C-47/88
ECLI:EU:C:1990:317
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COMMISSION v DENMARK
OPINION OF MR ADVOCATE GENERAL MISCHO delivered on 18 September 1990 *
Mr President, framework of the general Danish tax Members of the Court, system. With regard to used cars, it contests the fact that the duty is based on an estimated value which is generally higher than the real value of the vehicle. 1. Under Article 1 of Codified Danish Law No 13 of 16 January 1985 on registration duties on motor vehicles, duty is charged on motor vehicles when they are first registered I — Taxation of new vehicles in Denmark.
2. The rate of duty is based on the dutiable 5. The parties agree that the Danish regis value of the vehicle. For private cars, the tration duty is internal taxation falling rate of duty is 105% of the value up to under Article 95. In the terms of that article: DKR 19 750 and 180% of the value in excess of that amount (Article 4). The dutiable value of a new vehicle is the current price, including value-added tax, at 'No Member State shall impose, directly or which it is sold to the user in Denmark at indirectly, on the products of other Member the date of registration (Article 8). States any internal taxation of any kind in- excess of that imposed directly or indirectly on similar domestic products.
3. No further duty is charged when a vehicle already registered in Denmark is sold. On the other hand, duty is charged when a used vehicle is imported. In that Furthermore, no Member State shall impose case, the dutiable value is equal either to the on the products of other Member States any initial price of the vehicle when new or to internal taxation of such a nature as to afford 90 % of that price if it is more than six indirect protection to other products'. months old (Article 11).
6. It is common ground that in Denmark 4. The Commission considers that those there is not only no domestic motor car rules are contrary to Article 95 of the EEC production, that is to say no 'similar Treaty. With regard to new cars, it contests domestic product', but also no other the rate of duty, which is so high as to production such as to be protected by the restrict the free movement of goods within tax. The Danish Government concludes that the Community and falls outside the the registration duty
* Original language: French.
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'constitutes internal taxation which has no 'the fundamental principles of the Treaty discriminatory or protectionist effect. It is must be taken as the basis for the interpre therefore not contrary to Article 95 of the tation of Article 95, even where the express Treaty* (conclusion of the defence and the prohibitions in that article... are not rejoinder). applicable'.
7. The Commission, for its part, ' does not deny that in this case, 8. It is true that the Court stated in its judgment in Case 15/81 Schul v Inspecteur der Invoerrechten en Accijnzen [1982] ECR 1409, at p. 1431, paragraph 33 ('Schul I), 'the express prohibitions in that article and repeated in its judgment in Case 299/86 [Article 95] — which guarantee normal Rainer Drexl [1986] ECR 1213, at p. 1235, competition with domestic products — are that not applicable'.
'The interpretation of Article 95 must take It also accepts that, in accordance with the 2 account of the objectives of the Treaty as case-law of the Court, laid down in Articles 2 and 3, which include, in the first place, the establishment of a common market involving the elimi nation of all obstacles to trade in order to 'the same charge cannot within the system merge the national markets into a single of the Treaty fall simultaneously under market bringing about conditions as close as Article 95 and Articles 9 and 12 or possible to those of a genuine internal Article 30'. market'.
However, the Commission considers that 9. However, in the Court's case-law there is only one judgment concerning the rate of an internal tax charged only on imported 'the purpose of Article 95, like that of products in the absence of similar or Article 30 (and Articles 9 and 12), is to competing domestic products. That case is 1 guarantee in all circumstances' the free Case 31/67 Stier v Hauptzollamt Hamhurg- movement of goods within the Community'. Ericus [1968] ECR 235, in which the Court held as follows:
Therefore,
1 — The following extracts are taken from p. 14 of the 'Article 95 does not prohibit Member States Commission's reply. from imposing internal taxation on imported 2 — See the judgments in Case 78/76 Steinike v Germany [1977] ECR 595, at p. 614, and in Case 27/67 Fink-Fruét products when there is no similar domestic v Hauptzollamt ECR 223. Müncben-Landsberger Straße [19681 product or other domestic product capable 3 — Emphasized in the original. of being protected;
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... it would not be permissible for them to tax at a prohibitive rate. Moreover, the impose on products which, in the absence of Danish Government's Agent informed the comparable domestic production, would Court at the hearing, and was not contra escape from the application of the dicted by the Commission's Agent, that prohibitions contained in Article 95, charges registration duty brings in about of such an amount that the free movement DKR 10 000 000 000 per year, that is to of goods within the common market would say, about 4 % of the State's total revenue. be impeded as far as those products were It is thus manifestly not prohibitive. concerned;
Such a restraint on the free movement of 13. It remains to be determined whether the goods cannot however be presumed to exist free movement of motor vehicles is when the rate of taxation remains within the compromised by a charge such as the general framework of the national system of Danish duty which does not make imports taxation of which the tax in question is an impossible but which undoubtedly restricts integral part'. them to a certain degree. Beyond a certain threshold, the Danish tax system causes the final price of a car to be three times the price before taxes. For the same amount of 10. It is not necessary to dwell on the first money, a Danish family can buy only one of those three points, which is considered in car whereas a family resident in certain greater detail in the Stier judgment, since other Member States could buy two, and the Commission does not contest — in possibly even a third, smaller, one. Thus, principle — Denmark's right to tax motor some potential imports do not take place vehicles. because of the rate of the Danish duty.
11. It follows from the second point taken from the judgment in Stier that the Court 14. The Commission produced tables regarded as unacceptable showing that the density of vehicles in Denmark is lower than in the other Member States of comparable per capita income.
'charges of such an amount that the free movement of goods within the common market would be impeded as far as those products were concerned'. 15. However, in absolute terms, the number of vehicles is large and all have been imported. To conclude in those circum stances that imports into Denmark are 12. It may certainly be deduced from that compromised, amounts to arguing that the passage that an internal tax at a level which purpose of Article 95 is not merely to ensure would in fact make all imports impossible that all the discriminatory or protective would fall under Article 95. However, such effects of indirect taxes are eliminated but cases are unlikely to arise because the also to ensure that imports are as high as purpose of indirect taxes is to provide funds possible, having regard to the available for the budget of the State; no country purchasing power. That would mean that therefore has an interest in levying such a the 'optimization' of trade flows would take
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precedence over all other considerations, in 20. May I also remind the Court that in its particular those concerning the redistri judgment in Case 140/79 Chemial Farma- bution of wealth or the protection of the ceutici v DAF [1981] ECR 1, at p. 15, it environment. expressly recognized as lawful a rate of tax which prevented practically all imports into Italy of synthetic alcohol from other Member States on the basis that in applying that rate, the Member State was pursuing an economic policy objective which was 16. If that argument was correct, internal compatible with the requirements of the taxation could never exceed the marginal Treaty and because the rate had an equi cost which the consumer is still prepared to valent economic effect in the national pay in order to buy the desired goods; that, territory in that it also hampered the estab in this case, means, according to people's lishment of profitable production of the income level, the first, second or third car. same product by Italian industry.
21. Furthermore, in the judgment in Case 17. However, if it was possible to deduce C-132/88 Commission v Greece [1990] ECR from Article 95 of the Treaty an obligation 1-1567, the Court was called on to rule on a on the part of the Member States to do very rigorous system of taxation of motor nothing to prevent imports reaching their 4 vehicles, which involved, in particular, a Optimal economic level' that rule should steep increase in the tax at a point slightly also apply where there was domestic above the level of cubic capacity at which production of the same product. domestic production ceased. The Court refused to regard that system as an infringement of Article 95 because it had not been proved that it favoured the sale of domestically produced cars, even though it 18. If there is domestic production, Article practically impeded the importation of 95 merely prohibits the imposition on large-engined cars manufactured in other imports of taxation in excess of that Member States. imposed on similar domestic products. If the tax is not discriminatory, the rate at which it is levied cannot be contested. I should add that if there was domestic production in 22. Moreover, and most importantly, in the Denmark of motor cars taxed at the present same judgment, the Court held that two rates, imports would be even less because consumers would have the choice of buying from the domestic manufacturers.
'Article 95 of the Treaty does not provide a basis for censuring the excessiveness of the level of taxation which the Member States 19. In my view, that shows that the f ramers might adopt for particular products in the of the Treaty did not intend Article 95 to be 4 — Vehicles of 1 000 cc: 88%; vehicles of 1 600 cc: 166%; an instrument for ensuring that the level of vehicles of 1800 cc: 187.2%; vehicles of 1900 cc: trade in goods was as high as possible. 288.8%; vehicles of 2 632 cc: 400%.
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light of considerations of social policy' no problem in regard to compatibility with (paragraph 17). Article 95. It is only where the rate of tax is significantly higher than any other internal tax levied by the same State that a more detailed examination is necessary, as I 23. To my mind, that reasoning also applies carried out in regard to the registration tax. to this case because the Danish duty is very similar to the Greek one. Whereas the Greek duty increases sharply beyond a certain cubic capacity of the vehicle, the Danish duty increases from 105 to 180% 26. Moreover, since the judgment in Stier, once the price exceeds DKR 19 750. It is the Court has had occasion more than once therefore possible to regard it as being to rule on differential taxation systems and intended to redistribute income, that is to its consistent view has been: say, a social policy objective, particularly bearing in mind that in Denmark the social security system is entirely financed out of taxation. 'in its present stage of development Community law does not restrict the freedom of each Member State to lay down tax arrangements which differentiate 24. For all those reasons, I conclude that between certain products on the basis of the Danish registration duty on new cars is objective criteria. Such differentiation is not incompatible with Article 95 of the compatible with Community law if it Treaty. pursues objectives of economic policy which are themselves compatible with the requirements of the Treaty and its secondary legislation and if the detailed 25. In those circumstances, there is no need rules are such as to avoid any form of to attach much importance to the third discrimination, direct or indirect, in regard point from the judgment in Stier in which to imports from other Member States or any the Court held that form of protection of competing domestic products (judgment of 27 May 1981 in Joined Cases 142 and 143/80 Amminis- trazione delle finanze dello Stato v Essevi and 'a restraint on the free movement of goods Salengo [1981] ECR 1413, at p. 1434). Nor cannot however be presumed to exist when can it be denied that in the sphere of the rate of taxation remains within the harmonized systems of value-added tax general framework of the national system of Member States have the right to tax some taxation of which the tax in question is an consumer goods, particularly those regarded 5 integral part'. as luxury products, more heavily'.
To me, that passage means that in all cases 27. Furthermore, the Court has expressly in which the rate of a tax is not significantly recognized that motor cars may properly be above that of taxes levied on other products of the same kind (for example, food 5 — Judgment in Case 319/81 Comminion v Italy [1983] ECR products, consumer durables) there can be 601, at p. 620.
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subject to a separate system of taxation in of taxation is free from any discriminatory addition to value-added tax. In its judgment or protective effect' (paragraph 17, in Joined Cases 93 and 94/88 Wisselink and judgment of 5 April 1990). Others v Staatssecretaris van Financiën [1989] ECR 2671, the Court did not find fault with the 'special consumption tax on passenger cars' charged in the Netherlands It seems to me that the Court has thereby in addition to value-added tax. Even though accepted that 'the sky is the limit' as far as that tax is considerably lower than the rates of motor taxation are concerned Danish duty, it is similar to it in structure provided that the conditions indicated in the ( 18 % up to a value of HFL 10 000 and judgment have been fulfilled. Although the 27 . 3 % thereafter). Danish registration duty increases not in accordance with the cubic capacity but with the value of the product and even though it consists of only two levels, there can be no doubt that it is based on an objective criterion. Moreover, as stated at the 28. Finally, and most importantly, in its beginning of my Opinion, it has no judgment of 5 April 1990, Commission v discriminatory or protective effect. Greece, cited above, the Court did not call in question the system of taxation applying in Greece to the purchase and importation of motor vehicles. Laid down in a special 30. Under those circumstances, I can only law concerning tax provisions applying only to private cars, the system is completely propose that the Court dismiss the separate from the other systems of indirect application in so far as it concerns taxation taxation in Greece. It levies higher taxes on of new cars. private cars than are levied on other consumer durables. Moreover, the rates are, on average, higher than the Danish regis II — The taxation of used cars tration duty.
31. On the other hand, in regard to the taxation of used cars, I entirely share the 29. In that judgment, the Court reaffirmed Commission's view that the Kingdom of a principle which it had already laid down Denmark has infringed Article 95 of the in regard to a tax levied annually (judgment Treaty 'because the calculation of the regis in Case 112/84 Humblot v Directeur des tration duty for imported used motor services fiscaux [1985] ECR 1367), namely vehicles is in most cases made on the basis that of an estimated value which is higher than the real value of the vehicle with the result that imported used motor vehicles are taxed more heavily than used motor vehicles which are sold on the domestic market after 'as Community law stands at present the being registered in Denmark'. Member States are at liberty to subject products such as cars to a system of tax which increases progressively in amount according to an objective criterion, such as 32. No doubt the Danish Government is cylinder capacity, provided that the system probably right in stating that by virtue of
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the high tax on new cars, their value and that diminishes much more slowly on the Danish market than in countries where car tax is lower. It can scarcely be denied that in countries in which cars are liable only to 'the first paragraph of Article 95 is infringed value-added tax at 12 or 14%, the residual where the taxation on the imported product pan of that tax in the value of a used car and that on the similar domestic product are will be practically negligible after two or calculated in a different manner on the basis three years, whereas that could not possibly of different criteria which lead, if only in be the case in Denmark. certain cases, to higher taxation being imposed on the imported product'. 7
35. Furthermore, in order to assess the compatibility of a given tax with the second 33. However, it is none the less true that paragraph of Article 95, it is necessary to vehicles bought new in Denmark also determine progressively lose their value and the fixing of an estimated taxable value of imported used cars at 100 or 90% (if the vehicle is more than six months old) of the initial 'whether or not the tax is of such a kind as price of the vehicle when new is a clear to have the effect, on the market in over-taxation of those vehicles as a result of question, of reducing potential consumption which they bear a tax burden which is of imported products to the advantage of generally greater than the residual value of competing domestic products'. 8 the tax initially paid when the vehicle was first registered when new, that is to say that part of the tax still included in the value of the vehicle on the national used-car market. However, for the second paragraph of Article 95 to apply, it is not necessary that that protective effect should be shown stat- istically; it is sufficient if it is shown
34. However, it follows from the Court's previous decisions that 'that a given tax mechanism is likely, in view of its inherent characteristics, to bring about the protective effect referred to by the Treaty'. 9
'in order to apply Article 95 of the Treaty, 36. The argument that the judgment in not only the rate of direct and indirect Case 47/84 Staatssecretaris van Financiën v internal taxation on domestic and imported Schul [1985] ECR 1491 ('Schul II') is not products but also the basis of assessment and detailed rules for levying the tax must be 7 — See the judgment in Case 20/76 Schöttle v Finanzamt taken into consideration' 6 Freudenstadl[1977] ECR 247, at p. 260, paragraph 20. 8 — See the judgment in Case 356/85 Commission v Belgium [1987] ECR 3299, at p. 3325, paragraph 15. 6 — Sec the judgment in Case 74/76 lannelli v Meroni [1977] 9 — See the judgment in Case 170/78 Commission v United ECR 557, at p. 578, paragraph 21. Kingdom [1980] ECR 417, at p. 433, paragraph 10.
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applicable to this case does not call in cars that can be bought in Denmark were question the existence of a failure to fulfil manufactured abroad and were, when new, obligations. The Commission did not rely imported products. However, once imported on that judgment as evidence of the failure and cleared through customs, they become to fulfil obligations. It merely referred to the domestic products and are at least poten method of calculation which the Court tially available on the domestic used-car envisaged in that case for calculating the market. amount of value-added tax paid in the exporting Member State which is still contained in the value of the goods at the time of importation into another Member State in order to demonstrate the over taxation of used vehicles imported into Denmark: as has been seen, they are taxed 39. The Danish Government's objection on the basis of an estimated value which is that the real competition is between new, generally greater than their real value. and therefore imported, cars and imported However, if the formula in Schul II is used cars leaves me unconvinced. The applied, the point of reference would be the Danish Government argues that residual part of the registration duty still contained in the value of a Danish used car. That is equal to the amount of the duty paid at the time of registration of the car when new, reduced by an amount equal to the actual depreciation in the value of the car. 'if it is to be able to maintain the high return from motor vehicle registration duty, it is of fundamental importance that the taxes on new cars are not compromised by imports of used cars. For that reason the Danish Government must be able to maintain a 37. Different methods may be used to apply system of levying registration duties on that principle. The estimated value of such imported used cars which does not contain vehicles could be progressively reduced, for an economic incentive — in regard to the example, or the value of the vehicle could amount of duty charged — to import used be disregarded completely and registration cars rather than to buy them in Denmark. duty charged at a fixed rate, based on the Otherwise, the importation of new cars residual amount of duty still deemed to be would to a large extent be replaced by the contained in the price of a car of the same importation of used cars' (paragraph 6 of type and age offered for sale on the Danish the rejoinder). used-car market.
40. It is true that if the situation is viewed 38. I consider that the Commission is right in that way, there is competition between in believing that such a market exists and new cars and imported used cars. But at that used cars imported into Denmark are the same time the Danish Government similar to or compete with used cars bought acknowledges that the purpose of its system in Denmark. It is true that even the used of taxation is to encourage potential
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used-car buyers to buy a car which has bought abroad. The tax system thus has the already been in circulation in Denmark for effect of protecting the Danish used-car some time rather than to import a used car market.
Conclusion
41. On the basis of the foregoing considerations, I propose that the Court should decide as follows:
'(1) The Kingdom of Denmark has failed to fulfil its obligations under Article 95 of the Treaty because the calculation of the registration duty for imported, used motor vehicles is made on the basis of an estimated value which is generally higher than the real value of the vehicle with the result that such motor vehicles bear a tax burden which is generally greater than the residual value of the tax still contained in the value of a vehicle of the same type and age sold in Denmark after being registered there when new;
(2) For the rest, the application is dismissed;
(3) Each party is to bear its own costs.'
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