Avis juridique important

Judgment of the Court (Fifth Chamber) of 15 June 1999. - Yves Tarantik v Direction des services fiscaux de Seine-et-Marne. - Reference for a preliminary ruling: Tribunal de grande instance de Meaux - France. - Article 95 of the EC Treaty (now, after amendment, Article 90 EC) - Differential tax on motor vehicles. - Case C-421/97. European Court reports 1999 Page I-03633

Summary Parties Grounds Decision on costs Operative part

Tax provisions - Internal taxation - Differential taxation of motor vehicles - Sharp increase in progression coefficient above a cylinder level exceeded only by imported vehicles - Whether permissible - Conditions - Must not favour sales of vehicles of domestic manufacture

(EC Treaty, Art. 95 (now, after amendment, Art. 90 EC))

$$Article 95 of the Treaty (now, after amendment, Article 90 EC) does not preclude the application of national rules providing for a differential tax on motor vehicles, where the progression coefficient between one band and another rises more sharply in the bands above a certain cylinder power, covering exclusively imported vehicles, than in the lower bands, provided that the increase does not have the effect of favouring the sale of vehicles of domestic manufacture over the sale of vehicles imported from other Member States, in so far as consumers have a wide choice of imported vehicles among the lower-rated vehicles which are considered to be similar.

In Case C-421/97,

REFERENCE to the Court under Article 177 of the EC Treaty (now Article 234 EC) by the Tribunal de Grande Instance de Meaux, France, for a preliminary ruling in the proceedings pending before that court between

Yves Tarantik

and

Direction des Services Fiscaux de Seine-et-Marne,

" on the interpretation of Article 95 of the EC Treaty (now, after amendment, Article 90 EC),

THE COURT

(Fifth Chamber),

composed of: J.-P. Puissochet, President of the Chamber, J.C. Moitinho de Almeida, C. Gulmann, L. Sevón and M. Wathelet (Rapporteur), Judges,

Advocate General: F.G. Jacobs,

Registrar: H. von Holstein, Deputy Registrar,

after considering the written observations submitted on behalf of:

- Mr Tarantik, by G. Le Glaunec, of the Paris Bar,

- the French Government, by K. Rispal-Bellanger, Head of the Subdirectorate for International Economic Law and Community Law in the Legal Affairs Directorate of the Ministry of Foreign Affairs, and R. Nadal, Assistant Secretary for Foreign Affairs in the same directorate, acting as Agents,

- the Commission of the European Communities, by H. Michard and E. Traversa, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Mr Tarantik, represented by G. Le Glaunec and F. Naïm, of the Paris Bar, assisted by J. Perrotin, consultant engineer, of the French Government, represented by R. Nadal, and of the Commission, represented by H. Michard, at the hearing on 25 November 1998,

after hearing the Opinion of the Advocate General at the sitting on 28 January 1999,

gives the following

Judgment

1 By judgment of 13 November 1997, received at the Court on 11 December 1997, the Tribunal de Grande Instance (Regional Court), Meaux, referred a question to the Court under Article 177 of the EC Treaty (now Article 234 EC) for a preliminary ruling on the interpretation of Article 95 of the EC Treaty (now, after amendment, Article 90 EC).

2 That question was raised in proceedings between Mr Tarantik and the Direction des Services Fiscaux de Seine-et-Marne (Central Tax Office, Seine-et-Marne) relating to the notice for payment issued by the tax authority for failure by Mr Tarantik to pay the differential tax on motor vehicles for the year 1995/96.

3 In France, Articles 1599 C to 1599 J of the Code Général des Impôts (General Tax Code) provide for a differential tax on motor vehicles. Tax bands are established by legislation, each band covering a number of fiscal horsepower ratings. For each tax band there is a coefficient. The amount of the differential tax is calculated by multiplying a basic rate, decided annually by the councils of the individual départements, by the coefficient corresponding to the relevant tax band.

4 The French system for taxing motor vehicles is therefore based on the determination of the fiscal horsepower of private cars. The system which applied at the material time in the main proceedings may be described as follows, subject to the observation that the amendments made by Circular No 98-58 of 3 July 1998, which governs calculation of the fiscal horsepower rating of new vehicles sold from 1 July 1998, postdate the facts in the main proceedings and will therefore not be taken into consideration.

5 At the material time in the main proceedings, the method of calculating fiscal horsepower rating was essentially governed by the Circular of 28 December 1956 (Journal Officiel de la République Française, 22 January 1957, p. 910 hereinafter `the 1956 Circular') and Circular No 77-191 of 23 December 1977 (Journal Officiel de la République Française, 8 February 1978, p. 1052), as amended by Circular No 87-56 of 24 June 1987 and Circular No 88-04 of 12 January 1988 (hereinafter `the 1977 Circular'). Those circulars were given force of law, with retroactive effect, by Article 35 of the Finance (Amendment) Law for 1993 (Law No 93-859 of 22 June 1993; Journal Officiel de la République Française, 23 June 1993, p. 8815).

6 The formula for calculating fiscal horsepower under the 1956 Circular is based purely on a vehicle's cylinder capacity.

7 The 1977 Circular introduced, as from 1 January 1978, a new formula for calculating a motor vehicle's fiscal horsepower, drawing on several parameters other than cylinder capacity, including tyre circumference and the various reduction ratios for manual gearboxes with four or five gears and automatic gearboxes with three or four gears. The formula was amended by Circular No 88-04 of 12 January 1998 which abolished the upper limit of one of the parameters for calculating fiscal horsepower, but, under Circular No 91-71 of 20 September 1991 (hereinafter `the 1991 Circular'), the old formula continues to apply to certain vehicles granted individual approval.

9 One of the criteria for determining which rules apply is the type of approval granted to a vehicle.

10 Thus, as a general rule, the 1956 Circular applies to all motor vehicles approved prior to 1 January 1978, whether they are granted type or individual approval. It also applies to all vehicles granted individual approval from 1 January 1978 to 23 January 1987, and to vehicles granted individual approval on or after 24 June 1987 which neither match nor are considered to be equivalent, as regards fiscal horsepower, to a type-approved model whose power rating has been calculated in accordance with the 1977 Circular.

11 It should be added that it emerged during the hearing that the formula in the 1956 Circular also applies to private cars granted type approval on or after 1 January 1978 where a comparable model was approved before 1 January 1978.

12 The 1977 Circular in principle applies to private cars granted type approval on or after 1 January 1978, and to private cars granted individual approval on or after 24 June 1987 which match or are considered to be equivalent, as regards fiscal horsepower, to a type-approved model whose power rating has been calculated in accordance with the 1977 Circular. The French Government was not able to enlighten the Court as to the criteria which must be fulfilled in order for such equivalence to be recognised.

13 It is therefore apparent that two principal and distinct methods of calculating the fiscal horsepower ratings of private cars exist in parallel under the French tax system.

14 Mr Tarantik is the owner of an XJ6 4L2 Jaguar car which was first put on the road on 11 April 1979. The tax authority fixed the car's fiscal horsepower rating at 24 CV, using the calculation method in the 1956 Circular.

15 On 6 February 1996, Mr Tarantik was reported by the police for failing to display a tax disc for 1995/96, which he had refused to buy. On 9 May 1996, the principal tax inspector for Bussy Saint-Georges sent Mr Tarantik a notice for payment of FF 19 325, of which FF 6 569 represented ordinary duty and FF 12 756 fines and penalties. Mr Tarantik challenged that notice before the tax authority.

16 His application was rejected and he then brought an action against the Central Tax Office for Seine-et-Marne before the Tribunal de Grande Instance, Meaux. He argued that the Court has on several occasions held tax provisions relating to the differential tax on motor vehicles to be incompatible with Community law; that, subsequent amendments notwithstanding, they remained discriminatory under Community law; and that they had therefore to be declared inapplicable.

17 The Central Tax Office for Seine-et-Marne contended that the Tribunal de Grande Instance should dismiss Mr Tarantik's application on the ground that the tax provisions referred to above were compatible with Community law.

18 In those circumstances, the Tribunal de Grande Instance decided to stay proceedings and to refer the following question for a preliminary ruling:

`Considering the date of approval of the plaintiff's Jaguar car, which has a fiscal horsepower of 24 CV, bears the registration number 197 AT 77, and was first put on the road on 11 April 1979, and having regard to the diagrams and the outline of the progression of the tax submitted by the plaintiff, on the one hand, and to the observations of the French tax authorities, on the other, does the system of taxation applied correspond to objective criteria lacking in any discriminatory effect prohibited by Article 95 of the EEC Treaty? In particular:

- Is 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 discriminatory or not?

- 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 making the tax discriminatory in regard to owners of vehicles for which type-approval has not been granted in France, that is to say, vehicles approved on an individual basis?

- If the answer is yes, can the owner of a vehicle with a power rating in excess of 100 kW rely on that answer in order to plead, by application of the general principles of Community law such as equality in regard to public charges and the provisions of the European Convention on Human Rights and the Protocols thereto, that the tax is not payable on the ground that it is discriminatory or inequitable?'

19 That question breaks down into three parts which it is appropriate to examine separately.

The first part of the question

20 By the first part of its question, the national court is essentially asking whether a system such as the system of taxation at issue in the main proceedings has discriminatory effects in regard to imported vehicles or protectionist effects in regard to similar vehicles of domestic manufacture, which are incompatible with the first paragraph of Article 95 of the Treaty as a result of the increase in the tax's progression coefficient, in particular between the 15-16 CV band on the one hand and the bands over 18 CV, which cover imported vehicles only, on the other.

21 The Court has, in Case C-113/94 Casarin [1995] ECR I-4203, already been called upon to give a preliminary ruling on the compatibility with Article 95 of the Treaty of national motor vehicle tax rules such as the French legislation which provides for a sharper progression in tax increases for the 19 CV tax bands and above, which contain no vehicle of domestic manufacture, than that between the 15-16 CV and 17-18 CV bands, which cover vehicles of domestic manufacture capable of being considered to be similar to imported vehicles of over 19 CV.

22 The Court stated at paragraph 22 of its judgment in Casarin, cited above, that, in order to determine whether the increase in the progression coefficient of the differential tax above the 18 CV threshold has a discriminatory or protective effect in the sense contemplated by Article 95 of the Treaty, it must be examined whether that increase may deter consumers from purchasing vehicles with a fiscal horsepower of over 18 CV, which are all of foreign manufacture, to the benefit of vehicles of domestic manufacture.

23 The Court observed in that connection at paragraphs 23 to 25 of its judgment in Casarin that if the increase in the coefficient for vehicles with a fiscal horsepower of over 18 CV does indeed deter some consumers from buying such vehicles, those consumers will choose a model in the tax band immediately below, the 17-18 CV band, or in the 15-16 CV band. At the time of the facts in Casarin, those two tax bands included both imported vehicles and vehicles of domestic manufacture, although a very large majority of the vehicles in the 17-18 CV tax band were manufactured abroad and those in the 15-16 CV band were for the most part of domestic manufacture.

24 The Court also found, in the same judgment, first, that consumers did have a wide choice of imported vehicles in the 15-16 CV tax band and, second, that the progression coefficient between the 12-14 CV band and the 15-16 CV band was the same, in round figures, as that between the 15-16 CV band and the 17-18 CV band, so that consumers who were looking for a top-of-the-range vehicle would not be induced to purchase a vehicle in the 15-16 CV band. It concluded that under a system such as that established by the French legislation on tax on motor vehicles at the time of the facts in Casarin the increase in the progression coefficient for the bands above 18 CV did not have the effect of favouring the sale of vehicles of domestic manufacture.

25 The Court consequently held in Casarin that Article 95 of the Treaty does not preclude the application of national rules on motor vehicle taxation which provide for an increase in the progression coefficient of the kind introduced by the French legislation at issue, in so far as that increase does not have the effect of favouring the sale of vehicles of domestic manufacture over the sale of vehicles imported from other Member States.

26 Whereas in the judgment in Casarin, cited above, the progression in tax increases between the 15-16 CV band and the 17-18 CV band, on the one hand, and between the bands over 18 CV, on the other, was analysed, in this case the first part of the question referred to the Court relates specifically to the progression in tax increases between the 15-16 CV band only, on the one hand, and bands over 18 CV, on the other (the 19-20 CV, 21-22 CV and 23 CV bands).

27 That being so, in order to determine whether the tax system at issue in the main proceedings is discriminatory or protective in nature in the sense contemplated by Article 95 of the Treaty, it is for the national court to determine which vehicles in the 15-16 CV tax band may be considered similar, for the purposes of the first paragraph of Article 95 of the Treaty, to vehicles imported from other Member States which fall within a tax band above 18 CV, and, more particularly, to vehicles such as that of the plaintiff in the main proceedings, which has a fiscal horsepower rating of 24 CV.

29 It should be observed that vehicles with a high cylinder capacity, that is to say with a fiscal horsepower rating of over 18 CV, which are subject to a higher tax than that which applies to vehicles of domestic or foreign manufacture in the 15-16 CV tax band, are, as a general rule, priced considerably higher than vehicles in the 15-16 CV band. It follows that not all vehicles in the 15-16 CV band are necessarily similar, for the purposes of the first paragraph of Article 95 of the Treaty, to vehicles in the tax bands above 18 CV since the comparison must more particularly be made between vehicles in the 15-16 CV band and those in the 23 CV band and above.

30 Next, it must be pointed out that, unlike the 15-16 CV tax band, the bands above 18 CV cover imported vehicles exclusively. The observations of the plaintiff in the main proceedings, which have not been contradicted on this point, show that there is no vehicle of domestic manufacture in those bands.

31 Since certain vehicles in the 15-16 CV band could be considered similar to vehicles in the bands over 18 CV, and more particularly band 23 CV and above, it will be for the national court to inquire whether consumers have a wide choice of imported vehicles among the vehicles in the 15-16 CV band which are considered to be similar, so that the increase in the progression co-efficient between the 15-16 CV band and the bands over 18 CV, and more particularly the 23 CV band and above, does not have the effect of favouring the sale of vehicles of domestic manufacture.

32 In view of the foregoing considerations, the answer to be given to the first part of the question referred to the Court is that national rules on motor vehicle tax such as those in point in the main proceedings do not, as a result of the increase in the progression coefficient of the tax between the 15-16 CV tax band, on the one hand, and the tax bands above 18 CV, which contain only imported vehicles, on the other, have discriminatory or protective effects which are incompatible with the first paragraph of Article 95 of the Treaty where:

- either vehicles in the 15-16 CV tax band cannot be regarded as similar, for the purposes of that provision, to vehicles in the tax bands above 18 CV and, more particularly, to vehicles in tax bands 23 CV and above, such as that of the plaintiff in the main proceedings,

- or some of the vehicles in the 15-16 CV tax band may be regarded as products similar to vehicles in tax bands above 18 CV and, more particularly, those in tax bands 23 CV and above, but, within the range of imported vehicles in the 15-16 CV band, consumers have a choice such that the increase in the progression co-efficient between the 15-16 CV band and the bands above 18 CV and, more particularly, tax band 23 CV and above, is not of a nature such as to favour the sale of vehicles of domestic manufacture.

The second and third parts of the question referred

34 In this case, by the second part of the question referred, the national court is essentially asking whether the application of a system of taxation such as that resulting from the 1956, 1977 and 1991 Circulars has discriminatory effects in regard to vehicles granted individual approval in France. By the third part of its question, it is asking whether, in the event that the tax is held to be contrary to Article 95 of the Treaty, it is open to the owner of a vehicle with a horsepower of over 100 kW not to pay the tax.

35 It is clear from the text itself of the second part of the question that the answer is relevant to the decision in the main proceedings only if and to the extent that the vehicle of the plaintiff in those proceedings was granted individual approval. However, in his reply to written questions from the Court, Mr Tarantik informed the Court that his vehicle was granted type approval.

36 As regards the third part of the question referred, as the Advocate General noted in paragraph 66 of his Opinion, the 100 kW threshold is significant only for certain vehicles whose actual horsepower exceeds it, and whose fiscal horsepower rating is calculated in accordance with the 1977 Circular. The fiscal horsepower rating of Mr Tarantik's vehicle was, as he has pointed out, calculated in accordance with the 1956 Circular, in view of the fact that that model of vehicle was, according to the French Government's uncontested explanations, granted approval in France on 24 November 1976. As the fiscal horsepower rating of Mr Tarantik's vehicle was not calculated in accordance with the 1977 Circular, the reply to the question whether, if the tax is held to be contrary to Article 95 of the Treaty, it is open to the proprietor of a vehicle with a power rating in excess of 100 kW not to pay the tax, is irrelevant to the decision in the main proceedings.

37 There is therefore no need to reply to the second and third parts of the question referred.

Costs

38 The costs incurred by the French Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT

(Fifth Chamber),

in answer to the question referred to it by the Tribunal de Grande Instance de Meaux by judgment of 13 November 1997, hereby rules:

National rules on motor vehicle tax such as those in point in the main proceedings do not, as a result of the increase in the progression coefficient of the tax between the 15-16 CV tax band, on the one hand, and the tax bands above 18 CV, which contain only imported vehicles, on the other, have discriminatory or protective effects which are incompatible with the first paragraph of Article 95 of the EC Treaty (now, after amendment, the first paragraph of Article 90 EC) where:

- either vehicles in the 15-16 CV tax band cannot be regarded as similar, for the purposes of that provision, to vehicles in the tax bands above 18 CV and, more particularly, to vehicles in tax bands 23 CV and above, such as that of the plaintiff in the main proceedings,

- or some of the vehicles in the 15-16 CV tax band may be regarded as products similar to vehicles in tax bands above 18 CV and, more particularly, those in tax bands 23 CV and above, but, within the range of imported vehicles in the 15-16 CV band, consumers have a choice such that the increase in the progression co-efficient between the 15-16 CV band and the bands above 18 CV and, more particularly, tax band 23 CV and above, is not of a nature such as to favour the sale of vehicles of domestic manufacture.