C-262/99

OPINION OF MR ALBER — CASE C-262/99

OPINION OF ADVOCATE GENERAL ALBER delivered on 16 November 2000 1

I — Introduction amount of GRD 83 516 969 2in aggregate plus further taxes in the amount of GRD 2 004 410.

1. The questions referred by the Adminis- trative Court of Heraklion concern the interpretation of the concept of 'normal 3. Specifically, the following amounts are residence' within the meaning of Directive involved: 83/182/EEC on tax exemptions within the Community for certain means of transport temporarily imported into one Member State from another. Beyond that, the case concerns the observance of the principles of proportionality and the protection of good — a fine of GRD 100 000 in respect of faith. each motor vehicle that he imported into the Hellenic Republic without declaring it;

— a fine of GRD 5 000 000 in each case I I — The facts in respect of two motor vehicles whose cubic capacity exceeded 2 001 c.c. and of GRD 1 000 000 for a vehicle with a cubic capacity of less than 1 300 c.c; and finally 2. The questions arise in the course of the consideration by the courts of administra- tive jurisdiction of a notice of fines of 8 January 1996 imposed on the claimant in the main proceedings because of the alleged — double the customs duties and other illegal importation of three motor vehicles. taxes which, according to the customs The claimant was required by the Greek authorities, he had intentionally evaded authorities with a notice of assessment to (that is to say GRD 36 108 840 x 2). pay an increased duty and fines in the

2 — If one adds the specified individual amounts, this should be 1 — Original language: German. GRD 83 517 680.

5. According to the decision of the national court, the claimant was born in Chania, Crete, in 1956. For more than 15 years he has been an Italian national. He has lived in 8. On 17 September 1993 the claimant, Italy since 1974, retains a house in Florence with his wife, founded a partnership in and has an Italian identity card and a Chania whose object was the packaging of passport indicating that he has been per- oil and fats. The activity of that business manently resident in Florence since 1991. appears in the tax return for the financial According to the pleadings of the Greek year 1994 with gross income from the sale Government, he also has a Greek passport. of olive oil of GRD 3 686 355 and led to the issue of its first invoice/consignment note (serial number 1) in 1994 in respect of 25 tonnes of olive oil which were trans- ported from Kastelli to Italy. 6. The claimant is an architect but for many years has been engaged in business in Italy. On 15 September 1986 he, together with his wife, set up the limited partnership (Eterorrythmi Etairia) Studio Fiorentino Ikodomikes Epikhirisis P. Louloudakis kai Sia (Studio Fiorentino SAS), which is estab- 9. On 2 November 1994 the claimant also lished in Florence. The buying, selling, founded the public limited company Kritiki import and export of machinery and olive Viomichania Elaioladou AE (KRI-V-EL), oil and the power to create branches/store- whose registered office was in Chania. It houses in Italy and abroad comprise the failed to develop any significant business, statutory objects of the partnership. Income ceased trading following the initiation of tax returns of the partnership have been proceedings against the claimant and was adduced for the financial years from 1990 dissolved on 17 July 1995. to 1995.

1. Is the second subparagraph of Arti- cle 7(1) of Council Directive 83/182/ EEC of 28 March 1983 on tax exemp- tions within the Community for certain means of transport temporarily 12. He is registered on the electoral roll of imported into one Member State from the Italian town of San Severo and voted in another to be interpreted as meaning the elections of 21 April 1996. that the normal residence of a national of State A is in State A, where he successfully carries on business for many years both as an architect and in commerce through a limited partner- ship, retains a residence and spends 13. In the school year 1994/95 his eldest most of his working time, or is in son attended Korais Primary School, Cha- State B, of which he is also a national nia, in the second year. He had also been in and where, simultaneously, he starts up the preceding year at the same school. an independent business with a similar However, the claimant maintains that his or at least related object, leases a house children also attended a school in Florence. and begins to spend part of his time, The Hygiene and Public Health Service of while also complying with his fiscal the Municipality of San Severo certifies that obligations, assisted by his wife who the eldest son was inoculated against hepa- participates in all the above activities in titis B on 18 August 1994, on 24 Septem- both State A and State B and takes ber 1994 and on 25 February 1995. shares in those businesses?

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Apart from the abovementioned provi- If the answer is in the negative, do sion, do other criteria exist on the basis criteria exist as to the limits of what is of which, in cases where it is difficult to strictly necessary in order to achieve determine normal residence, it is pos- the objectives pursued? sible for that determination to be made?

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15. The tax exemption for motor vehicles the taxes specified in Article 1, provided imported temporarily is based on Arti- that: cle 1(1) of Directive 83/182. This provision states:

'(1) Member States shall, under the condi- (a) the individual importing the private tions laid down below, exempt temporary vehicle: imports from another Member State of motor-driven road vehicles... from:

— turnover tax, excise duties and any other consumption tax, (aa) has his normal residence in a Member State other than the Member State of temporary importation;

— the taxes listed in the Annex hereto.'

(2) Individuals shall give proof of their place of normal residence by any appro- priate means, such as their identity card or any other valid document. 17. Article 7 of Directive 83/182 reads:

'(1) For the purposes of this Directive, (3) Where the competent authorities of the 'normal residence' means the place where a Member State of importation have doubts person usually lives, that is for at least 185 as to the validity of a statement as to days in each calendar year, because of normal residence made in accordance with personal and occupational ties, or, in the paragraph 2, or for the purpose of certain case of a person with no occupational ties specific controls, they may request any because of personal ties which show close additional information or evidence.'

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(2) National legislation the customs procedure for temporary importation subject to the condition of re- export shall also apply, analogously and subject to the same conditions and require- (a) Law No 2127/1993 ments, to vehicles covered by Article 75 which are dispatched or transported from other Member States of the Community in order to be used temporarily within Greece.' 18. At the time relevant for establishing the contravention, Law No 2127/1993 (FEK (Official Gazette) I, p. 48) contained the following relevant provisions:

Article 88:

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(g) In the case of possession or use of a (b) Law No 1165/1918 vehicle covered by Article 75 by a person who does not enjoy a temporary exemption under Article 84(2), a fine as follows:

19. Article 97(3) of the Customs Code (Law No 1165/1918 — FEK 1, p. 73) pro- vides: — up t o l 300 c c , GRD 1 000 000...

'Multiple duty amounting to between two — from 1 301 to 1 600 cc, and ten times the customs duties, taxes and GRD 2 000 000... charges payable on the subject-matter of the contravention shall, in accordance with Article 100 et seq. of this Law, be imposed jointly and severally on each person who participates in any way in a customs contravention under Article 89(2) of this Law. The multiple duty shall reflect the — from 1 601 to 2 000 cc, degree of participation of each such person GRD 3 000 000... and shall be imposed irrespective of crim- inal proceedings brought against them...'

— 2 0 0 1 cc. and above, GRD 5 000 000... (c) Ministerial Order Ik.D.247/13/1-3

'1. ... An individual who wishes to import temporarily goods referred to in Article 1 must (a) have his normal residence outside Greece, (b) come to Greece temporarily and 2. The period for which the private vehicle (c) use the goods for private use. may remain is seven months, whether continuous or not, in a 12-month period for commercial representatives and six months in all other cases. 2. The period for which the goods may remain is six months, whether continuous or not, in a 12-month period. That period of six months may be extended for a further nine months, but in the case of a person engaging in business activity in the Hellenic 3. Where in exceptional circumstances, and Republic this extension is limited to a despite the evidence produced to prove maximum of three months....' normal residence, the customs authorities

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still have serious doubts, a security covering person is living in a country in order to all forms of claim by the State shall be paid carry out a task of a definite duration. when a private vehicle intended for busi- Attendance at a university or school shall ness use is placed under the procedure for not imply transfer of normal residence.' temporary importation pursuant to this order. However, if the person concerned ultimately proves that he has his normal residence in another country, the customs authorities must refund the security within (d) Circular D 366/26 Pol 10 two months from the day on which that evidence is produced.'

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claimant or employees of the partnership treatment of domestic vehicles. Finally, he within and outside Italy for the purposes of alleges that there is a disproportionate business meetings. In the period from difference between the penalties for the September 1994 to February 1995 all these importation of vehicles in the case of non- vehicles had made journeys and deliveries payment of the special consumption tax in within Italy and across borders. They could comparison with corresponding offences not therefore during the same period also within the territory. have been found for a long time in the Hellenic Republic. Indeed, they only entered the Hellenic Republic between 1 and 8 March 1995. 25. The Greek Government considers that the present case does not fall within Directive 83/182. In the claimant's case, the place of employment and the place of 23. According to the submissions of the residence of his family are not different. claimant, the BMW has a value of However, this is a condition of the applic- ITL 10 2 0 0 0 0 0 , t h a t is a b o u t ability of Article 7(1)(2) of the Directive. G R D 1 2 0 0 0 0 0 , t h e F o r d of Furthermore, the present case is concerned ITL 8 000 000 or GRD 1 200 000. The more with a practical problem in the value of the vehicles was slight and there- application of Article 7(1) of the Directive fore precludes smuggling of the extent and and less with the question of law as to what gravity of that of which he has been the criteria are by reference to which accused (customs duties and taxes of 'normal residence' within the meaning of GRD 31 181 280 were imposed on the the abovementioned provision is to be BMW, and of GRD 4 156 050 on the determined. Ford), at a time when the value of all three vehicles together was no more than GRD 4 000 000.

Greek Government states first that in the 31. The Commission shares the doubts of absence of the harmonisation of these the claimant as to the law. In respect of the matters, the Member States are competent determination of the 'normal residence' of to regulate the amounts of fines. It con- the claimant, it is of the view that the siders the principle of proportionality to present case should be determined by have been observed. Drastic fines are means of consultation between the Greek necessary to deter fraudulent schemes, for and the Italian Government in accordance it is impossible continually to inspect all with Article 10(2) of the Directive, since vehicles driven in the Hellenic Republic the present reference points make it truly that are registered in other Member States. difficult to determine the residence of the The determination of the amount of fines claimant clearly. by reference to cubic capacity is propor- tionate, since cubic capacity is proportional to the commercial value of the vehicles.

32. If the residence of the claimant is held to be in Italy, then the claimant is to be 28. The Greek Government is further of the exempted under the Directive from all opinion that fixed rate fines are propor- taxes. If it is decided that he has moved tionate. This is likewise a means of deter- his residence from Italy to the Hellenic rent. Republic, he is to be subject only to registration tax but not, however, to con- sumption tax. If it is decided that the claimant has never had his residence in Italy, then he is to be assessed both to registration and to consumption tax. The Court has already held in its judgment in Case C-375/95 Commission v Greece 4 that 29. The addition of a double penalty duty the latter is disproportionate. is likewise justified in order to guarantee compliance with the importation provi- sions.

35. In relation to the claimant, the national court sets the following criteria against 38. No other interpretation can be given to each other: in State A, nationality, carrying the phrase following on from this, that in on an independent business, retaining a the case of a person with no occupational residence and spending most of his working ties, it depends on personal ties. Here, the time; in State B, nationality, an indepen- criterion of occupational ties is simply dent business, leasing a house and compli- abandoned without any other criteria being ance with fiscal obligations. From this list it added. Thus, what is involved is simply is clear that the national court supports its taking into account two population groups, determination of normal residence in both being those who are workers and those cases with the same criteria, namely, who are not.

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42. In its judgment in the case of Ryborg, the Court also founded on a subjective element as well. Over and above the purely objective circumstances, it considered whe- ther the person concerned had, in the 40. The fact that the children of the course of his actings, manifested the inten- claimant have at least temporarily attended tion to settle in a different Member State a school in State B is immaterial for the from the one in which he had hitherto had determination of the normal residence of his normal place of residence. 7 In his the claimant. For under the third sentence Opinion in the case of Sivaddling, Advo- of Article 7(1)(2) of the Directive the cate General Saggio too founded on the fact attendance at school of the subject of the that it must appear from the objective provision himself, that is the claimant in circumstances that the person concerned the main proceedings, 'shall not imply has decided to choose his residence in a transfer of normal residence.' So much the particular Member State. 8 In its judgment less can the attendance at school of the in this case, which concerned social secur- children of the claimant in the main ity, the Court likewise founded on the proceedings lead to a transfer of the intention of the worker as it appeared from claimant's normal residence. a consideration of all the circumstances. 9

5 — Judgment in Case C-297/89 Ryborg [1991] ECR I-1943, paragraph 19 and references therein. 6 — Judgment in Case C-297/89 Ryborg, cited in footnote 5, paragraph 20. 7 — Judgment in Case C-297/89 Ryborg, cited in footnote 5, paragraph 25. 41. Apart from the analysis of the wording 8 — Opinion in Case C-90/97 Swaddling [1999] ECR I-1077, and of the systematic context of the provi- paragraph 17. 9 — Judgment in Case C-90/97 Swaddling [1999] ECR I-1075, sion, it must be pointed out that the Court paragraph 29.

44. For these reasons it is suggested that the first question should be answered to the effect that the question as to whether the 'normal residence', within the meaning of

10 —Judgment in Case C-297/89 Ryborg, cited in footnote 5, is to be determined by the national courts paragraphs 30 to 35. and authorities on the basis of all the

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circumstances from which the centre of Second, the following considerations apply interests of the person concerned emerges. subject to the condition that the taxes for In this connection, a possible intention of imported vehicles, in particular the con- the person concerned to leave his original sumption tax that was the subject of the normal residence and acquire a new one judgment in Case C-375/95, are determined must be considered. in accordance with Community law. The national court itself refers in this connec- tion to the judgment in Case C-398/95. It is therefore assumed that the national court will take these judgments into account in making its decision.

The second question

47. Now to the second question. It con- 49. The enactment of a fine is a suitable cerns the fine imposed under Artic- means of ensuring the payment of importa- le 88(2)(g) of Law No 2127/1993 on the tion taxes. Since there is moreover no less claimant in the main proceedings, which is restrictive means of ensuring the fulfilment set solely by reference to the cubic capacity of the tax obligation, the imposition of a of the vehicle concerned. The national fine is also a necessary means. However, court asks whether this approach, which what is questionable is whether the deter- completely ignores the current value of the mination of the amount of the fine solely by motor vehicle, is compatible with the reference to cubic capacity is not an principle of proportionality. In the first excessive means. place, it must be remembered that in the current state of development of Commu- nity law, the Member States have authority to enact such provisions on penalties for import contraventions as appear to them to be justified, in particular to prevent tax evasion. The Court has confirmed this specifically in relation to the implementa- 50. In this regard, it must first be stated tion of Directive 83/182. 11 In enacting that the question raised concerns only a these penalty provisions, they have a mar- part of the fine imposed, namely the part gin of appreciation. imposed under Article 88(2)(g) of Law No 2127/1993. Another part is calculated according to the amount of the taxes due (Article 97(3) of Law No 1165/1918) and another is a flat rate (Article 88(2)(a) of Law No 2127/1993). The extent to which the taxes due are linked to the value of the article imported cannot be deduced from the decision of the national court. How- ever, it cannot be excluded that the value of the motor vehicle is taken into account in this connection. 48. However, the system of penalties must not have the effect of impeding the free- doms of movement granted by the EC Treaty. This is the case where a penalty becomes an obstacle to the freedom guar- anteed by Community law. 12 The penalty must be appropriate and necessary to achieve the aim pursued. 13 51. In relation to the part of the fine imposed under Article 88(2)(g), it must be stated that the size of the cubic capacity of 11—Judgment in Case 283/79 Cardati [1980] ECR 2773, a motor vehicle is first of all an objective paragraph 9. reference criterion. It follows that in the 12 —Judgment in Case 299/86 Drexl [1988] ECR 1213, paragraph 18; judgment in Case C-265/88 Messner determination of the amount of the fine [1989] ECR I-4209, paragraph 14; judgment in Case imposed discrimination is not possible. The C-389/95 Klattner [1997] ECR I-2719, paragraph 38. Court has declared systems of tax that use 13 — Judgment in Case C-29/95 Pastoors and Trans-Cap [1997] ECR I-285, paragraph 24. the cubic capacity of the taxed motor

55. On the basis of the foregoing consid- erations, one must regard a provision that refers solely to cubic capacity as not excessive and must therefore declare it to 53. As regards the case in which the fine set be proportionate. by reference to cubic capacity may exceed the commercial value of the motor vehicle concerned, it is to be noted that the calculation of consumption taxes in respect of motor vehicles is also linked as a rule to an unalterable standard, such as the cubic capacity or the horsepower of the engine and that tax calculated in this way is not 56. For these reasons, it is suggested that reduced by reference to depreciation in the the answer to be given to the second commercial value either. A 10-year-old car question is that in the case of possession is taxed in exactly the same way as a new or use of private vehicles by a person not car. entitled to a temporary exemption, which under national law constitutes a simple customs contravention, it is consistent with the Community principle of proportional- ity to impose, on the basis of the sole criterion of the cubic capacity of the vehicle, a special administrative penalty, 54. Moreover, it is to be observed that the in particular a fine (such as the fine under purchase price paid by the claimant in Italy Article 88(2)(g) of Law No 2127/1993) of an amount from GRD 1 000 000 to GRD 5 000 000 per vehicle, where that 14 — Judgment in Case C-345/93 Nunes Taden [1995] fine exceeds the current market value of the LCR I-479, paragraphs 6 and 10 f. vehicle having regard also to its age.

61. As already explained, the fine in the 59. In relation to Directive 83/182 one can present case consists of three parts: double also support this principle with the first the amount of the duties due, a fine two reasons (recitals) of the Directive, determined by reference to cubic capacity according to which the '... freedom of and a flat rate fine. In respect of the duties movement of Community residents within demanded in double amount, reference the Community is hampered by the taxa- may be made to the Opinion of Advocate tion arrangements applied to the temporary General La Pergola in the case of Klattner, importation of certain means of transport in which he considered an administrative for private or business use' and the elim- penalty amounting to 100% of the total

15—Judgment in Case 299/86 Drexl, cited in footnote 12, 16 —Judgment in Case C-297/89 Ryborg, cited in footnote 5, paragraph 18. paragraph 13.

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amount of the duties and other taxes to be that exist in the absence of Community- compatible with Community law. 17 I agree wide harmonisation. with this view. An administrative penalty does not only serve to enforce the claim to tax: beyond that, it fulfils the function of a deterrent.

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65. The supplementary point put by the 68. However, as has likewise already been national court within the framework of the stated, it must in this connection be third question, whether criteria exist as to remembered that the national penalty can- the limits of what is strictly necessary in not be contrary to the realisation of the order to achieve the objectives pursued, is freedoms granted by Community law, such already answered by the above considera- as for example the free movement of tions. A fine is the least restrictive means persons. In addition to this, Directive available for enforcing the tax claims of the 83/182 is intended to eliminate obstacles state and whether it is appropriate is to be to the free movement of persons that derive determined on the basis of objective and from the existing provisions of tax law, as substantive reference criteria. appears from the first two recitals. If a citizen of the Union exercises the right to free movement of persons and uses his motor vehicle, which is registered in one Member State, in good faith in another Member State without observing its rules concerning the declaration of motor vehi- The fourth question cles, it conforms to the purpose of Directive 83/182 to take this good faith into account in determining the administrative penalty. This result also complies with the encour- 66. The last question of the Administrative agement the EC Treaty strives to give to the Court concerns the obligation to take into exchange of goods as well as to the long- account, when imposing administrative term alignment of the fiscal rules of the penalties, the possible good faith and Member States pursued by the Community. absence of fraudulent intent of the perpe- trator.

— where he successfully carries on business for many years both as an architect and in commerce through a limited partnership, retains a residence and spends most of his working time —,

or is in State B

— of which he is also a national and where, simultaneously, he starts up an independent business with a similar or at least related object, leases a house and begins to spend part of his time, while also complying with his fiscal obligations, assisted by his wife who participates in all the above activities in both State A and State B and takes shares in those businesses —,

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is to be determined on the basis of all the circumstances from which the centre of interests of the person concerned appears. In this connection, a possible intention of the person concerned to leave his original normal residence and acquire a new one must be considered.

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