Elisabeth Jacquier, nee Casarin v Directeur General des Impots. (Tax provisions) [1995] EUECJ C-113/94 (30 November 1995)

Judgment 1 By order of 29 March 1994, received at the Court on 14 April 1994, the French Cour de Cassation (Court of Cassation) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty a question on the interpretation of Article 95 of that Treaty. 2 That question was raised in proceedings between Mrs Jacquier, née Casarin, and the Directeur Général des Impôts for the département of Jura, concerning the latter' s refusal to refund her the differential tax paid on her vehicle. 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 defined by legislation and each cover several fiscal horsepower ratings, varying according to cylinder capacity. 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 factors of progression from one tax band to the next, known as "progression coefficients", are equivalent to the proportion of the coefficient for one tax band to the coefficient for the band below. 5 Article 1599 G of the Code Général des Impôts was amended by Law No 87-1061 of 30 December 1987 (Journal Officiel de la République Française, 31 December 1987, p. 15532). 6 It is apparent from the documents in the case that the progression coefficients determined by that law for all the tax bands are, in round figures: 1.2 from the 12-14 CV (horsepower) tax band to the 15-16 CV band; 1.2 from the 15-16 CV band to the 17-18 CV band; 1.5 from the 17-18 CV band to the 19-20 CV band; 1.5 from the 19-20 CV band to the 21-22 CV band; and 1.5 from the 21-22 CV band to the 23 CV and over band. 7 Mrs Jacquier owns a Mercedes vehicle with a fiscal horsepower of 40 CV. For 1990 she had to pay, under the Law of 30 December 1987, differential tax on motor vehicles amounting, for that category of vehicle, to FF 10 832. 8 Mrs Jacquier considers that the Law of 30 December 1987 discriminates against imported vehicles, since the system of tax it establishes has an unjustified break in progression between the last tax band which includes vehicles of French manufacture, namely the 17-18 CV band, and the higher bands for vehicles of high fiscal horsepower, which are exclusively imported vehicles. 9 Mrs Jacquier believed that the tax on her vehicle had hence been levied in breach of Community law, in particular Article 95 of the EC Treaty, and claimed a refund from the Directeur Général des Impôts for the département of Jura. 10 The Directeur Général rejected her claim, whereupon, by application of 30 October 1990, Mrs Jacquier brought proceedings against him in the Tribunal de Grande Instance, Lons-le-Saunier. That court found that the progression coefficients of the bands defined according to the cylinder capacity of vehicles were stable and that the system of taxation did not have any discriminatory effect within the meaning of Article 95 of the Treaty and, by judgment of 3 December 1991, dismissed Mrs Jacquier' s action. 11 Mrs Jacquier appealed against that judgment to the Cour de Cassation. In support of her appeal she put forward the following plea in law: "A system of tax applying a coefficient, the progression of which from band to band is higher with effect from the bands which correspond to imported vehicles than it is for the lower bands which correspond to the bulk of domestic production, has a discriminatory or protective effect prohibited by Article 95 of the Treaty of Rome. In holding that there was no such effect and merely finding that the progression coefficient of the bands was stable, although the figures are incremental, the lower court infringed that article." 12 On the basis of those considerations, the French Cour de Cassation stayed the proceedings and asked the Court to rule: "whether Article 95 of the Treaty is to be interpreted as meaning that it prohibits the application of legislation, such as that in issue in the present case, introducing a taxation system for motor vehicles where the progression coefficient is greater for tax bands from 19 CV, which concern only vehicles imported from other Member States, than the coefficient applicable to the bands from 12-14 CV (which includes three fiscal horsepower values) to 17-18 CV, which concern essentially vehicles made in France capable of being considered similar to imported products of more than 19 CV". Admissibility 13 The Commission observes that the national court asks whether the fact that the progression coefficient for the bands above 18 CV is greater than that for the tax bands from 12-14 CV to 17-18 CV constitutes discrimination contrary to Article 95 of the Treaty. It doubts whether Mrs Jacquier' s vehicle, which is rated at a high fiscal horsepower, 40 CV, and vehicles of domestic manufacture within the 12-14 CV to 17-18 CV tax bands can be regarded as similar within the meaning of the first paragraph of Article 95 of the Treaty. 14 The Commission is therefore uncertain as to the admissibility of the question put by the French Cour de Cassation because of those doubts as to its relevance for the main proceedings. 15 It suffices to note in this respect that, as the Advocate General observes in point 20 of his Opinion, products 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 relationship. It is not impossible that a sharp rise in the tax on vehicles in the last three bands might have a deterrent effect on consumers, leading them not to buy vehicles in the highest band (23 CV and over) and to opt for a domestic model in the 17-18 CV or 15-16 CV tax band, provided that their minimum requirements regarding performance, size and comfort are met. 16 Under those circumstances, the question is not without relevance to the main proceedings, and thus cannot be considered inadmissible. Substance 17 It should be noted to begin with that the Court held in Case 112/84 Humblot v Directeur des Services Fiscaux [1985] ECR 1367, paragraphs 12 and 13, that as Community law stands at present the Member States are at liberty to subject products such as cars to a system of road tax which increases progressively in amount depending on an objective criterion, such as cylinder capacity, provided that that system of taxation is free from any discriminatory or protective effect. 18 In view of the wording of the question put to it, the Court must proceed from the assumption ° in the absence of some of the relevant information ° that in a system of progressive taxation as described by the national court, in particular the method by which the fiscal horsepower is determined, the structuring of the tax bands and the amount of the basic rate of tax are based on objective criteria and do not have a discriminatory or protective effect, within the meaning of Article 95 of the Treaty, in favour of vehicles of domestic manufacture. 19 Under those circumstances, the national court' s question must be understood as seeking essentially to know whether Article 95 of the Treaty precludes the application of national rules on motor vehicle taxation which provide for an increase in the progression coefficient of the kind at issue in the main proceedings. 20 To answer that question, it must be ascertained whether a system of progression as described by the national court is free from any discriminatory or protective effect. 21 A system of taxation cannot be regarded as discriminatory solely because only imported products, in particular those from other Member States, come within the most heavily taxed category (Case 140/79 Chemial Farmaceutici v DAF [1981] ECR 1, paragraph 18, and Case C-132/88 Commission v Greece [1990] ECR I-1567, paragraph 18). 22 To determine whether the increase in the progression coefficient of the differential tax above the 18 CV threshold has a discriminatory or protective effect, 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 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 even, as the Advocate General notes in point 27 of his Opinion, a model in the 15-16 CV band. 24 The 15-16 CV and 17-18 CV tax bands, however, include both imported vehicles and vehicles of domestic manufacture. In the 17-18 CV band, it is apparent from the documents in the case that the vehicles are nearly all of foreign manufacture and that domestic manufacturers have a market share of only about 5% of total car sales in that band. In the 15-16 CV band, while the majority of vehicles sold are indeed of domestic manufacture, firstly, consumers do nevertheless have a wide choice of imported vehicles in that band, and secondly, as appears from paragraph 6 of this judgment, the progression coefficients for the 15-16 CV and the 17-18 CV bands are the same, in round figures, so that consumers who are looking for a vehicle from the top of the range will not thereby be induced to purchase a vehicle in the 15-16 CV band. 25 In a system such as that at issue in the present case, therefore, it does not appear that the increase in the progression coefficient can have the effect of favouring the sale of vehicles of domestic manufacture. 26 The answer to the national court' s question must consequently be 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 at issue in the main proceedings, 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. Costs 27 The costs incurred by the French Government and the Commission of the European Communities, 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 action pending before the national court, the decision on costs is a matter for that court. On those grounds, THE COURT (Second Chamber), in answer to the question referred to it by the French Cour de Cassation by order of 29 March 1994, hereby rules: Article 95 of the EC 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 at issue in the main proceedings, 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. © European Communities, 2001 All rights reserved BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII