dealers, and dealers' sales.

24 It is argued by the Belgian Government, on the other hand, that the dero- gation from Article 11 is lawful because it is based on Article 27 (5); in so fai- as the derogations relate to the simplification of the procedure for charging the tax, they must meet the criterion laid down in paragraph (1) of Article 27, that is to say, they may not affect the amount of tax due at the final consumption stage except to a negligible extent; however, the directive does not lay down any limitation as regards national provisions designed to prevent tax evasion or avoidance, so that departures from any of the provisions of the directive are permissible, including those concerning the taxable amount contained in Article 11 ; what is more, neither the principle of proportionality nor any other particular requirement can be invoked in that regard.

25 The Belgian Government maintains, however, that the rules in question do in fact satisfy the requirements of proportionality because there is widespread tax evasion in the motor trade. The practices in question consist inter alia in sellers' giving a false declaration of the price of new cars, expecially when accepting used cars in part-exchange, and in buyers' deducting unpaid input tax; such practices play a considerable part in the budgetary deficit and also distort competition.

28 For the retention of such measures, Article 27 (5) lays down the procedural requirement that Member States must notify them to the Commission. That requirement was duly satisfied by the Kingdom of Belgium.

29 It should, however, be noted that the measures notified must be of such a nature as to prevent tax evasion or avoidance and that in principle they may not derogate from the basis for charging VAT laid down in Article 11, except within the limits strictly necessary for achieving that aim.

30 It is n o t disputed that the Belgian G o v e r n m e n t was justified in taking the view that there was a real risk of tax evasion or avoidance in the m o t o r trade which justified the adoption of measures of the kind which Article 27 of the Sixth Directive allows to be retained. Such measures may, w h e r e appropriate, entail the application of standard a m o u n t s , provided that the special measures do not derogate from the rules laid down by Article 11 further than is necessary to avoid the risk of tax evasion or avoidance.

31 However, by applying to all new cars the catalogue prices notified to the Belgian authorities, the Belgian legislation entails such a complete and general amendment of the basis of assessment that it is impossible to accept

COMMISSION / BELGIUM

that it contains only the derogations needed to avoid the risk of tax evasion or avoidance. In particular, it has not been proved that, in order to attain the aim in view, it is necessary that the taxable amount should be fixed on the basis of the Belgian catalogue price or that the taking into account of any form of price discount or rebate should be excluded in such a comprehensive manner.

JUDGMENT OF 10. 4. 1984 — CASE 324/82

Costs

36 Under Article 69 (2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the Kingdom of Belgium has failed in its main submissions, it must be ordered to pay the costs.

On those grounds,

THE COURT

hereby:

Delivered in open court in Luxembourg on 10 April 1984.

P. Heim J. Mertens de Wilmars Registrar President