C-421/97

1. In this case, the Court has been called 3. Before turning to the facts of the case I upon once again to rule on the compat- will summarise the relevant French legisla- ibility with Community law of certain tion. I would point out — and I will return aspects of the French road tax system. to this issue — that, since the order for reference contains virtually no information about the content or the working of the « national rules on road tax, the account which follows has been almost entirely gleaned from the Court's earlier case-law 1 and the written observations submitted to the Court. 2. The case concerns both the relationship between the coefficients in the tax bands and the method by which fiscal horsepower is determined. Mr Tarantik, plaintiff in the main proceedings, claims that the progres- sion coefficient between on the one hand the top three tax bands, covering vehicles The national legislation of more than 18 CV, all of which are in fact imported, and the band covering vehicles of 15-16 CV, most of which are manufactured nationally, results in discrimination con- 4. Articles 1599 C to 1599 J of the Code trary to Article 95 of the Treaty. The General des Impôts (General Tax Code) lay progression coefficient is the factor of down the basic provisions governing the progression from one tax band to the next; differential road tax. The structure of the it is equivalent to the proportion of the tax is established at the national level but it coefficient for one tax band to the coeffi- is levied by each département. Every type of cient for the band below. In addition vehicle approved for the French market is Mr Tarantik claims in effect that the given for tax purposes a 'power rating', or method which is used to determine the fiscal horsepower, calculated according to a fiscal horsepower of his Jaguar is contrary complex formula, to which I will return. to Article 95. That method is laid down in The power ratings are divided into bands, an administrative circular dating from each containing two or three ratings. A 1956, which applies in certain limited cases coefficient is fixed at the national level for and differs from the standard method laid each tax band. Each year a basic rate of tax down in an administrative circular dating from 1977. 1 — In particular, Case C-113/94 Jacquier ν Directeur Général des Impôts [1995] ECR I-4203 and Case C-284/96 Tabouillot [1997] ECR I-7471. where further details of * Original language: English. the national legislation may be found.

is fixed for each département by its own result of the application of that formula to authorities. The basic tax thus fixed is vehicles is exclusively a function of the multiplied by the coefficients to determine engine's cylinder capacity. the amount of the differential tax payable for the corresponding tax bands. Thus, the amount of tax payable on any given vehicle may vary from one département to another but the structure of the tax is established nationwide and is the same throughout the country. 7. A new formula, which originates from the 1977 circular, came into effect on 1 January 1978. Under that formula Ρ = m (0.0458 χ C/K) 1 4 8 , where P stands for the power rating, m is 1 for petrol and 0.7 for diesel fuel, C is the cylinder capacity of the engine expressed in cubic centimetres, and K is a parameter representing the 5. Two successive administrative circulars transmission of motion obtained by calcu­ govern the method of calculating the fiscal lating 'the weighted arithmetic mean of the horsepower of private cars: the circular of speeds expressed in kilometres per hour 28 December 1956 and Circular No 77- which would in theory be attained by the 191 of 23 December 1977. They were vehicle at an engine speed of 1 000 given force of law, with retroactive effect, revolutions per minute for the various under Article 35 of the Finance (Amend- ratios of the forward gears of the gearbox'. ment) Law for 1993. 2 The new formula was intended to counter­ act the perceived effect of the formula in the 1956 circular, which depended directly on cylinder capacity, by encouraging cars with quieter engines and optimum con­ sumption. The formula was thus designed to obtain a power rating for tax purposes 6. The formula laid down by the 1956 which better reflected the intrinsic charac­ circular for calculating the fiscal horse- teristics of the car's fuel consumption for a power value is P= K n D Lw. Ρ stands for given mileage and encouraged efforts to the power rating, η for the number of reduce such consumption. 4 cylinders, D for the bore in centimetres, L for the stroke in centimetres, and ω for the rotation speed in revolutions per second, while Κ is a numerical coefficient. 3 It is accepted by Mr Tarantik, the French Gov­ ernment and the Commission that the 8. The 1977 circular originally applied to most private cars 5 granted type-approval 2 — Law No 93-859 of 22 June 1993; Journal Officiel de la République Française, 23 June 1993, p. 8815. The text of all circulars mentioned is annexed to the law. 3 — This formula, set out in the original 1956 circular, applies to 4 — See the second and third paragraphs of the 1977 circular. vehicles with reciprocating pistons. An amendment to the 5 — 'Private cars seating fewer than nine people, equipped with a 1956 circular macie by Circular No 73-168 of 19 September four-stroke cycle internal combustion engine and a trans- 1973 inserted a different formula applicable to vehicles with mission falling within one of the types described in the rotating pistons. annex'.

— private cars imported by type on or after 1 January 1978 where a compar- able model was approved before 1 Jan- uary 1978; 9. It is thus apparent that two separate methods of calculating power ratings have existed in parallel in France since 1 January 1978. It appears that the vast majority of private cars granted approval in France are covered by the formula laid down by the 1977 circular. Nevertheless, the formula laid down in the 1956 circular continues to — private cars whose specifications (num- apply to: ber of seats, type of engine and type of transmission) are not within those covered by the 1977 circular.6 This category includes cars with a manual gear box comprising more than five gears and cars with an automatic gear box comprising more than four speeds. Thus, for example, recently developed cars with six gears are subject to the 1956 circular; the Commission stated at the hearing that most such cars are

— private cars granted type or individual approval before 1 January 1978; 6 — See note 5.

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imported and that Article 169 proceed- of the fiscal horsepower of new vehicles ings against France in respect of this sold on or after 1 July 1998. The new aspect of the road tax are envisaged. calculation is based on two variables: the power of the engine, expressed in kilo- watts, and carbon dioxide emissions expressed in grams per kilometre. The equation thus takes no account of cylinder capacity, transmission or type of fuel.

10. The criteria by which the administra- tive authorities determine whether indivi- dually approved cars match or are consid- ered to be equivalent to a model granted type-approval are not set out.

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Article 700 of the Code of Civil Proce- hibited by Article 95 of the EEC Treaty ? In dure. 7 particular:

— Is the progression coefficient existing between the tax band covering an 14. Before the Tribunal de Grande Instance imported vehicle of more than 18 CV de Meaux, Mr Tarantik contested the law- and the tax band covering a similar fulness of the differential road tax, arguing vehicle of 15-16 CV discriminatory or that the Court of Justice had held it to be not? unlawful on several occasions. He submit- ted that the tax legislation remained dis- criminatory, subsequent amendments to it notwithstanding. — Do the circulars of 28 December 1956, 23 December 1977, 24 June 1987, 12 January 1988 and 20 September 1991, as retroactively validated by Article 35 of the Finance (Amendment) Law of 22 June 1993, have the effect of 15. The Tribunal de Grande Instance de making the tax discriminatory in Meaux accordingly sought a preliminary regard to owners of vehicles for which ruling from the Court on the following type-approval has not been granted in questions: France, that is to say, vehicles approved on an individual basis?

— If the answer is yes, can the owner of a 'Considering the date of approval of the vehicle with a power rating in excess of plaintiff's Jaguar car, which has a fiscal 100 kW rely on that answer in order to horsepower of 24 CV, bears the registra- plead, by application of the general tion number 197 AT 77, and was first put principles of Community law such as on the road on 11 April 1979, and having equality in regard to public charges and regard to the diagrams and the outline of the provisions of the European Con- the progression of the tax submitted by the vention on Human Rights and the plaintiff, on the one hand, and to the Protocols thereto, that the tax is not observations of the French tax authorities, payable on the ground that it is dis- on the other, does the system of taxation criminatory or inequitable?' applied correspond to objective criteria lacking in any discriminatory effect pro-

Admissibility 17. It appears from the answer to a written question put to Mr Tarantik by the Court that the fiscal horsepower of his vehicle was calculated on the basis of the 1956 circular, and not, as is twice stated in the order for reference, on the basis of the 1977 circular. The French Government concurs 20. In its written observations the French with this. Government contests the admissibility of the reference. It essentially argues that the order for reference does not provide suffi- cient information. The order mentions neither the Jaguar model at issue nor the date or method of approval. It does not set out the complex method of determining 18. According to the French Government, power rating pursuant to either the 1956 or Mr Tarantik's Jaguar was a model XJ6, the 1977 circular, nor does it indicate in type 4L2, of which production started in which cases each method is to be applied; 1968 and type approval was granted in at most, it states incorrectly that the 1977 France in January 1969. Supplementary circular was applied to Mr Tarantik. The type approvals, reflecting subsequent mod- French Government accordingly submits ifications to the model, were granted in that the national court's second sub-ques- April 1974, June 1975, November 1976, tion is too general and is irrelevant to the and, according to Mr Tarantik, October dispute before it and that the order for 1978. Mr Tarantik's car was a 2 Series, reference does not permit other Member production of which started in 1973, which States or other interested parties to submit was the subject of the November 1976 observations pursuant to Article 20 of the supplementary type approval. At that time, Court's Statute. the fiscal horsepower of all vehicles was calculated by reference to the 1956 circular.

give sufficient information to enable the order does not state the model of Mr Tar- Court to give a reply to the questions antik's vehicle, the procedure for its referred on the basis of the order alone. approval in France or how its fiscal horse- power was calculated. It does not set out the relevant national rules at all: the two existing formulas for calculating power rating are not described, nor is it explained in precisely which circumstances the for- mula laid down in the 1956 circular is 22. It is well established that, in order to applied. In addition, as indicated above, the arrive at an interpretation of Community order for reference contains several inaccu- law which will be helpful to the national rate statements of fact with regard to court, it is necessary for the national court elements essential to an understanding of to define the factual and legislative context the method by which the fiscal horsepower of the questions it is asking or, at the very at issue was determined. The order does least, to explain the factual circumstances not explain the effect of the national rules on which they are based. 8 The Court has on the taxation of motor vehicles imported observed that the need for adequate infor- from other Member States. It follows that mation is particularly acute in the field of the referring court has not explained why competition law which is characterised by the present case raises an issue of the complex factual and legal situations. 9 In compatibility of the French rules with my view the requirement is similarly of Article 95 of the Treaty. Lastly, the order particular relevance in cases concerning does not state in what way the Court's fiscal issues, where the national legislation judgment could be relevant for the main may well be highly complex and where it is proceedings: if the application of the 1956 likely to be impossible to assess the full implications of one aspect of the system in circular were contrary to Community law, the absence of complete information con- would that mean that the 1977 circular cerning the functioning of the system as a should be applied and, if so, would that whole. result in a different level of taxation ? Those may all to my mind be sound reasons for regarding the present reference as inadmis- sible. It may be noted that this was the approach taken by the Court in Bresle10 in similar circumstances.

24. The Court has however accepted that 26. I would note that one reason for the the requirement for the national court to inadequacy of the order for reference, and define the factual and legislative context is indeed it may be said for similar problems less pressing where the questions relate to with a number of orders for reference specific technical points and enable the recently lodged at the Court concerning Court to give a useful reply even where the the French road tax, 1 2 may be that parts of national court has not given an exhaustive it at least have apparently been drafted in description of the legal and factual situa- very general terms without regard to the tion. 11 In the present case much informa- facts and issues characterising the indivi- tion can be distilled from the Court's dual case. Any such practice is clearly previous case-law, from the observations unsatisfactory for the reasons given above. of Mr Tarantik, the French Government Moreover, according to the French Govern- and the Commission, and from the replies ment, many of the claims currently before of Mr Tarantik to the written questions put the French courts, some of which have by the Court. In so far as the national resulted in requests for preliminary rulings court's questions can be reformulated so as from the Court, have been instigated by an to permit replies which will enable that association orchestrating resistance to the court to resolve the dispute before it, it may French road tax system. If the response by be appropriate for the Court to answer the national courts to the activities of that questions notwithstanding the manifest association leads to orders for reference inadequacy of the order for reference. and pleadings before the Court which do not explain the specific case in respect of which the order is made, the question arises whether proper use is being made of the system of references for preliminary rulings established by Article 177 of the Treaty.

Article 169 has been opened in relation to Court first of all made the following two specific categories of cars still subject general observation concerning progressive to the 1956 circular, the vast majority of systems of road tax: which are imported, namely vehicles which as a result of new technology are not covered by the 1977 circular (for example, cars with six gears) and vehicles whose actual power rating is over 100 kW and which are approved on an individual basis. '... as Community law stands at present the The calculation of the fiscal horsepower of Member States are at liberty to subject those vehicles still includes factor K with a products such as cars to a system of road ceiling, and thus to that extent there has t a x w h i c h increases progressively in not been compliance with the Court's amount depending on an objective criter­ ruling in Feldain, 13 discussed below.) I will ion, such as the power for tax purposes, accordingly focus in this Opinion on what I which may be determined in various have described above as the national court's ways'. 15 sub-questions, namely the specific ques­ tions which it puts.

33. Second, the method of determining the power rating itself, as laid down in the 1977 circular, was not objective and favoured cars manufactured in France. That method was expressed in the formula 31. In the second case, Feldain,16 the Court Ρ = m (0.0458 x C/K) 1 4 8 . As explained was asked whether the system as so mod­ above, in that formula, Ρ stands for the ified was compatible with Article 95 of the power rating for tax purposes, m is 1 for Treaty. One of the issues was whether it petrol and 0.7 for diesel fuel, C is the was compatible with Article 95 to establish cylinder capacity of the engine expressed in a system whereby the progression of the cubic centimetres. The cylinder capacity coefficients from band to band, which was was divided by a factor, known as factor K, linear up to 16 CV, became 'exponential' which was equal to the average of the beyond the 12 to 16 CV tax band, which speeds which would in theory be attained was the last one to include vehicles manu­ by the vehicle concerned at an engine speed factured in France. The Court held that the of 1 000 revolutions per minute for each progression did not display any significant ratio of the gearbox. In the version of the difference of such a kind as to indicate that 1977 circular being considered by the there was any discriminatory or protective Court, however, the factor Κ was subject effect. However, the Court did find that the to a ceiling of 21 for vehicles whose actual tax system was discriminatory in two power rating exceeds 100 kW. respects.

35. The Court also found that no French- 38. In Deville,18 the Court ruled on the manufactured car had a cylinder capacity lawfulness of national time-limits applying exceeding 3 109.7 cc. Consequently, the to claims for refunds of that element of the effect of limiting the factor K to 21 was road tax found by the Court to be unlawful to place in the higher tax bands only in Humblot and Feldain. Circular No 91- imported vehicles, whereas, without such 71 was adopted on 20 September 1991 a limitation, those cars would be given listing the vehicles whose owners could lower power ratings for tax purposes. Such obtain rectification of their fiscal horse­ a limitation was not justified by considera­ power in the light of those judgments. It tions relating to fuel consumption. There permits owners of vehicles whose horse­ was no significant difference in that respect power was calculated in accordance with between vehicles affected by the limitation the aspects of the 1977 circular held to be of the factor K and comparable cars not unlawful by the Court to obtain rectifica­ affected by it. The Court therefore held that tion of the fiscal horsepower of their that method of determining the power vehicles. The 1991 circular is limited to rating for tax purposes was not objective vehicles within the scope of the 1977 in character and favoured cars manufac­ circular which were granted type approval tured in France. on or after 1 January 1 9 7 8 . 1 9 It is expressed not to apply to vehicles whose fiscal horsepower was calculated in accor­ dance with the 1956 circular. 20

41. The Court accordingly concluded that Article 95 did not preclude such a system provided that the increase in the coeffi- cients did not have the effect of favouring the sale of vehicles of domestic manufac- ture over the sale of vehicles imported from other Member States. 40. The Court noted that whether the increase in the progression coefficient above the 18 CV threshold had a discrimi- natory or protective effect depended on whether that increase might deter consu- mers from purchasing vehicles with a fiscal horsepower of over 18 CV, which were all 42. The Court did not in that case consider of foreign manufacture, to the benefit of the method of determining the power rating vehicles of domestic manufacture. If the of cars. increase in the coefficient for vehicles with a fiscal horsepower of over 18 CV did indeed deter some consumers from buying such vehicles, those consumers would choose a model in the tax band immedi- ately below, the 17-18 CV band, or even a model in the 15-16 CV band. The 15-16 CV and 17-18 CV tax bands, however, included both imported vehicles and vehi- The first question: the progression coeffi- cles of domestic manufacture. In the 17-18 cients CV band, the vehicles were nearly all of foreign manufacture, domestic manufactur- ers having a market share of only about 5% of total car sales in that band. In the 15-16 CV band, the majority of vehicles were of 43. By its first question, the national court domestic manufacture; consumers never- asks whether the progression coefficient theless had a wide choice of imported between the tax band covering an imported

45. The factors of progression of the coef- ficients for the bands from 12 CV upwards are as follows:

B a n d s Progression factor from 12-14 CV to 15-16 CV 1.22 from 15-16 CV to 17-18 CV 1.23 from 17-18 CV to 19-20 CV 1.50 47. The French Government and the Com- from 19-20 CV to 21-22 CV 1.50 mission both consider that the national

from 21-22 CV to 23 CV & over 1.50 23 — See paragraph 15 of the judgment.

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court's first question may be answered by the Advocate General notes in point 27 of reference to the judgment of the Court in his Opinion, a model in the 15-16 CV Jacquier,24 where the Court stated: 2 5 band.

In a system such as that at issue in the 24 — Cited in note 1. present case, therefore, it does not appear 25 — Paragraphs 21 to 25 of the judgment. that the increase in the progression coeffi-

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TARANTIK

The second question: the method of deter- mining fiscal horsepower

49. By its second question, the national court asks whether the effect of the circu-

26 — See also paragraphs 23 to 27 (particularly paragraphs 26 50. Mr Tarantik, after analysing in great and 27) of my Opinion in Jacquier. detail the system for determining fiscal

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OPINION OF MR JACOBS — CASE C-421/97

horsepower, expounds certain aspects of it and increase the tax payable by imported which in his view are discriminatory. vehicles alone.

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TARANTIK

manifestly abusive and should be prohib- come within the most heavily taxed cate- ited. gory, 29 and that Member States are at liberty to subject products such as cars to a system of road tax which increases pro- gressively in amount depending on an objective criterion, such as cylinder capa- city, provided that that system of taxation is free from any discriminatory or protec- tive effect. 30 55. Finally, the criterion for determining the amount of tax payable is not objective since the authorities' choice of different formulae applying only to certain imported vehicles is manifestly liable to discourage imports and is not perfectly neutral in effect. The Court has ruled that Article 95 is infringed where the taxation on the imported product and that on the similar domestic product are calculated in a differ- ent manner on the basis of different criteria 57. The French Government concludes that which lead, if only in certain cases, to the method of determining fiscal horse- higher taxation being imposed on the power laid down by the 1956 circular, imported product. 27 which depends on the objective criterion of cylinder capacity, and applies equally to domestic and foreign cars, is compatible with Article 95, noting that the applicant has adduced no evidence of the discrimina- tory effect of the 1956 circular vis-à-vis foreign vehicles nor demonstrated that the application of the 1956 circular leads 56. The French Government argues that consumers to buy French vehicles with an the method of determining the fiscal horse- equivalent cylinder capacity. power of the applicant's vehicle, namely in accordance with the 1956 circular, is com- patible with Article 95. It notes that the Court has held that Member States have the right to apply progressive taxation based on objective criteria and that a system of taxation cannot be considered to be discriminatory solely because it applies only to imported vehicles in the absence of domestic production 28 or solely 58. The Commission refers to my Opinion because only imported products, in parti- in Tabouillot,31 which noted the apparent cular those from other Member States,

61. The Commission has submitted further arguments going to the legality of the 1977 circular, in particular the retention of the 59. More specifically, the Commission ceiling on factor K for certain categories of states that it cannot be sure that the vehicles. Those observations appear to be circumstances in which the disadvanta- based on the misapprehension — entirely geous calculation set out in the 1956 understandable in the light of the order for circular is applied to vehicles for which reference — that the fiscal horsepower of individual approval was granted after Mr Tarantik's Jaguar was calculated in 1 January 1978 are neutral and objective accordance with the formula in the 1977 as required by Article 95. That depends on circular with factor K subject to a ceiling. whether the authorities consider that the They are accordingly not relevant to the vehicle matches or is equivalent to an present case. As indicated above, the Com- approved type; the French Government mission proposes to bring infringement has not provided details of the criteria proceedings in respect of that particular applied. aspect of the present application of the 1977 circular, which are clearly a more appropriate forum for an evaluation of the 32 — Paragraphs 34 and 35. lawfulness of the issue than a preliminary

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TARANTIK

63. It is clear from the Court's case-law 33 — Case C-152/89 Commission ν Luxembourg [1991] ECR I-3141, paragraph 25 of the judgment, and Case C-153/89 that progressive taxation is permissible, Commission ν Belgium [1991] ECR I-3171, paragraph 16.

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national courts. A system of taxation which 66. The reference to vehicles with a power is so lacking in transparency that the rating in excess of 100 kW appears yet national courts are unable to decide whe- again to be irrelevant to the case before the ther it is discriminatory or not would make national court: the 100 kW threshold is it impossible for the taxpayer to rely on significant only for certain vehicles whose Article 95. Such a system must for that actual power rating exceeds it, whose fiscal reason alone be contrary to Article 95. The horsepower is calculated in accordance effectiveness of the prohibition of fiscal with the 1977 circular and which are not discrimination could be singularly reduced covered by the 1991 circular. Since the if a Member State were allowed to intro- fiscal horsepower of Mr Tarantik's vehicle duce or maintain a non-transparent tax was not calculated in accordance with the system, in particular where the tax is 1977 circular, an answer to the question as differential and progressive and applies to put cannot assist the national court to a product which is highly tax sensitive and resolve the dispute before it. traded across borders in large quantities, as is the case with cars.

(1) It is for the national court to determine, in the light of the judgment of the Court in Case C-113/94 Jacquier ν Directeur General des Impôts [1995] ECR 1-4203, whether the progression coefficient existing between the tax band covering an imported vehicle of more than 18 CV and the tax band covering a similar vehicle of 15-16 CV is discriminatory and thereby infringes Article 95 of the Treaty.

(2) Article 95 of the Treaty does not preclude the application by a Member State of two sets of rules for establishing the fiscal horsepower of vehicles provided that the choice between the two sets of rules is based on objective criteria which do not discriminate against similar imported products and are not such as to afford protection to domestic production. Where however there is a lack of transparency in the system used by a Member State to establish the fiscal horsepower of vehicles, the onus lies on the Member State to satisfy the national court that the system does not engender any possibility of discriminatory effects.

(3) Fiscal charges held to be contrary to Article 95 of the Treaty cannot lawfully be demanded by the authorities and, once paid, may be recovered. Claims for recovery are governed by the applicable national rules, provided that those rules are no less favourable than the conditions applicable to similar domestic claims and do not make it impossible in practice or excessively difficult to exercise rights which the national courts have a duty to protect.

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