Judgment of the Court of 12 May 1992.
Commission of the European Communities v Hellenic Republic.
C-327/90 • ECLI:EU:C:1992:206 • 61990CJ0327
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Commission of the European Communities v Hellenic Republic.
Tax provisions ° Internal taxation ° Special consumption tax on cars ° Calculation of basis of assessment favouring cars produced domestically ° Not permissible
(EEC Treaty, Art. 95)
A Member State which, in calculating the basis of assessment for a special consumption tax on private cars, lays down rules for cars imported from other Member States which differ from those applicable to cars manufactured on national territory, so that, by virtue of deductions available to the latter or increases applied to the former, imported cars are, even if only in certain cases, more heavily taxed, is in breach of its obligations under Article 95 of the Treaty.
In Case C-327/90,
Commission of the European Communities, represented by M. Patakia, of its Legal Service, and T. Margellos, a lecturer at the Université de Picardie seconded to the Commission' s Legal Service, acting as Agents, with an address for service in Luxembourg at the office of Roberto Hayder, a representative of the Legal Service, Wagner Centre, Kirchberg,
Hellenic Republic, represented initially by K. Samoni-Rantou, of the Athens Bar, employed in the Special Legal Department for the European Communities in the Ministry of Foreign Affairs, and subsequently by V. Kontolaimos, Legal Adviser in the State Legal Service, acting as Agents, with an address for service in Luxembourg at the Greek Embassy, 117 Val Sainte Croix,
APPLICATION for a declaration that, by laying down different rules for calculating the basis of assessment for the special consumption tax according to whether cars are imported from the other Member States or are produced in Greece, the Hellenic Republic has failed to fulfil its obligations under Article 95 of the EEC Treaty,
composed of: O. Due, President, R. Joliet, F. Grévisse, P.J.G. Kapteyn (Presidents of Chambers), C.N. Kakouris, J.C. Moitinho de Almeida, G.C. Rodríguez Iglesias, M. Diez de Velasco and M. Zuleeg, Judges,
Advocate General: G. Tesauro,
Registrar: H.A. Ruehl, Principal Administrator,
having regard to the Report for the Hearing,
after hearing oral argument from the parties at the hearing on 21 November 1991, at which the Commission was represented by T. Margellos, a national expert seconded to the Commission' s Legal Service, acting as Agent, and the Hellenic Republic by V. Kontolaimos, Legal Adviser in the State Legal Service, acting as Agent
after hearing the Opinion of the Advocate General at the sitting on 28 January 1992,
gives the following
1 By application lodged at the Court Registry on 13 October 1990, the Commission of the European Communities brought an action under Article 169 of the EEC Treaty for a declaration that, by laying down different rules for calculating the basis of assessment for the special consumption tax according to whether cars are imported from the other Member States or are produced in Greece, the Hellenic Republic has failed to fulfil its obligations under Article 95 of the EEC Treaty.
2 Law No 363/1976 of 22 June 1976, as supplemented and amended by Laws Nos 1003/1979 and 1591/1986, introduced in Greece a special consumption tax on private cars which are imported or assembled in Greece (hereinafter "the tax").
3 Pursuant to Article 1(3) of that Law, the basis of assessment of the special tax on imported cars is the sum of the following components:
"(a) the net ex-factory wholesale price of the vehicle, which may not differ by more than 25% from the retail (list) price in the country of manufacture, after deduction of any fiscal charges to which that price is subject in that country;
(b) the price of any optional accessories;
(c) 21% of the sum of (a) and (b) if the vehicles are bought direct from the manufacturer, whether the buyer is a sole concessionaire, a distributor or a motor dealer.
23.2% is added in other cases;
(d) 7% of (a) and (b) to take account of the costs of insurance and import of the vehicle.
In the case of vehicles from overseas, 25% is added."
4 For cars assembled in Greece, Article 4(2) of Law No 1573 of 19 and 27 November 1985 provides that the basis of assessment is to be calculated by reference to the ex-factory price indicated in the catalogue submitted by the automobile industry to the Price Control Committee and that components of the price of the car do not include fiscal charges of any kind incorporated in the cost price.
5 Furthermore, by virtue of Article 3(1) of the same Law, "raw materials imported from abroad or purchased by the automobile industry within national territory are exempt from any fiscal charge accruing to the State or to third parties, with the exception of the customs duties provided for by Community legislation for raw materials from non-member countries".
6 So far as concerns collection of the tax, Articles 2, 4 and 6 of Law No 1573/1985 make Greek automobile plants subject to a customs supervision regime, so that the consumption tax on cars produced in Greece is collected by the customs authorities at the time of customs clearance.
7 The Commission considers that the application of two different methods for calculation of the basis of assessment of the tax according to whether the cars are imported or manufactured in Greece infringes Article 95 of the Treaty. That system, it maintains, favours cars assembled in Greece at the expense of those imported from other Member States. The discrimination derives mainly from the fact that a flat-rate increase of 21% or 23% of the basis of assessment of the tax is prescribed for imported cars, whereas those assembled in Greece are taxed on the basis of actual data, namely the ex-factory price.
8 To justify that addition, the Greek Government explains that in Greece the automobile industry is not highly developed and that car manufacturers usually sell their production direct to the final consumer without recourse to intermediaries. As a result, the manufacturer' s selling price, which serves as the basis for calculating the tax on cars assembled in Greece, is equivalent to the retail price, which includes marketing expenses. It is therefore necessary, in order to restore equality between cars manufactured in Greece and imported cars, to add to the foreign manufacturer' s price for the latter cars the marketing costs incurred by the importer, such as promotional, advertising and after-sales-service expenses. That addition also covers the importer' s commission. As regards the addition of 23.2% which applies when imported cars are bought not direct from the manufacturer but from a foreign distributor, it is intended to cover that intermediary' s profit as well.
9 The Hellenic Republic also contends that, in general, that flat-rate system of taxation is intended to prevent the evasion to which imports of cars are susceptible in view of the high rate of tax. Such evasion takes the form of under-declaration of the invoice price so as to reduce the amount of tax paid. Proof of this is provided by the fact that lorries, which are subject to a lower rate of tax and are therefore less susceptible to evasion of that kind, are taxed, without distinction as to origin, on the basis of the transaction value.
10 Reference is made to the Report for the Hearing for a fuller account of the legislation at issue, the procedure and the submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.
11 It should first be recalled that, as the Court has held, it is necessary for the purposes of the application of Article 95 of the Treaty, to take into consideration not only the rate of the internal tax affecting domestic and imported products directly or indirectly but also the basis of assessment and the detailed rules for levying the tax in question (see the judgment in Case 55/79 Commission v Ireland  ECR 481, paragraph 8).
12 Furthermore, it has been held on several occasions that the first paragraph of Article 95 is infringed where the taxation on the imported product and that on the similar domestic product are calculated in a different manner on the basis of different criteria which lead, if only in certain cases, to higher taxation being imposed on the imported product (see in particular the judgment in Case 45/75 REWE-Zentrale v Hauptzollamt Landau  ECR 181, paragraph 15).
13 It is therefore necessary in the present case to determine whether the system for calculating the basis of assessment of the tax introduced by the contested legislation is such as to exclude any risk of discrimination.
14 Firstly, it will be observed that deductions are envisaged for cars manufactured in Greece, without any corresponding deduction being available for imported cars. That is the effect of the second indent of Article 4(2) of Law No 1573/1985, which authorizes the deduction of all fiscal charges of any kind incorporated in the cost price, and Article 3(1) of the same Law, which exempts raw materials purchased by the automobile industry from any fiscal charge with the exception of customs duties imposed by Community legislation.
15 Conversely, the basis of assessment of the tax levied on imported cars is raised by the addition of various components not forming part of the basis of assessment of the tax applicable to cars assembled in Greece. In the case of the former, Article 1(3) of Law No 363/1976, as amended, provides that the ex-factory price is to have added to it the price of optional equipment, whilst there is nothing in the legislation at issue to indicate with certainty that the same addition is made in respect of cars assembled in Greece. Moreover, under the same provision, two additions, one of 7% for costs of insurance and transport and the other of 21% or 23.2%, are prescribed for imported cars.
16 The Greek Government' s argument that the addition of 21% or 23.2% is justified by the need to restore equality with domestic manufacturers, who bear the expenses of marketing the cars produced by them, cannot be upheld.
17 It must first be emphasized in that regard that, as the Commission observed, marketing expenses are often included, at least in part, in the ex-factory price of imported cars.
18 Next, it should be noted that, as is apparent from the documents before the Court, the flat-rate increase of 21% or 23.2% was based on an average which was itself determined by reference to company balance-sheets. A flat-rate evaluation of that kind cannot ensure that the imported product is never subjected to a heavier tax burden than the corresponding domestic product.
19 The same applies to the 7% addition which is intended to cover the costs of transport and insurance. It must be observed, moreover, that, whilst insurance costs may vary according to the value of the product, transport costs are more closely related to its weight and dimensions and the distance over which it is carried.
20 Finally, where a system like that created by the contested legislation applies rules to domestic products which differ from those applied to products imported from other Member States and lacks transparency and precision, the defendant government must furnish proof that the system of which the Commission complains could not in any circumstances have a discriminatory effect (see in that regard the judgments of the Court in Case C-152/89 Commission v Luxembourg  ECR I-3141 and Case C-153/89 Commission v Belgium  ECR I-3171).
21 In that connection, the Greek Government relied, for the first time at the hearing, on Article 4(3) of Law No 1573/1985, according to which "the basis of assessment for the tax on cars manufactured in Greece may not be less than the minimum value allowed by the committee for imported vehicles of a corresponding or similar cylinder capacity".
22 A provision of that kind, in so far as it refers to the minimum basis of assessment for similar imported vehicles, cannot eliminate the risk of discrimination described above. The application of that provision leads to the result that, if several models of different makes but having the same cylinder capacity are imported, the taxation of cars manufactured in Greece is the same not as that of the imported vehicles for which the basis of assessment is highest but as that of those which are afforded the most favourable treatment.
23 Therefore the Greek Government has not proved that the system of taxation in force in Greece has been so arranged as to ensure that imported cars are not subject to higher taxation than cars manufactured in Greece.
24 Finally, it need merely be stated in reply to the Greek Government, which contends that the flat-rate system of taxation is intended to discourage the kinds of fraud associated with imports of private vehicles by reason of the high rate of tax applied to them, that, as the Court has held, the impossibility of carrying out the requisite controls and investigations concerning imported cars cannot justify the introduction of a flat-rate system of taxation for imported cars alone (see the judgment in Case 45/75 REWE-Zentrale, cited above, paragraph 15).
25 In view of all the foregoing considerations, it must be stated that, by laying down different rules for calculating the basis of assessment of the special consumption tax according to whether cars are imported from the other Member States or are produced in Greece, the Hellenic Republic has failed to fulfil its obligations under Article 95 of the EEC Treaty.
Decision on costs
26 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the Hellenic Republic has failed in its submissions, it must be ordered to pay the costs.
On those grounds,
1. Declares that, by laying down different rules for calculating the basis of assessment of the special consumption tax according to whether cars are imported from the other Member States or are produced in Greece, the Hellenic Republic has failed to fulfil its obligations under Article 95 of the EEC Treaty;
2. Orders the Hellenic Republic to pay the costs.