C-393/98

I — Facts and procedural background '[it] is incompatible with Article 95 of the EEC Treaty for a Member State to levy on 2. Following the Court's judgment in Com- second-hand cars from other Member mission v Denmark, 2 the Commission States a tax which, calculated without taking the vehicle's actual depreciation into

1 — Original language: English. 2 — Case C-47/88 [1990] LCR I-4509. 3 — Case C-345/93 [1995] LCR I-479.

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account, exceeds the residual tax incorpo- granted in accordance with the following rated in the value of similar second-hand table: motor vehicles already registered in the national territory.'

Years of Use Tax Reduction

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the domestic market) and where for a vehicle in Portugal is not subject to car vehicle which has been used for more tax? than eight years 33% of the car tax which would be payable on a new vehicle (imported or bought on the domestic market) has to be paid without, in either of such situations, account being taken of all the other factors which influence the value of a [3.] In the light of the first paragraph of car, such as kilometrage, state of Article 95 of the Treaty, may it be upkeep and the model, among others, considered that such a system cannot, guarantee perfect neutrality of domes- not even in only a few cases, lead to tic taxation as regards competition higher taxation of the imported pro- between domestic and imported pro- duct and that the system is regulated in ducts (in this case cars) and is it such a way that the possibility is compatible with the first paragraph always excluded of an imported vehicle of Article 95 of the Treaty? being taxed at a higher level than a similar national vehicle?

'[1.] Are the questions raised in these proceedings by the appellant and set out above relevant? What is the answer to those questions under Community law? I I — Analysis

[2.] Does depreciation of the real value of used vehicles, referred to in the judg- ment of the European Court of Justice in Case C-345/93 Nunes Tadeu neces- (a) The obligations of the Supremo Tribu- sarily imply that a valuation or expert nal Administrativo under Article í 77 of the assessment must be carried out on EC Treaty (now Article 234 EC) every vehicle or may the calculation be made in general and abstract terms by reference to a legal criterion?

tion of seeking a preliminary ruling... this 11. According to the Court's ruling in Supremo Tribunal Administrativo followed Fornasar 'it is settled case-law that it is the proper course in its judgment in Case solely for the national courts before which No 22 396. If not, it has infringed Arti- actions are brought, and which must bear cle 177 of the EC Treaty. In any event, it is responsibility for the subsequent judicial important for the point to be cleared up so decision, to determine in the light of the that this Supremo Tribunal Administrativo special features of each case both the need may in future discharge its obligations for a preliminary ruling in order to enable under Article 177 of the Treaty'. them to deliver judgment and the relevance of the questions which it submits to the Court. Dismissal of a request from a national court is possible only where it is clear that the interpretation of Community law or the consideration of the validity of a Community rule requested by that court has no bearing on the real situation or on the subject-matter of the case'. 4

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guidance. The question cannot be said to be the obligations are being complied with; hypothetical either, merely because it was such a decision may be coloured by poli- referred to the Court in the same order for tical or practical considerations which reference as the substantive questions; the remain outside the jurisdiction of the question of the extent of the duty of the Court. The decisive consideration is, in Supremo Tribunal Administrativo to make any event, that the opinion of the Commis- a reference arose normally in the course of sion that the legal situation in a Member genuine litigation. The course of action State is in conformity with the Treaty is in adopted by the referring court could in any no way determinative of the issue which case be justified by reasons of procedural can only be finally decided by the Court, economy. The alternative course of action whether directly in subsequent infringe- would have been for the national court first ment proceedings or indirectly in answering to refer the question of its duties under a request for a preliminary ruling. Article 177 separately, and only in the case of a negative answer subsequently to refer the substantive questions, with all the delays this would inevitably entail.

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patibility with Article 95 of the revised Tribunal Administrativo asked whether the Portuguese taxation scheme cannot there- applicant's questions, some of which go fore affect the referring court's obligations well beyond the facts of the present case, under Article 177. were relevant, when the relevance of the questions referred is exclusively a matter for the referring court. I would therefore propose to the Court that it only answer those questions to the extent that an answer would be useful in the resolution of the 15. For the avoidance of doubt, I would national proceedings. add that I can see no foundation in the Treaty or in the relevant case-law for the view expressed by the Netherlands that the withdrawal of an infringement proceeding by the Commission constitutes a factor which can be taken into account in a lower 17. The questions posed by the Supremo court's appreciation of the 'necessity' for a Tribunal Administrativo raise two distinct ruling on a point of Community law. In but related issues. The first, which corre- accordance with the second paragraph of sponds to the referring court's second Article 177, the desirability or otherwise of question, is whether a Member State may a reference is a function of whether the adopt general criteria for the imposition of Community law question is pertinent to the registration tax on imported used cars, as solution of the dispute before it, and the Portugal has, or whether they are obliged discontinuance by the Commission of to proceed on the basis of an individual infringement proceedings can have no bear- evaluation of each vehicle. If the former is ing on this matter. permitted, the second issue is whether the scale applied in the present case is in conformity with the requirements of Arti- cle 95.

'where the taxation on the imported pro- suggested that '[in] order to calculate the duct and that on the similar domestic residual tax incorporated in the value of a product are calculated in a different man- domestic used car it is necessary to look at ner on the basis of different criteria which its market value, the assumption being that lead, if only in certain cases, to higher the amount of residual tax declines in direct taxation being imposed on the imported proportion to the value of the car'. 12 product'. 9 It follows that 'a system of Moreover, he continued, 'the importing taxation can be considered compatible with State is not required to base the tax on Article 95 of the Treaty only if it is proved the price paid for the car by the importer or to be so structured as to exclude any on its value in the exporting State; it is possibility of imported products being entitled to take into account the value in taxed more heavily than domestic products, the importing State. That follows from the so that it cannot in any event have dis- requirement that the tax charged in the criminatory effect'. 10 importing State must not exceed the resi- dual amount of tax incorporated in the value of a domestic used car of the same characteristics. If the importing State were required to base the tax on the lower value in the exporting State, that would not merely preserve any competitive advantage 19. The correct test for verifying compli- arising from that lower value but would in ance with Article 95 in circumstances such addition give the importer a fiscal advan- as those in the main proceedings appears tage which would be inconsistent with from Commission v Greece, where the fiscal neutrality'. 13 Court expressly approved the comparison made by the Commission between 'the amount of the ... tax borne by imported used cars with the residual portion of the tax still incorporated in vehicles put into circulation in [the Member State of impor- tation] when new before being resold in that country'. 11

23. It does not follow from those judg- ments, in my opinion, that Article 95 requires that Member States proceed on the basis of an individual assessment of the value of imported used cars and hence the 22. The duty of a Member State of impor- residual tax element which determines the tation to take account of the depreciation maximum car tax which can be imposed on in the value of used cars in assessing car tax importation. It should be borne in mind has also been established by the case-law. In that the tax, whether on importation or on Commission v Denmark, the defendant first registration, of new cars is here Member State was condemned for applying calculated on the basis of the single element to imported used cars an assessment rate of of cylinder capacity without taking account 90%, thereby limiting depreciation to 10% of other features such as levels of equip- 'whatever their age or condition'. 14 Simi- ment and the reputations of different larly, in Nunes Tadeu, the Court found that brands. Furthermore, it is notorious that the Portuguese legislation in force at the certain brands depreciate more rapidly than material time was 'calculated without tak- others. In practice, there may be no exact ing the vehicle's actual depreciation into identifiable comparator for the individual account'. 15 In neither of these judgments, imported used car; as the applicant has nor in Commission v Greece,16 however, argued, the make and model of the car, its did the Court rule that the national autho- state of conservation and working order rities were obliged to assess imported used and its mileage are all factors which affect cars individually, rather than in accordance the market value of a used car, as well as its with general criteria, as in none of these age. Because of these differences, the mar- cases did the impugned national legislation ket value of individual used cars sold on the seek to take account of depreciation in domestic market, and hence the residual other than a token manner. Instead, the tax element in this value, are, strictly Court compared imported used cars as a speaking, infinitely variable. Even if the category of products with domestically sold importer could find an identical vehicle on used cars as a category, and had no the domestic market, there is no reliable means of ascertaining its precise value, which is in practice equal to the amount the buyer is willing to pay and the vendor 14 — Case C-47/88, cited in footnote 2 above, paragraph 20. 15 — Case C-345/93, cited in footnote 3 above, paragraph 20. to accept as consideration. While the point 16 — Case C-375/95, cited in footnote 10 above. was not fully canvassed in these proceed-

ings, the Netherlands' suggestion that even formulated by the applicant in the main individual assessments would, in practice, proceedings, and hence of the first question be effected using some sort of table seems of the national court, is essentially to to me to be eminently plausible. determine whether in the concrete case the scheme applied by the Portuguese authorities is in conformity with Article 95 of the Treaty. Portugal has explained that the tax reduction allowed for imported used cars is not directly related to actual depreciation; instead, the reduction is 24. I am therefore of the opinion that, as a determined by a formula which takes matter of principle, Member States may account of a variety of factors, including adopt general criteria for assessing the inflation and a figure for depreciation. The amount of car tax due on the importation depreciation element is in turn made up of of used vehicles, on condition that these are a weighted average of factors which affect such as to guarantee that this amount does the market value of a notional used car, not exceed, even if only in certain cases, the presumed to be in good working condition, residual tax in comparable vehicles on the and with a mileage corresponding to not domestic market. It is inherent in the more than 15 000 km per annum. While in recognition by the Court of the direct effect the application of the table only the age of of the first paragraph of Article 95 17 that the car and its cylinder capacity are rele- an individual should be able to challenge vant, some account of depreciation is the scale for the assessment for tax on his therefore taken in the establishment of the imported used car. I should add that the table. practical difficulties of determining pre- cisely the value of an individual used car do not preclude Member State authorities' relying as a guideline on average values of used cars recognised as such in the domes- tic market, subject to the requirements of Article 95 referred to above. Indeed, as also noted above, both the applicant and Portu- gal in the present case were able to produce figures, albeit that they differed, for the average value on the Portuguese market in 1996 of a car similar to that of the 26. Portugal claimed that the application of applicant. the tables in force at the material time resulted in a depreciation value close to real depreciation. Likewise, the Commission, at least in its written observations, took the view that the percentage figures for tax reduction seemed to correspond to the depreciation in the real value of used cars. Finland and the Netherlands submitted that 25. In so far as the Court should answer a Member State can apply a scale providing them, the object of the five questions for annual depreciation so that the value assigned to a used car declines with age by reference to reliable data on average mar- 17 — Case 57/65 Lütticke v Hauptzollamt Saarlouis [1966] ECR 205. ket prices.

27. The applicant in the main proceedings nation in the factual situation which gave contended that, 'according to the rules of rise to the main proceedings. In 1996 (at experience', the account taken of deprecia- the time of importation of the applicant's tion in the Portuguese rules was 'manifestly car), the average value on the Portuguese insufficient'. market of a comparable 1991 vehicle was, according to these figures, PTE 4 600 000. As was pointed out at the oral hearing, this represents a depreciation of 56% in the value of the car, while the reduction in the car tax was only 4 1 % . While it is not in 28. As interpreted in the case-law cited itself determinative, the agent for Portugal above, Article 95 clearly requires that the stated unequivocally at the hearing that the amount of tax payable on importation, car tax sought to ensure that the value of however described, should not exceed the the imported car is similar to that of a car residual tax incorporated in the value of on the domestic market on which the tax similar vehicles on the domestic market. It has already been paid. However, as the is common ground that the residual tax Court held in Nimes Tadeu, '[a] national incorporated in a domestic used car at a tax system which is liable to eliminate a given moment is a function of its value, competitive advantage held by imported which in turn depends very closely on products over domestic products would be depreciation. Under the Portuguese legisla- manifestly incompatible with Article 95, tion at issue in the main proceedings, which seeks to guarantee that internal however, the tax payable is a function of charges have no effect on competition the value of the car when new, reduced in between domestic and imported pro- accordance with a sliding scale which, as ducts'. 19 Portugal admits, does not fully reflect actual depreciation. In such circumstances, the Portuguese scheme does not guarantee that the amount of tax payable on an imported car does not exceed the residual tax on a corresponding domestic vehicle, and the scheme is therefore not such as 'to exclude any possibility of imported pro- ducts being taxed more heavily than domestic p r o d u c t s ' , as Article 95 requires. 18 30. In view of the foregoing, I am of the opinion that, while a Member State is not obliged to assess the value of imported used cars individually, it may not apply a scheme 29. On the contrary, the figures provided which could result, if only in certain cases, by Portugal in answer to questions put by in the imposition of a tax on importation the Court appear to show that the applica- which exceeds the residual tax incorpo- tion of the table did not exclude discrimi- rated in the value of similar used cars on the domestic market.

(2) Member States may adopt general criteria for assessing the amount of car tax due on the importation of used vehicles, on condition that these are such as to guarantee that this amount does not exceed, even if only in certain cases, the residual tax in comparable vehicles on the domestic market.

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