C-132/88

The Court then went on to say: 2 Details of the legislation in question are given in the Report for the Hearing and accordingly I shall refer to them here only to the extent necessary for my reasoning to be followed 'in the absence of considerations relating to the amount of the special tax, consumers seeking comparable cars as regards such 3 In support of its application, the matters as size, comfort, actual power, Commission relies principally on the maintenance costs, durability, fuel judgment of 9 May 1985 in Case 112/84 consumption and price would naturally Humblot [1985] ECR 1367, which was choose from among cars above and below concerned with a special tax in France the critical power rating laid down by levied each year on cars which exceeded a French law However, liability to the special given fiscal power rating, which was nearly tax entails a much larger increase in five times higher than the highest amount of taxation than passing from one category of the progressive tax payable in respect of cars car to another in a system of progressive of a lower rating taxation embodying balanced differentials

* Original language: French

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COMMISSION v GREECE

like the system on which the differential tax However, it cannot in my view be asserted is based' (paragraph 15) that that is so in the case of very small cars (for example, those shorter than 3 7 m, with an engine of less than 1 000 cc), on the one 5 The Court concluded that Article 95 hand, and top-of-the-range cars (longer prohibited the charging of such a tax where, than 4 7m and with a cylinder capacity of as in that case, the only cars on which it was 2 500 cc or more), on the other levied were imported, particularly from other Member States

8 I cannot share that view The Court has held that similar products are those that 11 In that respect it can rely on the judgment of 16 December 1986 in Case 'have similar characteristics and meet the 200/85 Commission v Italy [1986] ECR same needs from the point of view of 3953, which indicates that it is neither consumers' ' arbitrary nor unreasonable to treat cars in excess of a given cylinder capacity as luxury 1 — See in the first place, the judgment of 17 February 1976 in products and to subject them to the higher Case 45/75 Rewe v Hauptzollamt Landau [1976] ECR 181 paragraph 12 rate of VAT levied on such products within

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OPINION OF MR MISCHO —CASE C 132/88

the tax system of a Member State I am higher than that exhibited by the two Greek therefore astonished that the Commission taxes at the threshold of 1 800 cc should claim, even in its rejoinder (paragraph II 7), that

'the social circumstances prevailing in 13 It should also be noted that there does Greece and, to some extent, in Europe: cars not seem to be any need to confine the with a cylinder capacity of 1 200 cc or less scope of the judgment in Case 200/85 to are intended for people with low income, the particular area with which it was those with a cylinder capacity of 1 201 to concerned, and specifically the matter of 1 800 cc are bought by people whose VAT, as the Commission wishes to do (see income is in the middle range; and those of paragraph 16 of its application), especially above 1 800 cc are, above all in Greece, since, in relative terms, the increase of the only for people with very substantial rate of VAT in the Italian case, at the thre­ incomes' (see p I-1574 of the Report for sholds of 2 000 and 2 500 cc, was much the Hearing)

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COMMISSION v GREECE

16 Since the Commission has not denied reductions of duty, serve legitimate social that the threshold of 1 200 cc makes it purposes possible to separate cars intended for people with low incomes from those designed for people in the middle-income range, it is 19 To concede that such objective differen­ difficult to see why it objects to the tiation becomes incompatible with Article 95 threshold of 1 800 cc as the boundary line merely because the heavier taxation in fact between the latter and cars intended for only affects imponed products would be to those with high incomes deny the Member States that freedom

17 It is true that, by contrast with cars 20 In that connection, it is significant that exceeding 1 800 cc, cars exceeding 1 200 cc in the great majority of the cases in which are produced in Greece However, that the Court has considered differentiated factor alone cannot be decisive As the taxation to be contrary to Article 95, it Court has consistently held 2 found that the criterion on which the differentiation was based was such that in advance it excluded imported products from the favourable tax regime or else it excluded 'at its present stage of development domestic products from the more onerous Community law does not restrict the tax regime 4

3 — See in addition to Commission v France supra paragraph 7 in particular the judgment of 10 October 1978 in Case 148148//77 Hansen and Balle v Hauptzollamt Flensburg ( 1978 1978]] ECR 1787 paragraph 16 18 It is apparent from the previous 4 — See judgments of 7 May 1981 in Case 153 153//80 Rumbaus decisions of the Court that such differen­ Hansen v Hauplzollamt Flensburg [19811981]] ECR 1165 of 27 May 1981 in Joined Cases 142 and 143 /80 Ammini 143/ tiation is also permissible if the tax benefits strazione delle finanze dello Stato v Essevi and Salengo granted, in the form of exemptions from or [1981 1981]] ECR 1413 of 15 March 1983 in Case 319 319//81 Commission v Italy [ 1983 1983]] ECR 601 (taxation of spirits ), of spirits), 11July 1985 in Case 278 278//83 Commission v Italy [ 1985 1985]] 2 — See in particular the judgments of 4 March 1986 in Case ECR 2503 ( VAT VAT—— taxation of sparkling wines } of 4 wines} 106 106//84 Commission v Denmark [ 1986 1986]] ECR 833,, 833 March 1986 in Case 106 106//84 Commission v Denmark [19861986]] paragraph 20 and of 7 April 1987 in Case 196 /85 196/ ECR 833833,, and of 7 April 1987 in Case 196 196//85 Commission Commissioni France France((1987 1987)) ECR 1597 paragraph 6 v France [ 1986 ] ECR 1597 1986]

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OPINION OF MR MISCHO —CASE C 132/88

The Court went on to add (paragraph 31) that:

24 If that had in fact been the case, the court, in reply to a preliminary question as to whether the fact that a Member State levied on automatic gaming machines for the most part originating abroad a tax three 'the Member States are in principle at times higher than that applied to similar liberty to subject products to a system of machines mostly produced domestically was taxation which increases progressively in amount according to an objective criterion, 5 — Professor Dr Ulrich Everling: Aktuelle Fragen der provided that the system is free from any europäischen Steuergerichtsbarkeit in Die Steuerberalung Bonn September 1988 p 281 at p 286 discriminatory or protective effects'

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COMMISSION v GREECE

In other words, as I pointed out in my Opinion in Case 200/85, a differentiated 30 The sum of those two components gives taxation system in which the highest tax amounts which correspond to a percentage affects only products imported from other of the pre-tax price of the car Because of Member States is not discriminatory (or the incidence of the first component of the protective) unless the latter is of a markedly tax, that percentage varies for each higher rate and additional cubic centimetre The minimum tax is 48% for a car of 600 cc, and the maximum is 400% for cars of 2 632 cc and above 'marks a break or a discontinuity with regard to the general taxation system to 31 To simplify its exposition of the which the category of products concerned is problem, the Commission makes a separate 8 subject' comparison for each band of 100 cc According to the Commission, the 6 — See Humblot [1985] ECR 1378, paragraph 13 Feldain [1987] ECR 3540 paragraph II and Bergandi [1988] progression of the special consumption tax ECR 1375 paragraph 31 is not balanced Up to 1 800 cc it increases 7 — See Humblot [1985] ECR 1379, paragraph 15 and Feldain [1987] ECR 3540 paragraph II on average by only 116 percentage points 8 — [1986] ECR 3966 (right hand column) per band of 100 cc; at 1 801 cc it first

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OPINION OF MR MISCHO —CASE C 132/88

makes a sudden jump of 86 5 points, the entire cylinder capacity of the car, that thereafter growing at the average rate of is to say also to the part of the capacity 15 2 points per band of 100 cc corresponding to one or both of the lower categories In the Commission's view, that constitutes a 'break in the progression', which would not exist in a system in which the upper weightings applied only to the 32 That presentation of the progression of part of the cylinder capacity above the the tax does not, however, seem to me to be differential thresholds in question and in acceptable as it stands since it overlooks the which the bands below those thresholds fact that the Greek system also has a differential threshold at 1 200 cc If account continued to be subject to the lower rates is taken of the three categories of cars thus normally applicable to them created, the progression of the tax is as follows:

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COMMISSION v GREECE

Commission, it would be, at those two thre­ and the second (156%) categories, namely sholds, of exactly the same order of 2 16, is the same as the ratio between the magnitude as that applicable to the other averages of the second and first (72%) 100 cc bands in the category in question categories It is immediately noticeable that the progression, as a whole, would thus be more balanced

39 Finally, allow me to remind the Court once again that the differentiation of the 36 Must a system which involves a sharp taxation at the threshold of 1 800 cc is increase in taxation at two different levels beneficial not only to Greek cars with a necessarily be regarded as inherently incom­ smaller cylinder capacity but also to patible with the first paragraph of Article 95 imported cars, in particular those of a of the Treaty? capacity exceeding 1 600 cc but less than 1 801 cc, of which none is produced in Greece at the present time

37 It will be recalled, in the first place, that Humblot was concerned with a 'special tax' and it was the subjection to that tax which gave rise to a 'break' from the taxation system that was otherwise applicable As I 40 I therefore consider that the actual said in my Opinion in Case 200/85, existence of the two taxation thresholds cannot be criticized Moreover, by contrast with the position in Feldain, the location of the two thresholds is not such as to permit 'the French tax [which affected only the inference that they were chosen in order imported cars] was, so to speak, outside the to favour domestically produced cars normal system for the taxation of cars, which consisted of a tax which increased progressively with the fiscal horsepower' ([1986] ECR 3966, last paragraph)

42 I consider that a system involving two 46 For cars with a cylinder capacity of less thresholds at which the taxation increases than 1 200 cc, this tax is DR 100 per cc, so sharply is permissible only if, at the second that it progresses by DR 10 000 per band of threshold, which affects only imported cars, 100 cc and reaches DR 120 000 at the the progression is not greater than the one 1 200 cc threshold For cars with a cylinder that affects both imported and domestic capacity of 1 201 to 1 800 cc, it is DR 100 products Indeed, if a ratio of 1: 1 46 were per cc for the first band of 1 200 cc and to be acceptable, why not a ratio of 1: 2 or DR 200 per cc for the band from 1 201 to 1: 3 or 1: 5, like the one at issue in 1 800 cc; it is thus DR 140 000 at 1 300 cc Humblotì and increases by DR 20 000 per band of 100 cc, so as to attain DR 240 000 at the 1 800 cc threshold On each side of the 1200 cc threshold, the single supple­ mentary special tax thus increases regularly, by DR 100 and DR 200 per cc respectively 43 A system of that kind must be consistent Moreover, it is apparent from the foregoing from start to finish, in other words it must that that differentiation in rates, in so far as display an internal logic which cannot be it is based on an objective criterion, that of faulted at any level of taxation cylinder capacity, would be perfectly lawful under the first paragraph of Article 95 of the Treaty even if Greece did not produce cars taxed at the higher rate

44 Since in the present case the rate or percentage of increase in the applicable tax at the 1 800 cc threshold is not the same as that which applies to the 1 200 cc threshold, 47 But, as in the case of the special I propose that the Court hold that the consumption tax, the Hellenic Republic special consumption tax is incompatible with applies a second differentiation of the single

48. On the one hand, therefore, following the pattern below 1 200 cc, the progression above 1 800 cc is perfectly regular 50 The consequence of such divergences Moreover, the fact that it is DR 300 per cc between the calculation methods is as and is thus greater than the increase follows: whereas, for a car of a cylinder applicable to the bands below 1 800 cc capacity of 1 800 cc or less the tax increases constitutes a differentiation based on an by DR 200 per cc as from the 1 200 cc objective criterion which, in itself, is not threshold, for a car with a cylinder capacity objectionable, particularly since the increase of over 1 800 cc it does not increase by in the rate per cc above the 1 800 cc DR 300 per cc until it has leapt drastically threshold, after which point all the cars from DR 240 000 to DR 360 000 actually concerned are imported, is exactly the same at the 1 800 cc threshold In other words, as that applied at the 1 200 cc threshold, whilst a 1 201 cc car is subject to a tax of above which there are also Greek cars, and DR 120 200, which is only DR 200 more the progression in the rate per cc at the than that payable on a car of 1 200 ce, a 1 800 cc threshold is even lower ( 1 : 15) car of 1 801 cc is subject to a tax of than that which operates at the 1 200 cc DR 360 000 which, for its part, is threshold ( 1 : 2 ) DR 120 000 + DR 300 more than the tax on a car of 1 800 cc

threshold, above which there are also Greek domestic manufacture or the same cars at cars Indeed, if the same calculation method the second-hand stage or both which are were applied, namely DR 100 for the first placed at an advantage over imported 1 200 ce, DR 200 for the band between second-hand cars However, it must be 1 201 and 1 800 cc, and DR 300 above that concluded that, since both systems of tax figure, a 1 801 cc car would be subject to a have an inherent defect, namely excessive tax of DR 240 000 instead of DR 360 300 increase in tax as from the 1 800 cc This sharp 'jump' in the level of taxation, threshold, that defect has an impact on all which does not occur at the 1200 cc imported cars threshold, thus marks a break or discon­ tinuity with respect to the system of taxation normally applied Since the higher tax affects only cars imported from other 55 It must then be stated that, during the Member States, that system of taxation pre-litigation phase, the Commission also cannot be regarded as 'free of any discrimi­ criticized the detailed rules for determining natory or protective effect' within the the taxable amount for calculation of the meaning of Humblot and Feldain and is special consumption tax which is charged on therefore unlawful under Article 95 of the second-hand cars upon importation That Treaty tax is determined by reducing the price of corresponding new cars by 5% for each year of the car's age, but without any C — The taxation of second-hand cars deduction beyond four years, so that the total reduction cannot exceed 20% The Commission considers that as a result of 52 In its application, the Commission asks those rules the taxable amount for imported the Court to find that the Greek system of second-hand cars taxation is discriminatory as regards both new cars and second-hand cars Does that mean that, with respect to the taxation of second-hand cars, the Commission relies on 'is always higher than the net value of the the arguments relating to new cars which I corresponding domestically produced have examined here? vehicle on which the special consumption tax was paid when it was new' (reasoned opinion, paragraph 2 3) 53 The least that can be said is that the Commission's claims in that respect are far from clear The result is higher taxation for imported cars 54 In paragraph 22 of the application, the Commission asserts in a very laconic manner that 56 The Commission did not expressly reiterate that complaint, either in its application or in its reply It confined itself 'the foregoing considerations also apply, to making, at paragraph 22 of its mutatis mutandis, to second-hand cars' application, the statement which I have just cited At the hearing, the Commission's agent referred to that phrase, claiming that It would be desirable to know whether, in the Commission had thus mentioned that the Commission's view, it is new cars of complaint

I-1587