C-265/99

COMMISSION V FRANCE

OPINION OF ADVOCATE GENERAL ALBER delivered on 26 October 2000 1

I — Introduction system. Since most vehicles with a six-speed manual gearbox or five-speed automatic transmission are imported and only a small number of such vehicles are produced in France, the Commission alleges that the French provisions on motor vehicle tax infringe Article 95 of the EC Treaty (now, 1. In the present case the Court is again after amendment, Article 90 EC). required to decide, on this occasion by way of Treaty infringement proceedings, on the compatibility with Community law of certain methods of calculation used in the French system of motor vehicle taxation. 2 What is at issue is whether the method used to calculate the engine rating for adminis- trative purposes, which ultimately deter- 2. The Commission had initially also con- mines the level of taxation — in the pre- sidered that the French authorities had sent case calculated primarily according to infringed the Community law in force as the number of gears — has discriminatory regards the calculation of the engine rating or protectionist effects in the case of for administrative purposes of vehicles vehicles manufactured in other Member developing over 100 kW. It had therefore States compared with similar vehicles pro- brought two separate sets of proceedings. duced in France. The Commission consid- Those were then combined in the present ers that to be the case because, in its view, action since both complaints related to the vehicles with a six-speed manual gearbox calculation of the engine rating for admin- or five-speed automatic transmission are istrative purposes on the basis of the same assessed under the 1956 system and thus at French statutory provisions. a higher rate of tax than technically com- parable vehicles taxed under the 1977

4. A graduated tax on motor vehicles was 7. The formula for calculating the engine introduced in France by Articles 1599 C to rating for administrative purposes under 1599 J of the Code general des impôts the 1956 Circular is based solely on the (General Tax Code). The legislation estab- cylinder capacity of the vehicle. lished tax bands which — originally cal- culated by reference to cylinder capacity alone —· cover several engine rating bands; there is one coefficient for each of those tax bands. The level of the graduated tax, which is paid to the Départements, is calculated by multiplying a basic rate — 8. However, the 1977 Circular introduced, which is set annually by the members of the as from 1 January 1978, a new formula for individual Conseils généraux (Département calculating the engine rating for adminis- Councils) — by the coefficients corre- trative purposes of motor vehicles, which, sponding to the tax band concerned. in the light of new technologies, includes several parameters in addition to cylinder capacity, such as tyre circumference and gear ratio (the number of gears), that is, technical criteria which result in better performance in terms of fuel consumption 5. The French system of motor vehicle and pollutant emissions. taxation is thus based on the determination of the engine rating for administrative purposes of passenger cars, and it should be noted that the amendments made by the Law of 2 July 1998, which lays down provisions governing the calculation of the engine rating for administrative purposes of 9. The method of approval of the vehi- new cars registered on or after 1 July 1998, cles — the type approval — is one of the are not, according to the Commission, a criteria which determine the applicable priori in breach of Community law. rules.

11. The 1977 Circular, on the other hand, applies in principle to passenger cars which were type-approved from 1 January 1978 III — Pre-Htigation procedure onwards and to passenger cars which were individually approved from 24 June 1987 onwards and which conform to an approved type or, from the point of view 14. The Commission considers that motor of the engine rating for administrative vehicles from other Member States which purposes, are regarded as equivalent to an incorporate an 'innovative technology' —

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OPINION OF MR ALBER — CASE C-265/99

16. By letters of 25 May 1993 and 19 Sep- (2) By comparison with similar models tember 1994, the Commission informed the with a four-speed automatic transmis- French authorities that that situation was sion, those models with a five-speed contrary to Article 95 of the EC Treaty. transmission could have the same engine rating for administrative pur- poses or a rating increased by one HP or a rating reduced by four to seven HP.

17. The French authorities replied by let- ters of 6 August 1993 and 13 March 1995. In the former they acknowledged that those vehicles which had a six-speed manual (3) For many other models, no comparison gearbox or five-speed automatic transmis- was possible since there were no mod- sion were subject to the provisions of the els with comparable technical equip-

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COMMISSION V FRANCE

ment with a conventional gearshift on 22. The Commission sent the reasoned the market. opinion to France by letter of 22 December 1997. By letter of 2 March 1998, the French authorities set out their views on the matter.

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OPINION OF MR ALBER — CASE C-265/99

vehicles) were equipped with the innovative which is unfavourable to vehicles fitted transmission technologies. Nevertheless, with a six-speed manual gearbox or studies had been carried out with a view five-speed automatic transmission, to revising the method of calculation laid which has discriminatory or protec- down in the 1977 Circular. In the event of tionist effects in the case of vehicles such a revision, however, there would be no manufactured in other Member States departure from the objective of basing the compared with similar or competing calculation of the engine rating for admin- domestic vehicles, the French Republic istrative purposes partly on fuel consump- has failed to fulfil its obligations under tion. The new method of calculation would Article 95 of the EC Treaty; therefore retain its validity irrespective of technical developments in engines and gearboxes. Those studies had been com- pleted by autumn 1997. They had led to a new method of calculation based essen- tially on the overall performance of the (2) order the French Republic to pay the vehicle measured in accordance with the costs. Community directives in force.

V — Arguments of the parties IV — Action and form of order sought

25. Since the Commission continued to 27. In addition to the arguments already allege infringement of Article 95 of the put forward in the pre-litigation procedure, EC Treaty, it brought the present action the parties submitted the following obser- which was received at the Court Registry vations on the remaining plea in law: on 16 July 1999.

cular as regards fuel consumption. By nance of the vehicle in the case of vehicles reason of a small technical difference in equipped with the innovative technology. the design of the gearbox, such vehicles, The decisive criterion in the present case is which are mainly manufactured in other the number of gears in the various types of Member States, are made subject to a transmission. The vehicles concerned, most different method of calculation, namely, of which are, admittedly, imported, also that contained in the 1956 Circular. Under include several French types, namely two that method, no account is taken of the models of the Peugeot 306 and two ver- special characteristics of such vehicles, sions of the Hommel. which results in a higher level of taxation as compared with similar domestic vehi- cles. That constitutes a breach of the prohibition of discrimination contained in Article 95 of the EC Treaty. 31. The Court's case-law to the effect that there is an infringement of Article 95 of the EC Treaty if the duties to which imported and domestic goods are subject are calcu- lated differently is not applicable here since 28. The Commission further criticises the the tax is, precisely, not calculated differ- complexity and lack of transparency of the ently. French system of motor vehicle taxation and refers in this connection to the Court's existing case-law on that system of taxa- tion. 3

VI — Assessment

33. With regard to the burden of proof, the French Government is of the opinion that the Commission is required to prove the 36. A point which should be made at the existence of a discriminatory effect. In this outset is that Article 95 of the EC Treaty connection, its reply to the Commission's (now, after amendment, Article 90 EC) is a argument concerning the complexity and specific formulation of the general prohibi- lack of transparency of the system of tion of discrimination laid down in Arti- taxation is that the system was published cle 6 of the EC Treaty (now, after amend- in the Journal officiel de la République ment, Article 12 EC) with regard to domes- française and acquired force of law, which tic taxes on goods. The Court has held in now precludes taxable persons from claim- this regard that Article 95 of the EC Treaty ing a lack of transparency. is intended to ensure the complete neutral- ity of domestic taxation from the point of view of competition between domestic products and imported products. 5

38. Thus the Court has already held, in facture, in favour of vehicles of domestic Feldain, 6 that a system of progressive manufacture. 8 taxation based on the engine rating for administrative purposes could have a dis- criminatory or protectionist effect within the meaning of Article 95 of the EC Treaty. The Court stated in paragraph 19 of its judgment in that case that: 40. The Court eventually held in that case that Article 95 of the EC Treaty did not preclude the application of national rules on motor vehicle taxation which provide for an increase in the progression coeffi- cient of the kind arising from the relevant '... a system of road tax in which one tax French provisions, in so far as that increase band comprises more power ratings for tax did not have the effect of favouring the sale purposes than the others, with the result of vehicles of domestic manufacture over that the normal progression of the tax is the sale of vehicles imported from other restricted in such a way as to afford an Member States. advantage to top-of-the-range cars of domestic manufacture, and in which the power rating for tax purposes is calculated in a manner which places vehicles imported from other Member States at a disadvan- tage has a discriminatory or protective 41. It can be inferred from that case-law on effect within the meaning of Article 95 of the French system of motor vehicle taxation the Treaty.' that, for the purpose of interpreting Arti- cle 95 of the EC Treaty, the decisive criterion adopted by the Court is that of comparability between the domestic and imported products concerned, so as to be able to examine on that basis whether those 39. The Court was required to give a products are taxed according to the same preliminary ruling on the interpretation of methods of calculation and rules. Article 95 of the EC Treaty with regard to the French system of motor vehicle taxation likewise in Casarin. 7It stated that, in order to determine whether certain provisions in that system had a discriminatory or protec- tionist effect, it had to be examined whe- 42. Thus, in its most recent judgment on ther an increase in the motor vehicle tax the French system of motor vehicle taxa- affecting certain vehicles might deter con- tion, given in Tarantik 9 — a reference for sumers from purchasing vehicles with a a preliminary ruling —, the Court held higher engine rating for administrative that, 'in order to determine whether the tax purposes, which were all of foreign manu- system at issue in the main proceedings is

45. If similarity cannot be established, it must be examined, in the light of the second paragraph of Article 95, whether the tax is capable of protecting national products as against imported products, in other words of having a protectionist effect. 43. Referring to its judgment and the Advocate General's Opinion in Casarin, the Court points out that '... products such as cars are similar for the purposes of the first paragraph of Article 95 of the Treaty if their characteristics and the needs which they serve place them in a competitive 46. The Court has also interpreted the first relationship'. The degree of competition paragraph of Article 95 of the EC Treaty 'between two models depends on the extent widely so as to cover all taxation proce- to which they meet various requirements dures which conflict with the principle of regarding price, size, comfort, perfor- the equal treatment of domestic products mance, fuel consumption, durability, relia- and imported products. 12 According to the bility and other matters'. 11 Court, in order to assess the similarity on which the prohibition in the first paragraph of Article 95 is based, it must be examined whether the products have similar charac- teristics and meet the same needs from the point of view of consumers. 13

44. Likewise in the present case, the deci- sive criterion is that of comparability of the products, in this instance vehicles. Since Article 95 of the EC Treaty is intended to ensure the complete neutrality of national 47. In this case, the Commission, in con- taxation systems from the point of view of trast to the French Government, considers competition, there is discrimination pro- that vehicles which are equipped with hibited by the first paragraph thereof if it is technology described as innovative and found, by means of a comparison between 12 —See, to that effect, the judgment in Case 216/81 Cogi's [1982] ECR 2701. 10 — Tarantik, cited in footnote 2, paragraph 27. 13 — Case 106/84 Commission v Denmark [1986] ECR 833, 11 — Tarantik, cited in footnote 2, paragraph 28. paragraph 15.

52. The formula for calculating the engine rating for administrative purposes under the 1956 Circular is based on cylinder capacity alone. However, the calculation 50. It should therefore be assumed, in this method laid down in the 1977 Circular case, that vehicles of different makes must includes other parameters (see point 8 be compared. The examples cited by the above) and also distinguishes between the Commission and the French Government, different methods of approval.

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53. Consequently, 'two principal and dis- point 34) — is relatively small, so that, tinct methods of calculating the fiscal despite equal tax treatment, the higher tax horsepower ratings of private cars exist in affects more imported vehicles than domes- parallel' under the French system of motor tic vehicles, with the result that, in this vehicle taxation. 14 respect also, there is indirect discrimina- tion.

The net effect of that coexistence is that vehicles which (in the majority) are 55. It follows from all the foregoing that imported from other Member States are comparable vehicles of domestic manufac- subject to a higher level of motor vehicle ture are subject to a different system of tax than comparable domestic vehicles taxation from that applicable to imported which, although not fitted with the same vehicles, which, however, is not possible gearbox, none the less meet the same according to the first paragraph of Arti- consumer expectations in respect of other cle 95 of the Treaty. technical characteristics.

(2) The French Republic is ordered to pay the costs.

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