Mr Siilin bought in Germany a used Mercedes Benz car which, some weeks later,
he imported into Finland and declared to the customs office for the purposes
of paying car tax.
The customs office calculated the amount which he had to pay on the basis
of a comparison between his car and a new car of the same make, of a different
model but with similar technical characteristics.
The Finnish system applicable to the taxation of cars consists of:
(i) car tax:
- it
is characterised by the taking into account of the different marketing stages.
In the case of used cars already registered in Finland, the tax is calculated
on the basis of the purchase value of the new car paid by the official importer,
excluding his profit margin and that of any dealers or retailers. As regards
used cars imported by private individuals, the tax is calculated on the basis
of the purchase price paid by the consumer for a similar new car, which is as
a rule higher than that paid by the official importer.
- as
to depreciation, the Finnish legislation applicable to imported used cars provides
for a linear reduction of the tax by 0.5% which does not begin until the expiry
of the first six months from registration or bringing into use.
(ii) a tax described in national
law as "value added tax" on car tax.
After having paid the sum required, Mr Siilin brought proceedings before the
national courts. The national court referred to the Court of Justice of the
European Communities questions on the interpretation of the national legislation
in the light of the Treaty provision which prohibits any discriminatory internal
taxation and of the Sixth Directive on value added tax.
(i) The legislation on car tax
The Court recalled that the Treaty seeks to guarantee the neutrality of internal
charges as regards competition between imported products and products already
on the domestic market which have similar characteristics and meet the same
needs from the point of view of consumers.
The Court first of all examined whether the differences in the basis used
for the calculation of car tax are compatible with the provisions of the
Treaty. It considered that the amount of tax charged on imported used cars
must be compared with the residual tax incorporated in the value of a similar
used car already registered in the national territory, that is, with the
tax paid when the "national" used car was registered when new, taking
account of its depreciation. That implies that the taxable value, in
both cases, must be defined in the same way.
That is not the case if the similar used car already registered in the
national territory has been taxed when new, at a marketing stage where its value
was lower.
Consequently, a system which can give rise to such tax differences is
contrary to the Treaty.
As to the depreciation of cars, the Court found that the Finnish system
does not take account of the actual depreciation of used cars because that depreciation
is not linear, especially in the first years when it is much more marked than
subsequently. Such a system is incompatible with the Treaty.
A system of taxation on imported used cars which takes account of
the actual depreciation of vehicles on the basis of general criteria is
compatible with the Treaty only if it excludes any discriminatory effect.
That requirement means:
- that the depreciation criteria
on which the flat-rate method is based are made public and;
- that the owner is able to challenge
the application of such a method, which may mean that the particular characteristics
of his vehicle have to be examined in order to ensure that the tax is neutral.
(ii) The application of the tax described in Finnish law as "value added
tax" on car tax
Since the definition of value added tax is not a matter for national legislation,
the Court examined whether this tax truly amounts to value added tax within
the meaning given by the Community directive. In that regard, it recalled the
essential characteristics of value added tax. The Court found that the Finnish
tax does not have those characteristics because:
- the tax on car tax does not
constitute a general tax. It applies only to certain vehicles;
- the amount of the tax is not
proportional to the price of the goods;
- the tax is not paid at each
stage in the production and distribution process; and
- the object of the tax is to
tax the total value, not the added value.
Consequently, the Court found that the Finnish tax in question is not value
added tax within the meaning of the Community directive.
Finally, in order to answer the question referred by the national court, the
Court assessed whether the Finnish tax on car tax amounts to a discriminatory
internal charge prohibited by the Treaty. By analogy with the preceding analysis,
the Court found that the Finnish tax on car tax is incompatible with the
Treaty if the amount charged by way of that tax when an imported used car is
registered exceeds the amount of the residual tax incorporated in the value
of a used car already in the national territory.
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