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Cite as: [1997] EUECJ C-375/95

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JUDGMENT OF THE COURT (Fifth Chamber)

23 October 1997 (1)

(Failure to fulfil obligations - Taxation of motor vehicles - Discrimination)

In Case C-375/95,

Commission of the European Communities, represented by Dimitrios Gouloussis, Legal Adviser, with an address for service in Luxembourg at the office of Carlos Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

applicant,

Hellenic Republic, represented by Panagiotis Mylonopoulos, Grade 1 Legal Adviser in the Community Legal Affairs Department of the Ministry of Foreign Affairs, and Anna Rokofyllou, Special Adviser to the Deputy Minister for Foreign Affairs, with an address for service in Luxembourg at the Greek Embassy, 117 Val Ste-Croix,

defendant,

APPLICATION for a declaration under Article 169 of the EC Treaty that, by introducing and maintaining in force provisions concerning the taxation of used cars which, first, for the purposes of calculating the basis of assessment to the special consumer tax permit only 5% for each year of age to be deducted from the selling price of equivalent new vehicles, which percentage cannot exceed 20% of the value of the equivalent new vehicles and, second, govern the levying of the flat-rate added special duty without any reduction for used cars and, third, grant tax advantages (reduction of the special consumer tax) only in respect of new anti-pollution technology cars and not imported anti-pollution technology used cars, the Hellenic Republic has failed to fulfil its obligations under Article 95 of the EC Treaty,

THE COURT (Fifth Chamber),

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

Advocate General: A. La Pergola,

Registrar: L. Hewlett, Administrator,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 29 May 1997,

after hearing the Opinion of the Advocate General at the sitting on 26 June 1997,

gives the following

Judgment

By application lodged at the Court Registry on 30 November 1995, the Commission of the European Communities brought an action under Article 169 of the EC Treaty for a declaration that, by introducing and maintaining in force, with respect to the taxation of imported used cars,
- Article 1 of Law No 363/1976 (as amended by Law No 1676/1986) which, for the purposes of calculating the basis of assessment to the special consumer tax, permits only 5% for each year of age to be deducted from the selling price of equivalent new vehicles, which percentage cannot exceed 20% of the value of the equivalent new vehicles,
- Article 3(1) of Law No 363/1976 (as last replaced by Article 2(7) of Law No 2187/1994) which governs payment of the flat-rate added special duty without any reduction for used cars, and
- Article 1 of Law No 1858/1989 (as subsequently amended by Articles 37(2) and 42(1) of Law No 1882/1990 and Article 10 of Law No 2093/1992 and in the version resulting from Article 2(1) of Law No 2187/1994), which grants tax advantages (reduction of the special consumer tax) only in respect of new anti-pollution technology cars and not of imported second-hand cars with the same technology,
the Hellenic Republic has failed to fulfil its obligations under Article 95 of the EC Treaty.
Greek Law No 363/1976, as amended by Law No 1676/1986, introduced a special consumer tax and a flat-rate added special duty on private cars imported into or assembled in Greece.
The special consumer tax is payable when a car is first sold or when it is imported. The rate varies, depending on the cubic capacity of the engine. The amount of the tax is equal to a certain percentage of the pre-tax selling price of the vehicle. With regard to imported used cars, the taxable value is calculated by deducting from the price of the corresponding new vehicles 5% for each year of use, up to a maximum as a rule of 20% (25% if the car is damaged or shows greater signs of wear than those due to normal use).
The flat-rate added special duty is payable on the first registration of a new or used car in Greece. Until 1994 the amount of that duty was expressed in drachmas, and depended solely on the vehicle's engine capacity. Imported used cars were subject to the duty in the same way as new ones and were not entitled to any reduction. Since Law No 2187/1994 was adopted, the amount of the flat-rate added special duty has been equal to a certain percentage of the pre-tax selling price of the vehicle, its rate varying according to engine capacity. The taxable value of imported used cars is determined in the same way as it is for the special consumer tax.
Law No 1858/1989 provided for the rates of special consumer tax to be reduced for 'new technology' or 'anti-pollution technology' cars which satisfied certain criteria fixed by decree. Those rates were further reduced pursuant to Laws No 1882/1990, 2093/1992 and 2187/1994. For example, the rates for cars with, respectively, 1 000 cm³, 1 600 cm³ and 2 000 cm³ engines are 20%, 25% and 45%, as opposed to the normal rates of 80%, 166% and 304%. Imported used cars which fall within the category of 'new technology' or 'anti-pollution technology' cars are not eligible for the reduced rates.
By formal notice of 31 December 1991, the Commission informed the Hellenic Republic that it considered the Greek system of private vehicle taxation to be contrary to Article 95 of the Treaty, on the ground that it involved discrimination against used cars imported from the other Member States in comparison with used cars bought in Greece.
First, the Commission challenged the detailed rules for calculating the basis of assessment to the special consumer tax in the case of imported used cars. It maintained that under the system for that tax the basis of assessment was always greater than the current net value of the corresponding domestic vehicle which was subject to the tax when new. It followed that the special consumer tax on imported used cars was patently higher than the residual proportion of the tax incorporated in the value of used cars bought in Greece.
Second, the Commission pointed out that used cars imported into Greece had to bear the entire flat-rate added special duty as though they were new. In this case, the over-taxation of that class of vehicles as opposed to Greek used cars, on which it was levied when they were first registered, was compounded by the fact that no reduction in the value of the imported cars was allowed when calculating the tax.
Third, the Commission noted that imported non-polluting technology used cars were not eligible for the reduced rates of special consumer tax. Those cars were therefore discriminated against in relation to similar Greek used cars which, when purchased new, were allowed the reduced rates in question and whose value still includes a residual proportion of the tax so reduced.
In a letter of 6 March 1992 the Hellenic Republic rejected the Commission's objections. First of all, it claimed that cars, whether produced in Greece or imported, were taxed in the same way. It justified limiting reduction of the taxable value of imported used cars to 5% per year and to a maximum of 20% (25% where the vehicle is damaged or exhibits signs of wear greater than those due to normal use) with a view to discouraging old, polluting and dangerous vehicles from being put into circulation. It added that the system reflected actual depreciation of vehicles, if it was borne in mind that cars had a longer life expectancy in Greece than elsewhere and that the price of the corresponding new car which was used in calculating the tax was the price for the year in which the imported used vehicle was manufactured and not the price for the year in which it was imported.
The Hellenic Republic also pointed out that if the reduced rates of special consumer tax were applied to imported non-polluting used cars it would be necessary to set up a system for checking each car individually, unlike the case of new cars which can be tested by sampling. The introduction of such a system would meet with unsurmountable practical difficulties.
On 7 September 1993 the Commission sent the Hellenic Republic a reasoned opinion in which it repeated all its objections.
In its reply of 22 November 1993 the Hellenic Republic maintained its position. In addition, it asserted that the flat-rate added special duty applied without distinction to all cars, domestic or imported, new or used. The duty was levied on cars when they were first registered in Greece and the value of the vehicle was irrelevant. As a result of that answer given by the Hellenic Republic, the Commission brought the present action.

The first ground of complaint
Under its first ground of complaint, the Commission questions the compatibility with Article 95 of the Treaty of the rules for calculating the basis of assessment to the special consumer tax for imported used cars inasmuch as they determine the taxable value of those cars by reducing the price of equivalent new cars by 5% for each year of age of the vehicles in question, the maximum reduction allowed as a rule being 20%.
The Greek Government contends, primarily, that the Commission's comparison of the treatment of imported used cars and that of used cars bought in Greece is of no relevance on the ground that the latter have already borne the special consumer tax when new.
It should first of all be noted that the special consumer tax does not apply to domestic used-car transactions because it is charged only once, when the vehicle is first purchased within the country, and part of it remains incorporated in the value of those cars (for a similar tax, see Case C-345/93 Nunes Tadeu [1995] ECR I-479, paragraph 10).
It is common ground that imported used cars and those bought locally constitute similar or competing products and Article 95 therefore applies to the special consumer tax charged on the importation of used cars (see, to this effect, Case C-47/88 Commission v Denmark [1990] ECR I-4509, paragraph 17).
It follows that the Commission was correct in comparing, for the purpose of verifying compliance with Article 95, the amount of the special consumer tax borne by imported used cars with the residual portion of the tax still incorporated in vehicles put into circulation in Greece when new before being resold in that country.
It should be borne in mind that, for the purposes of applying Article 95 of the Treaty, not only the rate of direct and indirect internal taxation on domestic and imported products but also the basis of the assessment and the detailed rules for levying the tax must be taken into consideration (Commission v Denmark, cited above, paragraph 18; see also Case C-327/90 Commission v Greece [1992] ECR I-3033, paragraph 11).
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, Case 45/75 Rewe-Zentrale v Hauptzollamt Landau [1976] ECR 181, paragraph 15, and Commission v Greece, cited above, paragraph 12).
In the present case it is not disputed that as a result of the detailed rules for determining the taxable value of imported used cars, the special consumer tax on those vehicles, whatever their condition, is reduced for each year of use by only 5% of the total of the tax charged on a new vehicle, and that reduction cannot as a rule be more than 20% of the total of that tax, however old the vehicle in question may be. At the same time, the residual portion of the special consumer tax incorporated in the value of a used car bought in Greece decreases proportionately as the vehicle depreciates.
It should be noted that, as the Commission has observed, in general the annual depreciation in the value of cars is considerably more than 5%, that that depreciation is not linear, especially in the first years when it is much more marked than subsequently, and, finally, that vehicles continue to depreciate more than four years after being put into circulation.
It follows that the special consumer tax on imported used cars is usually higher than the proportion of the tax still incorporated in the value of used cars already registered and purchased on the Greek market (to the same effect, see Nunes Tadeu, cited above, paragraph 14).
The Greek Government has, however, maintained that the rates of reduction of the taxable value of imported used cars reflect the actual depreciation of those vehicles if it is borne in mind that cars have a longer life in Greece than elsewhere and that the price of the equivalent new car taken into consideration in calculating the tax is the price charged in the year in which the imported used car was manufactured and not the price for the year in which it was imported.
As regards the first point, it is sufficient to observe that the Greek Government has not produced any specific data concerning the particularly long life of cars in Greece which could challenge the Commission's findings as to the normal depreciation of vehicles.
As to the fact that it is the prices of the equivalent new cars charged in the year in which the imported used cars were manufactured which are taken into account, that could offset the discrimination resulting from the detailed rules for calculating the taxable value of those vehicles only if the manufacturers regularly have recourse to particularly substantial price increases. In any event, given its uncertain nature, such a factor cannot guarantee that the imported product will in no circumstances be subject to higher fiscal pressure than that represented by the taxation imposed on the equivalent domestic product.
In those circumstances it must be held that the detailed rules for calculating the taxable value of imported used cars for the purposes of applying the special consumer tax give rise to taxation which discriminates against those cars.
The Greek Government has also claimed that the limits placed on the reduction in the taxable value of imported used cars are justified by the aim of discouraging old, dangerous and polluting vehicles from being put into circulation.
However, the pursuit of such an objective does not relieve a Member State from its duty to observe the rule of non-discrimination laid down in Article 95 of the Treaty. According to settled case-law, a system of taxation can be considered compatible with Article 95 of the Treaty only if it is proved to be so structured as to exclude any possibility of imported products being taxed more heavily than domestic products, so that it cannot in any event have discriminatory effect (see, in particular, Case C-90/94 Haahr Petroleum v ÊAbenrÊa Havn and Others [1997] ECR I-0000, paragraph 34).
Consequently, the Commission's first ground of complaint must be upheld.

The second ground of complaint
Under its second ground of complaint the Commission submits that the detailed rules for calculating the flat-rate added special duty on imported used cars are not incompatible with Article 95 of the Treaty.
It should first be considered whether this ground of complaint is admissible, even though this point has not been taken by the Greek Government (Cases C-362/90 Commission v Italy [1992] ECR I-2353, paragraph 8, and C-151/96 Commission v Ireland [1997] ECR I-0000, paragraph 10).
As paragraph 4 of this judgment makes clear, the flat-rate added special duty was altered during the period between the issue of the reasoned opinion and the bringing of this action by the Commission. The duty initially varied solely in relation to the vehicle's engine capacity and imported used cars were subject to the tax in the same way as new ones, without being entitled to any reduction. Since the adoption of Law No 2187/1994 amending Article 3(1) of Law No 363/1976, the duty has been based on the pre-tax selling price of the vehicle and its rate depends on engine capacity. The taxable value of imported used cars is determined in the same way as it is for the special consumer tax.
In those circumstances the criticisms formulated by the Commission during the pre-litigation procedure referred exclusively to the flat-rate added special duty as it stood before the entry into force of Law No 2187/1994. In the grounds of its application to the Court, the Commission did not reproduce those criticisms except in the form of a mere reference to the arguments set out in its reasoned opinion. It did, on the other hand, explain why the new version of the flat-rate added special duty seemed to it to be open to the same reproach as the special consumer tax, and requested the Court to declare that duty, as it stood both before and after 1994, to be incompatible with the Treaty.
The Court has consistently held that the Commission must indicate, in any application made under Article 169 of the Treaty, the specific complaints on which the Court is asked to rule and, at the very least in summary form, the legal and factual particulars on which those complaints are based (see, inter alia, Case C-52/90 Commission v Denmark [1992] ECR I-2187, paragraph 17). An application does not satisfy that requirement if the Commission's complaints are not accurately set out in it and simply appear by way of reference to the reasons set out in the letter of formal notice and in the reasoned opinion (Case C-43/90 Commission v Germany [1992] ECR I-1909, paragraphs 7 and 8).
It follows that, in so far as it relates to the flat-rate special added duty as it was structured before 1994, the application is inadmissible.
According to settled case-law, an application under Article 169 of the Treaty is circumscribed by the pre-litigation procedure provided for by that article and, consequently, the Commission's reasoned opinion and the application must be based on identical grounds of complaint (see, in particular, case 298/86 Commission v Belgium [1988] ECR 4343, paragraph 10).
The Court did, however, make it clear that that requirement could not go so far as to make it necessary that, irrespective of the circumstances, the national provisions mentioned in the reasoned opinion and in the application should be completely identical. Where a change in the legislation occurred between those two phases of the procedure, it is sufficient that the system established by the legislation contested in the pre-litigation procedure has as a whole been maintained by the new measures which were adopted by the Member State after the issue of the reasoned opinion and have been challenged in the application (Case C-105/91 Commission v Greece [1992] ECR I-5871, paragraph 13).
That is exactly the case, for the reasons given by the Advocate General in section 10 of his Opinion, with respect to the Greek legislation on the flat-rate added special duty after the amendments introduced in 1994. Accordingly, the Commission's second ground of complaint, in so far as it relates to the new version of that duty, must be declared admissible.
As to the substance, it is sufficient to point out that since Law No 2187/1994 was adopted the detailed rules for determining the taxable value of imported used cars for the purposes of levying the flat-rate added special duty have been similar to those in force for the special consumer tax. Thus they also give rise to discriminatory taxation of those vehicles, for the reasons set out in paragraphs 14 to 29 of this judgment.
In the circumstances, the Commission's second ground of complaint must be upheld in so far as it relates to the detailed rules for calculating the flat-rate special added duty on imported used cars as it has been structured since 1994.

The third ground of complaint
Under its third ground of complaint, the Commission charges the Hellenic Republic with excluding, in all events, imported used cars from the benefit of the reduced rates of special consumer tax applicable to anti-pollution technology cars.
It is not disputed that a Member State cannot, without offending against the prohibition on discrimination laid down in Article 95 of the Treaty, confer tax advantages on less polluting cars while refusing those advantages to cars from the other Member States which nevertheless satisfy the same criteria as the domestic cars which do benefit from them.
The Greek Government has, however, invoked a statement entered in the minutes of a meeting of the Council of Ministers of the Environment of 20 and 21 December 1990, in which, it claims, the Commission recognized the particular pollution problems besetting the Hellenic Republic and accepted the fiscal measures at issue, which are designed to encourage the purchase of new, less polluting, vehicles.
It should be pointed out that such a statement cannot affect the meaning of a provision of the Treaty and that the Commission cannot give a Member State assurances as to the compatibility of domestic tax legislation with the Treaty. Furthermore, in the statement in question the Commission made its approval of the national provisions in question expressly subject to the condition that they should comply with the rules of the Treaty, in particular the prohibition of all discrimination between domestic and imported vehicles.
The Greek Government has also claimed that applying the reduced rates of special consumer tax to imported used cars would require it to carry out a technical test on each of those cars individually when they were imported and that, at the moment, the introduction of such testing would run up against serious practical difficulties.
However, even assuming the existence of those difficulties to be established, it must be pointed out that they cannot justify the application of internal taxation which discriminates against products from other Member States in breach of Article 95 of the Treaty (see, to that effect, Case C-327/90 Commission v Greece, cited above, paragraph 24, and Nunes Tadeu, cited above, paragraph 19).
In those circumstances the Commission's third ground of complaint must be upheld.
It follows from all the foregoing considerations that, by determining, for the application of the special consumer tax and the flat-rate added special duty, the taxable value of imported used cars by reducing the price of equivalent new cars by 5% for each year of age of the vehicles concerned, with, as a rule, a maximum reduction of 20%, and by excluding anti-pollution technology imported used cars from the benefit of the reduced rates of the special consumer tax applicable to that type of vehicle, the Hellenic Republic has failed to fulfil its obligations under Article 95 of the Treaty.

Costs
Under Article 69(3) of the Rules of Procedure, the Court may order that the costs be shared or that the parties bear their own costs if each party succeeds on some and fails on other heads. Since the Hellenic Republic has been unsuccessful in all essential respects, it must be ordered to pay the costs.

On those grounds,
THE COURT (Fifth Chamber)
hereby:
1. Declares that, by determining, for the application of the special consumer tax and the flat-rate added special duty, the taxable value of imported used cars by reducing the price of equivalent new cars by 5% for each year of age of the vehicles concerned, with, as a rule, a maximum reduction of 20%, and by excluding anti-pollution technology imported used cars from the benefit of the reduced rates of the special consumer tax applicable to that type of vehicle, the Hellenic Republic has failed to fulfil its obligations under Article 95 of the Treaty;
2. For the rest, dismisses the application;
3. Orders the Hellenic Republic to pay the costs.

GulmannWathelet Moitinho de Almeida

Edward Puissochet

Delivered in open court in Luxembourg on 23 October 1997.

R. Grass

C. Gulmann

Registrar

President of the Fifth Chamber

1: Language of the case: Greek.