C-391/85 Commission v Belgium

Judgment of the Court of 4 February 1988. - Commission of the European Communities v Kingdom of Belgium. - Failure of a State to fulfil its obligations - Failure to comply with a judgment of the Court - Sixth VAT Directive - Taxable amount. - Case 391/85. European Court reports 1988 Page 00579

Summary Parties Grounds Decision on costs Operative part

++++

ACTION FOR FAILURE TO FULFIL OBLIGATIONS - JUDGMENT OF THE COURT ESTABLISHING A BREACH OF OBLIGATIONS - EFFECTS - OBLIGATIONS OF THE MEMBER STATE FOUND TO BE IN BREACH OF ITS OBLIGATIONS - PROHIBITION AGAINST REINTRODUCING IN ANOTHER FORM THE PROVISIONS CONSTITUTING THE BREACH - SPECIFIC CASE

( EEC TREATY, ARTS 169 AND 171 )

A MEMBER STATE HAS NOT TAKEN THE NECESSARY MEASURES TO COMPLY WITH A JUDGMENT OF THE COURT FINDING IT TO BE IN BREACH OF ITS OBLIGATIONS FOR HAVING LAID DOWN, IN BREACH OF A COMMUNITY DIRECTIVE, A MINIMUM TAXABLE AMOUNT EQUAL TO THE LIST PRICE FOR THE PURPOSES OF VAT ON SALES OF NEW CARS IF, WHILST

ABOLISHING THE SAID MINIMUM TAXABLE AMOUNT, IT ADJUSTS AN EXISTING REGISTRATION TAX IN SUCH A WAY THAT BY THE COMBINED EFFECT OF VAT AND THAT TAX, WHICH ONLY APPEARS TO BE A SEPARATE TAX, THE TOTAL AMOUNT OF TAX LEVIED REMAINS THE SAME .

IN CASE 391/85

COMMISSION OF THE EUROPEAN COMMUNITIES, REPRESENTED BY H . ETIENNE, PRINCIPAL LEGAL ADVISER, ACTING AS AGENT, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF G . KREMLIS, A MEMBER OF ITS LEGAL DEPARTMENT, JEAN MONNET BUILDING, KIRCHBERG,

APPLICANT,

V

KINGDOM OF BELGIUM, REPRESENTED BY THE MINISTER FOR FOREIGN AFFAIRS, APPEARING THROUGH R . HOEBAER, DIRECTOR AT THE MINISTRY OF FOREIGN AFFAIRS, FOREIGN TRADE AND COOPERATION WITH DEVELOPING COUNTRIES, AND BY J . DUSSART, GENERAL

INSPECTOR AT THE MINISTRY OF FINANCE, BOTH ACTING AS AGENTS, ASSISTED BY G . VAN HECKE AND K . LENAERTS, OF THE BRUSSELS BAR, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE BELGIAN EMBASSY, RESIDENCE CHAMPAGNE, 4 RUE DES GIRONDINS,

DEFENDANT,

APPLICATION FOR A DECLARATION THAT BY RETAINING IN PRACTICE, UNDER ITS LAW OF 31 JULY 1984 AMENDING THE CODE ON TAXES EQUIVALENT TO STAMP DUTIES, THE CATALOGUE PRICE AS THE BASIS FOR THE TAXATION OF NEW SALOON CARS AND ESTATE CARS, THE KINGDOM OF BELGIUM HAS FAILED TO TAKE THE MEASURES NECESSARY TO COMPLY WITH THE JUDGMENT DELIVERED BY THE COURT OF JUSTICE ON 10 APRIL 1984 ( (( 1984 )) ECR 1861 ), IN WHICH THE COURT DECLARED THAT PRACTICE TO BE CONTRARY TO THE SIXTH COUNCIL DIRECTIVE ( 77/388/EEC ) OF 17 MAY 1977 ON THE HARMONIZATION OF THE LAWS OF THE MEMBER STATES RELATING TO TURNOVER TAXES - COMMON SYSTEM OF VALUE-ADDED TAX : UNIFORM BASIS OF ASSESSMENT ( OFFICIAL JOURNAL L 145, P . 1 ),

THE COURT

COMPOSED OF : G . BOSCO, PRESIDENT OF CHAMBER, ACTING AS PRESIDENT, O . DUE ( PRESIDENT OF CHAMBER ), T . KOOPMANS, K . BAHLMANN, R . JOLIET, T . F . O' HIGGINS AND F . SCHOCKWEILER, JUDGES,

ADVOCATE GENERAL : J . MISCHO

REGISTRAR : D . LOUTERMAN, ADMINISTRATOR

HAVING REGARD TO THE REPORT FOR THE HEARING AND FURTHER TO THE HEARING ON 30 SEPTEMBER 1987,

AFTER HEARING THE OPINION OF THE ADVOCATE GENERAL DELIVERED AT THE SITTING ON 22 OCTOBER 1987,

GIVES THE FOLLOWING

JUDGMENT

Legal context and the dispute

1BY AN APPLICATION LODGED AT THE COURT REGISTRY ON 29 NOVEMBER 1985, THE COMMISSION OF THE EUROPEAN COMMUNITIES BROUGHT AN ACTION BEFORE THE COURT UNDER ARTICLE 169 OF THE EEC TREATY FOR A DECLARATION THAT BY RETAINING IN PRACTICE, UNDER ITS LAW OF 31 JULY 1984, THE LIST PRICE AS THE BASIS FOR THE TAXATION OF NEW SALOON CARS AND ESTATE CARS, THE KINGDOM OF BELGIUM HAD FAILED TO TAKE THE MEASURES NECESSARY TO COMPLY WITH THE JUDGMENT DELIVERED BY THE COURT ON 10 APRIL 1984 IN CASE 324/82 ( COMMISSION V KINGDOM OF BELGIUM (( 1984 )) ECR 1861 ).

2IN THAT JUDGMENT, THE COURT DECLARED THAT :

"BY RETAINING THE CATALOGUE PRICE AS THE BASIS FOR CHARGING VAT ON CARS, AS A SPECIAL MEASURE DEROGATING FROM ARTICLE 11 OF THE SIXTH DIRECTIVE, WHEN THE REQUIREMENTS LAID DOWN IN ARTICLE 27 ⁵ OF THE DIRECTIVE ARE NOT FULFILLED, THE KINGDOM OF BELGIUM HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE EEC TREATY ."

3IN THAT JUDGMENT THE COURT CENSURED BELGIAN RULES CONTAINED IN A ROYAL DECREE OF 1970 LAYING DOWN FOR VAT PURPOSES A MINIMUM TAXABLE AMOUNT FOR NEW CARS SUPPLIED WITHIN THE COUNTRY OR IMPORTED, WHICH WAS EQUAL TO THE LIST PRICE OF THE VEHICLE IN QUESTION . IN SO DOING, THE COURT REJECTED THE ARGUMENT PUT FORWARD BY THE KINGDOM OF BELGIUM TO THE EFFECT THAT THE REFERENCE TO THE LIST PRICE WAS JUSTIFIED AS A MEASURE DESIGNED TO PREVENT TAX EVASION OR AVOIDANCE .

4FOLLOWING THE JUDGMENT OF 10 APRIL 1984, THE KINGDOM OF BELGIUM, BY ROYAL DECREE NO 17 OF 20 DECEMBER 1984 ( MONITEUR BELGE OF 3 JANUARY 1985, P . 9 ), REPEALED, WITH RETROACTIVE EFFECT FROM 10 APRIL 1984, THE ABOVEMENTIONED DECREE OF 1970 IN SO FAR AS IT LAID DOWN THE LIST PRICE AS THE MINIMUM TAXABLE AMOUNT . SINCE THAT DATE, VAT ON NEW MOTOR VEHICLES IS NO LONGER CALCULATED ON THE BASIS OF THE LIST PRICE BUT, UNDER ARTICLE 26 OF THE VALUE-ADDED TAX CODE, ON THE BASIS OF THE PRICE ACTUALLY AGREED .

5ON THE SAME DATE, THE LAW OF 31 JULY 1984 AMENDING THE CODE ON TAXES EQUIVALENT TO STAMP DUTIES AND THE ROYAL DECREE OF 20 DECEMBER 1984 ADOPTED TO IMPLEMENT THAT LAW ( MONITEUR BELGE OF 3 JANUARY 1985, PP . 2 AND 4 RESPECTIVELY ) WERE PUBLISHED . THE PREAMBLE TO THE IMPLEMENTING DECREE STATES THAT THE PURPOSE OF THE LAW OF 31 JULY 1984 IS TO "COMPENSATE", FROM THE DATE ON WHICH THE ABOVEMENTIONED JUDGMENT OF THE COURT WAS DELIVERED, FOR THE ABOLITION OF THE MINIMUM TAXABLE AMOUNT FOR VAT PURPOSES BY LEVYING A REGISTRATION TAX AND THAT THE SAID LAW, THE IMPLEMENTING DECREE AND ROYAL DECREE NO 17 OF 20 DECEMBER 1984 "FORM AN INSEPARABLE WHOLE ".

6THOSE RULES, SUPPLEMENTARY TO THE ABOLITION OF THE MINIMUM TAXABLE AMOUNT FOR VAT PURPOSES, SHOULD BE CONSIDERED IN THE FOLLOWING LEGISLATIVE CONTEXT . IN DECEMBER 1977, THE KINGDOM OF BELGIUM INTRODUCED A REGISTRATION TAX, LEVIED AT THE SAME RATE AS VAT, ON THE REGISTRATION OF BOTH NEW AND SECOND-HAND SALOON CARS AND ESTATE CARS, THE TAXABLE AMOUNT BEING THE NORMAL VALUE OF THE VEHICLE . HOWEVER, MOTOR VEHICLES UPON WHICH VAT WAS PAID AT THE TIME OF PURCHASE WERE EXEMPT FROM THE REGISTRATION TAX . FOR NEW SALOON CARS AND ESTATE CARS ( HEREINAFTER REFERRED TO AS "NEW CARS ") THERE WAS IN FACT A FULL EXEMPTION SINCE, UNDER THE BELGIAN VAT RULES APPLYING AT THAT TIME, THE LIST PRICE CONSTITUTED THE MINIMUM TAXABLE AMOUNT FOR VAT PURPOSES AND THAT PRICE ALSO CORRESPONDED TO THE NORMAL VALUE LAID DOWN BY THE RULES CONCERNING THE REGISTRATION TAX .

7UNDER THE NEW 1984 RULES, THE REGISTRATION TAX WAS TO BE LEVIED ON THE LIST PRICE IN FORCE ON THE DATE ON WHICH THE VEHICLE WAS REGISTERED . HOWEVER, SINCE THE TAXABLE AMOUNT FOR VAT PURPOSES HAD BEEN REDUCED TO THE ACTUAL PRICE AND WAS THEREFORE NO LONGER IDENTICAL TO THE TAXABLE AMOUNT FOR THE PURPOSES OF THE REGISTRATION TAX, THE KINGDOM OF BELGIUM DECIDED TO AMEND THE PROVISION CONCERNING THE EXEMPTION FROM REGISTRATION TAX SO THAT IN FUTURE THE EXEMPTION WAS TO BE APPLICABLE ONLY UP TO THE AMOUNT CONSTITUTING THE TAXABLE AMOUNT FOR VAT PURPOSES UPON THE SUPPLY OR IMPORTATION OF THE VEHICLE .

8FINALLY, THE NEW RULES COMPRISED A TRANSITIONAL PROVISION FOR REGISTRATIONS BETWEEN THE DATE ON WHICH THE ABOVEMENTIONED JUDGMENT WAS DELIVERED ( 10 APRIL 1984 ) AND THE DATE OF PUBLICATION OF THE NEW RULES ( 3 JANUARY 1985 ), UNDER WHICH THE VAT UNDULY PAID DURING THAT PERIOD WAS AUTOMATICALLY SET OFF AGAINST THE AMOUNTS PAYABLE BY WAY OF REGISTRATION TAX .

9AS SOON AS IT BECAME AWARE OF THE TRAVAUX PREPARATOIRES FOR THE BELGIAN LAW OF 31 JULY 1984, THE COMMISSION INFORMED THE KINGDOM OF BELGIUM THAT SUCH LEGISLATION WAS NO MORE THAN A FORMAL RECASTING OF THE OLD VAT RULES AND DID NOT THEREFORE BRING TO AN END THE INFRINGEMENT FOUND TO EXIST BY THE COURT . SUBSEQUENTLY, IN A FORMAL NOTICE OF 27 NOVEMBER 1984, THE COMMISSION DECLARED THAT THE KINGDOM OF BELGIUM HAD NOT ADOPTED THE MEASURES NECESSARY TO COMPLY WITH THE JUDGMENT OF THE COURT OF 10 APRIL 1984 AS ARTICLE 171 OF THE TREATY REQUIRED IT TO DO AND THAT CONSEQUENTLY IT HAD FAILED TO FULFIL ITS OBLIGATIONS UNDER THAT PROVISION . FURTHERMORE, THE COMMISSION POINTED OUT IN THE NOTICE THAT, IN SO FAR AS THE REGISTRATION TAX ON NEW CARS WAS TO BE CONSIDERED INDEPENDENTLY, IT WAS NOT IN CONFORMITY WITH ARTICLE 33 OF THE SIXTH DIRECTIVE WHICH, AFTER THE INTRODUCTION OF THE COMMON SYSTEM OF VALUE-ADDED TAX, PROHIBITS THE INTRODUCTION OF ANY OTHER TAX WHICH COULD BE CHARACTERIZED AS A TURNOVER TAX .

10SINCE THE BELGIAN GOVERNMENT DISAGREED WITH THE COMMISSION' S ARGUMENT, THE COMMISSION DELIVERED A REASONED OPINION ON 20 JUNE 1985 IN WHICH IT STATED THAT THE KINGDOM OF BELGIUM HAD NOT ADOPTED THE MEASURES NECESSARY TO COMPLY WITH THE JUDGMENT OF THE COURT OF 10 APRIL 1984 BY MAINTAINING IN ITS LAW OF 31 JULY 1984 WITH REGARD TO NEW CARS A PROVISION CONTRARY TO THAT JUDGMENT AND TO THE SIXTH DIRECTIVE . SINCE THE COMMISSION WAS NOT SATISFIED WITH THE OBSERVATIONS MADE BY THE KINGDOM OF BELGIUM IN RESPONSE TO THE REASONED OPINION, IT BROUGHT THIS ACTION .

11REFERENCE IS MADE TO THE REPORT FOR THE HEARING FOR THE LEGAL BACKGROUND TO THE CASE, THE COURSE OF 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 .

ADMISSIBILITY

12THE KINGDOM OF BELGIUM CONTENDS THAT THE ACTION IS INADMISSIBLE BECAUSE IT DOES NOT IN FACT RELATE TO THE FAILURE TO COMPLY WITH THE JUDGMENT OF 10 APRIL 1984 AND THEREFORE TO AN INFRINGEMENT OF ARTICLE 171 OF THE EEC TREATY BUT TO A BREACH OF OBLIGATIONS QUITE DIFFERENT FROM THAT WHICH WAS THE SUBJECT OF THE SAID JUDGMENT, NAMELY THE INFRINGEMENT OF ARTICLE 33 OF THE SIXTH DIRECTIVE . FURTHERMORE, THE COMMISSION DID NOT REFER TO ARTICLE 171 EITHER IN ITS REASONED OPINION OR IN ITS APPLICATION . WITH REGARD TO THE ALLEGED INFRINGEMENT OF ARTICLE 33 OF THE SIXTH DIRECTIVE, THE COMMISSION CANNOT ALLEGE A BREACH OF OBLIGATIONS OF THAT KIND IN THE CONTEXT OF THE PRESENT PROCEEDINGS .

13THAT ARGUMENT MUST BE REJECTED . AS CAN BE SEEN FROM THE FORMAL NOTICE, WHICH EXPRESSLY REFERS TO ARTICLE 171, AS WELL AS FROM THE REASONED OPINION AND THE APPLICATION, WHICH REPEAT IN PART THE WORDING OF ARTICLE 171, THE COMMISSION HAS FROM THE OUTSET CONTENDED THAT THE KINGDOM OF BELGIUM HAS NOT ADOPTED ALL THE MEASURES NECESSARY TO COMPLY WITH THE JUDGMENT OF 10 APRIL 1984 SO THAT THE KINGDOM OF BELGIUM COULD NOT HAVE BEEN IN ANY DOUBT AS TO THE REAL SCOPE OF THE DISPUTE . HOWEVER, IN SO FAR AS THE COMMISSION ALLEGES, IN THE ALTERNATIVE, THAT THE KINGDOM OF BELGIUM HAS INFRINGED ARTICLE 33 OF THE SIXTH DIRECTIVE, IT MUST BE ACCEPTED THAT THIS COMPLAINT CAN BE CONSIDERED IF NECESSARY ONLY WITHIN THE FRAMEWORK OF ARTICLE 171 OF THE TREATY .

Grounds

SUBSTANCE OF THE CASE

14THE COMMISSION MAINTAINS THAT THE MEASURES ADOPTED BY THE KINGDOM OF BELGIUM FOLLOWING THE JUDGMENT OF 10 APRIL 1984 CANNOT BE REGARDED AS CONSTITUTING PROPER COMPLIANCE WITH THAT JUDGMENT . THE PRACTICE OF CALCULATING VAT ON THE BASIS OF THE LIST PRICE, WHICH THE COURT HELD TO BE CONTRARY TO ARTICLE 11 OF THE SIXTH DIRECTIVE, HAS NOT BEEN DISCONTINUED . THE KINGDOM OF BELGIUM HAS IN FACT MAINTAINED THE LIST PRICE AS THE TAXABLE AMOUNT WHILST THE REGISTRATION TAX ON NEW CARS, AS PROVIDED FOR IN THE BELGIAN LAW OF 31 JULY 1984, CONSTITUTES IN REALITY A TURNOVER TAX, ALTHOUGH IT HAS A DIFFERENT NAME .

15THE KINGDOM OF BELGIUM STATES IN REPLY THAT IN THE JUDGMENT IN QUESTION THE COURT CONFINED ITSELF TO DECIDING THE QUESTION WHETHER THE BELGIAN LEGISLATION CONCERNING VAT ON NEW CARS WAS COMPATIBLE WITH ARTICLES 11 AND 27 ⁵ OF THE SIXTH DIRECTIVE . THAT LEGISLATION IS NOW ENTIRELY IN CONFORMITY WITH THOSE PROVISIONS . ARTICLE 171 OF THE EEC TREATY MERELY REQUIRES PROPER COMPLIANCE WITH THE PRECISE TERMS OF THE OPERATIVE PART OF THE JUDGMENT AND THE MEMBER STATE CONCERNED CANNOT BE CENSURED FOR AN INFRINGEMENT OF ARTICLE 171 ON THE BASIS OF AN ALLEGED NEW BREACH OF OBLIGATIONS WHICH WAS NOT CONSIDERED IN THE FIRST JUDGMENT . THE ONLY CHARGE MADE AGAINST THE KINGDOM OF BELGIUM IN THIS CASE IS THAT ITS REGISTRATION TAX ON NEW CARS IS CONTRARY TO ARTICLE 33 OF THE SIXTH DIRECTIVE, WHICH IS NOT EVEN MENTIONED IN THE JUDGMENT OF 10 APRIL 1984 .

16IN REGARD TO THOSE ARGUMENTS IT SHOULD FIRST BE POINTED OUT THAT ARTICLE 171 OF THE EEC TREATY REQUIRES MEMBER STATES WHICH THE COURT HAS FOUND TO BE IN BREACH OF AN OBLIGATION UNDER THAT TREATY "TO TAKE THE NECESSARY MEASURES TO COMPLY WITH THE JUDGMENT OF THE COURT OF JUSTICE ".

17ALTHOUGH THE KINGDOM OF BELGIUM HAS REPEALED THE RULES LAYING DOWN THE TAXABLE AMOUNT FOR VAT PURPOSES WHICH THE COURT DECLARED UNLAWFUL IN ITS JUDGMENT OF 10 APRIL 1984, IT HAS AT THE SAME TIME INTRODUCED NEW RULES REGARDING REGISTRATION TAX ON NEW CARS WITH THE AIM OF ADJUSTING THE TAX SYSTEM IN SUCH A WAY THAT IN FACT THE SITUATION COULD REMAIN UNALTERED .

18IT SHOULD BE POINTED OUT THAT THE AMENDMENTS MADE ON 3 JANUARY 1985 REGARDING THE BELGIAN REGISTRATION TAX SPECIFICALLY CONCERN THE SAME GOODS, NAMELY NEW CARS, WHICH WERE SUBJECT TO THE TAXATION OF TURNOVER WHICH THE COURT DECLARED UNLAWFUL IN ITS JUDGMENT OF 10 APRIL 1984, AND, SECONDLY, THAT THE REGISTRATION TAX IS LEVIED AT THE SAME RATE AS THE TURNOVER TAX BORNE IN THE KINGDOM OF BELGIUM BY NEW CARS WHEN SUPPLIED OR IMPORTED . FURTHERMORE, THE TAXABLE AMOUNT IS NOT THE PRICE ACTUALLY AGREED BUT THE LIST PRICE; PRECISELY THIS POINT WAS AT THE CORE OF THE ABOVEMENTIONED JUDGMENT OF THE COURT .

19ARTICLE 3 OF THE BELGIAN LAW OF 31 JULY 1984 ESTABLISHES A DIRECT LINK BETWEEN THAT REGISTRATION TAX AND TURNOVER TAX INASMUCH AS IT PROVIDES THAT IF VAT WAS PAID AT THE TIME OF SUPPLY OR IMPORTATION, THE EXEMPTION FROM REGISTRATION TAX APPLIES, UPON THE SUBSEQUENT REGISTRATION, ONLY UP TO THE AMOUNT WHICH FORMED THE TAXABLE AMOUNT FOR VAT PURPOSES WHEN THE VEHICLE WAS SUPPLIED OR IMPORTATED .

20THE EFFECT OF THAT OFFSETTING MECHANISM, AS IS EXPRESSLY INDICATED IN THE PREAMBLE TO THE IMPLEMENTING DECREE OF 20 DECEMBER 1984, IS THAT THE ADJUSTMENT OF THE REGISTRATION TAX ON NEW CARS "COMPENSATES FOR" THE ABOLITION OF THE MINIMUM TAXABLE AMOUNT FOR VAT PURPOSES REQUIRED BY THE ABOVEMENTIONED JUDGMENT OF THE COURT AND THAT THE TWO TAXES THUS "FORM AN INSEPARABLE WHOLE ".

21CONSEQUENTLY, THE BELGIAN REGISTRATION TAX, AS FAR AS ITS AMOUNT OR EVEN ITS VERY EXISTENCE IS CONCERNED, DOES NOT CONSTITUTE AN INDEPENDENT TAX BUT DEPENDS ON THE VAT PAID ON THE SUPPLY OR IMPORTATION OF A NEW CAR .

22THE KINGDOM OF BELGIUM DISAGREES WITH THAT DESCRIPTION OF THE TAX . IT CONTENDS, PRINCIPALLY, THAT THE TWO TAXES IN QUESTION ARE CLEARLY DISTINCT FROM ONE ANOTHER IN THE DEFINITION OF THE PERSON LIABLE AND THE CHARGEABLE EVENT . AS FAR AS DOMESTIC TRANSACTIONS ARE CONCERNED, THE PERSON LIABLE FOR VAT AT THE RETAIL STAGE IS THE TRADER WHO SUPPLIES THE NEW CAR TO THE FINAL CONSUMER AND NOT THE LATTER . ON THE OTHER HAND, THE REGISTRATION TAX IS PAYABLE BY THE PERSON IN WHOSE NAME THE NEW VEHICLE IS ALLOWED TO BE DRIVEN ON THE PUBLIC HIGHWAY . THE CHARGEABLE EVENT FOR VAT PURPOSES IS THE SUPPLY OF THE NEW CAR BY THE RETAILER TO HIS CUSTOMER WHEREAS THE REGISTRATION TAX IS LINKED TO A DIFFERENT EVENT, NAMELY THE ISSUE OF THE REGISTRATION CERTIFICATE CONSTITUTING AUTHORIZATION FOR THE CAR TO BE DRIVEN ON THE PUBLIC HIGHWAY .

23AS REGARDS THE ARGUMENT BASED ON THE FACT THAT VAT AND THE REGISTRATION TAX ARE PAYABLE BY DIFFERENT PERSONS, IT SHOULD FIRST BE POINTED OUT THAT THE COURT HAS ALREADY STATED IN ITS JUDGMENTS OF 10 JULY 1985 IN CASE 16/84 COMMISSION V NETHERLANDS (( 1985 )) ECR 2366 AND IN CASE 17/84 COMMISSION V IRELAND (( 1985 )) ECR 2376 THAT THE PRINCIPLE OF THE COMMON SYSTEM OF VALUE-ADDED TAX CONSISTS IN THE APPLICATION TO GOODS AND SERVICES UP TO AND INCLUDING THE RETAIL STAGE OF A GENERAL TAX ON CONSUMPTION WHICH IS EXACTLY PROPORTIONAL TO THE PRICE OF THE GOODS AND SERVICES, IRRESPECTIVE OF THE NUMBER OF TRANSACTIONS WHICH TAKE PLACE IN THE PRODUCTION AND DISTRIBUTION PROCESS BEFORE THE STAGE AT WHICH TAX IS CHARGED . HOWEVER, VAT IS CHARGEABLE ON EACH TRANSACTION ONLY AFTER DEDUCTION OF THE AMOUNT OF VAT BORNE DIRECTLY BY THE COST OF THE VARIOUS PRICE COMPONENTS . AFTER REACHING THE FINAL CONSUMER WHO IS NOT A TAXABLE PERSON, THE GOODS REMAIN BURDENED WITH AN AMOUNT OF VAT PROPORTIONAL TO THE PRICE PAID BY THAT CONSUMER TO HIS SUPPLIER .

24THUS, ALTHOUGH IT IS TRUE THAT THE FINAL CONSUMER IS NOT THE TAXABLE PERSON FOR THE PURPOSES OF VAT, IT IS NONE THE LESS HE ALONE WHO, AT THE END OF THE DISTRIBUTION PROCESS, BEARS THE BURDEN OF PAYING THE AMOUNT OF VAT PROPORTIONAL TO THE PRICE OF THE GOODS PURCHASED . IT THEREFORE APPEARS THAT UNDER THE SYSTEM OF TAXATION APPLYING IN BELGIUM TO THE PURCHASE OF NEW CARS IT IS THE FINAL CONSUMER WHO HAS ACQUIRED SUCH A CAR, AND HE ALONE, WHO MUST ULTIMATELY BEAR THE BURDEN OF BOTH VAT AND REGISTRATION TAX SO THAT THE DIFFERENCE ALLEGED TO EXIST BY THE KINGDOM OF BELGIUM IS TO BE SEEN AS A MATTER OF A PURE FISCAL TECHNIQUE WHICH MAY THEREFORE BE DISREGARDED . FURTHERMORE, THE KINGDOM OF BELGIUM PLAINLY HAD THE SAME IDEA IN MIND WHEN PROVIDING, IN THE TRANSITIONAL PROVISION CONTAINED IN THE NEW RULES, THAT THE TWO TAXES MAY BE SET OFF AGAINST ONE ANOTHER DESPITE THAT FORMAL DIFFERENCE .

25WITH REGARD TO THE OTHER ARGUMENT PUT FORWARD BY THE KINGDOM OF BELGIUM TO THE EFFECT THAT ONLY VAT IS CHARGED ON THE SUPPLY OF NEW CARS WHEREAS REGISTRATION TAX IS LINKED TO THE MERE PLACING OF THE VEHICLE ON THE ROAD, IT SHOULD BE OBSERVED THAT THAT ARGUMENT COULD BE ACCEPTED ONLY IF THE TWO TAXES WERE GENUINELY INDEPENDENT OF EACH OTHER . HOWEVER, IT HAS ALREADY BEEN ESTABLISHED THAT, OWING TO THE AFOREMENTIONED OFFSETTING MECHANISM AND THE FACT THAT THE REGISTRATION TAX IS CONSEQUENTLY SUPPLEMENTARY TO VAT, THE REGISTRATION TAX CANNOT BE REGARDED AS AN INDEPENDENT TAX . ON THE CONTRARY, THE DIRECT LINK WHICH THAT MECHANISM CREATES BETWEEN THE SUPPLY TO THE FINAL CONSUMER AND THE SUBSEQUENT REGISTRATION OF A NEW CAR ELIMINATES THE NOTIONAL DIFFERENCE BETWEEN THE EVENTS UPON WHICH THE TWO TAXES BECOME CHARGEABLE .

26CONSEQUENTLY, NEITHER THE FACT THAT IN BELGIAN LAW THE TWO TAXES ARE PAYABLE BY DIFFERENT PERSONS NOR THE FACT THAT ONLY VAT IS FORMALLY LINKED TO THE SUPPLY OF NEW CARS CAN ALTER THE NATURE OF THE INSEPARABLE AND COMPLEMENTARY RELATIONSHIP EXISTING IN BELGIAN LAW BETWEEN VAT AND REGISTRATION TAX .

27THE KINGDOM OF BELGIUM ALSO CONTENDS THAT ITS REGISTRATION TAX IS JUSTIFIED BY THE DESIRE TO ELIMINATE THE RISK OF TAX EVASION THROUGH PRACTICES WHEREBY THE SUPPLIER DECLARES A PRICE LOWER THAN THE ACTUAL SELLING PRICE AND THE PURCHASER ACCEPTS THAT DECLARATION, THEREBY REDUCING THE TAX WHICH HE MUST BEAR .

28HOWEVER, THAT ARGUMENT ONCE AGAIN DEMONSTRATES THAT IN REALITY THE REGISTRATION TAX, LIKE THE VAT WHICH IT SUPPLEMENTS, IS GEARED TO THE COMMERCIAL TRANSACTION CONSISTING IN THE PURCHASE OF A NEW CAR AND NOT, AS THE KINGDOM OF BELGIUM CONTENDS, TO REGISTRATION AS A SEPARATE LEGAL EVENT . FURTHERMORE, IN ITS JUDGMENT OF 10 APRIL 1984 THE COURT HAS ALREADY REJECTED REFERENCE TO THE LIST PRICE AS A MEASURE DESIGNED TO AVOID TAX EVASION OR AVOIDANCE IN THE SPHERE OF TURNOVER TAX ON THE GROUND THAT IT IS DISPROPORTIONATE TO THE AIM IN VIEW BECAUSE IT SYSTEMATICALLY DEPARTS FROM THE RULES LAID DOWN IN ARTICLE 11 OF THE SIXTH DIRECTIVE .

29IT FOLLOWS FROM THE FOREGOING THAT IT MUST BE DECLARED THAT BY RETAINING IN PRACTICE, UNDER ITS LAW OF 31 JULY 1984, THE LIST PRICE AS THE BASIS FOR THE TAXATION OF NEW SALOON CARS AND ESTATE CARS, THE KINGDOM OF BELGIUM HAS FAILED TO TAKE THE MEASURES NECESSARY TO COMPLY WITH THE JUDGMENT OF THE COURT OF 10 APRIL 1984 AND HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE TREATY .

Costs

COSTS

30UNDER ARTICLE 69 ² OF THE RULES OF PROCEDURE, THE UNSUCCESSFUL PARTY IS TO BE ORDERED TO PAY THE COSTS . SINCE THE KINGDOM OF BELGIUM HAS FAILED IN ITS SUBMISSIONS, IT MUST BE ORDERED TO PAY THE COSTS .

Operative part

ON THOSE GROUNDS,

THE COURT

HEREBY :

¹ DECLARES THAT BY RETAINING IN PRACTICE, UNDER ITS LAW OF 31 JULY 1984, THE LIST PRICE AS THE BASIS FOR THE TAXATION OF NEW SALOON CARS AND ESTATE CARS, THE KINGDOM OF BELGIUM HAS FAILED TO TAKE THE MEASURES NECESSARY TO COMPLY WITH THE JUDGMENT OF THE COURT OF 10 APRIL 1984 AND HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE TREATY;

Signatures

² ORDERS THE KINGDOM OF BELGIUM TO PAY THE COSTS .

OPINION OF MR ADVOCATE GENERAL MISCHO delivered on 22 October 1987 * Mr President, Members of the Court,

1In the new action which the Commission has brought against the Kingdom of Belgium concerning the taxation of motor cars it claims that the Court should declare that, 'by retaining in practice, under its Law of 31 July 1984, the list price as the basis for the taxation of new saloon cars and estate cars, Belgium has failed to take the measures necessary to comply with the judgment delivered by the Court of Justice on 10 April 1984, 1 in which the Court declared that practice to be contrary to Directive 77/388/EEC'.

2Directive 77/388/EEC is entitled 'Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover tax — Common system of value-added tax: uniform basis of assessment' (hereinafter referred to as the 'Sixth Directive').

3The operative part of the judgment of 10 April 1984 with which Belgium has allegedly failed to comply reads as follows:

'By retaining the catalogue price as the basis for charging VAT on cars, as a special measure derogating from Article 11 of the Sixth Directive, when the requirements laid

* Translated from the French.

down in Article 27 (5) of the directive are not fulfilled, the Kingdom of Belgium has failed to fulfil its obligations under the EEC Treaty*.

4By Royal Decree No 17 of 20 December 1984 laying down a minimum basis for charging VAT on second-hand saloon cars and estate cars, which repeals Royal Decree No 17 of 20 July 1970, Belgium terminated the practice whereby the list price was used as the minimum taxable amount for new cars for VAT purposes.

5Belgium's contention that from that date the list price is no longer used in Belgium as the basis for charging VAT on new cars must therefore be accepted.

6However, the purchaser of a new car must still pay a tax proportional to the list price, since, by a Law of 31 July 1984, Belgium amended its code on taxes equivalent to stamp duties so that with retroactive effect from the date of the judgment of the Court a registration tax, the rate of which is identical to the rate of VAT, is charged on the list price of new cars.

7Belgium contends that by adopting that law it has not failed correctly to comply with the judgment of 10 April 1984 since that judgment does not have any bearing on taxes other than VAT.

8It is true that the Court did not, in the operative part of its judgment or in the grounds thereof, make any reference to the list price except with regard to Articles 11 and 27 of the directive, which deal solely with VAT.

9Moreover, Belgium has demonstrated — in my view convincingly and without being contradicted in this respect by the Commission — that the registration tax has characteristics which distinguish it from VAT. The arguments which it has put forward are contained in the Report for the Hearing. The most decisive argument concerns the fact that registration tax is not deductible.

10It might therefore be concluded, on the basis of the actual terms of the judgment of 10 April 1984, that Belgium has in fact adopted the measures needed to comply with that judgment and that the Commission's application is unfounded.

11To reach that conclusion would be to adopt a strict interpretation of Article 171 which could be described in the following terms: Article 171 requires a Member State to adopt the precise measures arising out of the operative part of the judgment by which the Court held that the Member State had failed to fulfil its obligations. Those measures may be negative (repeal of a provision, as was the case here) or positive (adoption of a new provision).

12If, however, the Member State adopts a new measure which is outside the framework laid down by the judgment or which raises a point of law not considered in the judgment, this is a new fact whose compatibility with Community law the

590 Commission may contest only by instituting entirely new proceedings, not linked with the question whether the preceding judgment has been complied with.

13It must be admitted that such an approach would be logical and consistent. Does that mean that it is the only possible approach? The Commission thinks not, since in its application it seeks a declaration that the judgment of the Court has been incorrectly implemented, and not that there has been a fresh infringement, independent of the old one.

14It should also be noted that the fresh proceedings instigated by the Commission seem almost like two combined actions against Belgium for failure to fulfil its obligations, one for infringement of Article 171 of the EEC Treaty and the other for failure to comply with Article 33 of the Sixth Directive.

15Indeed, even in its letter of formal notice the Commission claimed that the registration tax infringed Article 33 of the Sixth Directive. It repeated that argument in the reasoned opinion, in the application and in the reply.

16It is therefore undeniable that as regards the latter complaint Belgium had the same opportunity of defending itself as it would have had if entirely separate proceedings had been instituted against it for failure to fulfil its obligations. At the hearing, however, the Commission insisted that its action related solely to the infringement of Article 171.

17Belgium, on the other hand, denies that this action for infringement of Article 171 is in proper form because, as it rightly points out, Article 171 is not cited in the reasoned opinion or in the application instituting proceedings before the Court. It seems to me, however, that the fact that the article was cited in the letter of formal notice and was set out in the conclusion of both the reasoned opinion and the application is sufficient for this action to be considered an action for the infringement of Article 171. I therefore propose that the Court should reject that submission.

18In support of the Commission's point of view two lines of reasoning may be put forward, which may overlap. The first is based on the implied scope of the judgment of 10 April 1984 and the second on the connection between the measures adopted by Belgium and compliance with that judgment.

19The first approach emphasizes the fact that the subject-matter of the Commission's application which gave rise to the judgment of 10 April 1984 was necessarily limited to the method of charging VAT, since at that time in Belgium there was no other tax on new cars. There was therefore no reason for the Court to consider the compatibility with the Sixth Directive of other taxes based on the list price. The Court was, however, fully aware of the fact that, under the system established by the Sixth Directive, there could be no tax on turnover other than VAT (see Article 33 of the Directive). Therefore the judgment of 10 April 1984 implied that the supply (the chargeable event for VAT purposes) of a new car could not give rise to any taxation based on the list price.

20It follows that if registration tax is charged on the supply of new cars and if (as the Commission seeks to establish) it constitutes a turnover tax, the judgment of the Court has not been properly complied with.

21The second approach is as follows:

22Article 171 requires a Member State to adopt the necessary measures to comply with a judgment by which the Court held that it was in breach of one of its obligations. If in complying with a judgment a Member State infringes a rule of Community law, it is not respecting Article 171 of the Treaty and is liable to be found to have thereby failed to fulfil its obligations.

23In this case Belgium, obliged as a result of the judgment of the Court to abolish the minimum basis for charging VAT, adopted a set of measures which were expressly stated, in the recitals to the Royal Decree of 20 December 1984 amending the general rules on taxes equivalent to stamp duties (Moniteur belge of 3 January 1985, p. 17), to be an 'inseparable whole'. The introduction of a registration tax based on the list price of new cars constitutes a major part of that whole. It was even stated, in the preamble to the aforesaid Royal Decree, that the registration tax was intended to 'compensate for the abolition of the minimum taxable amount for VAT purposes'.

24If it should therefore be found that the registration tax is contrary to a provision of Community law, namely Article 33 of the Sixth Directive, Belgium would not have properly complied with the judgment in question and would therefore have failed to fulfil its obligations under Article 171 of the Treaty.

25Which of the two interpretations of Article 171 is to be accepted, the narrow interpretation supported by Belgium or the wide interpretation of the Commission? OOPPIINNIIOONN OOFF MMRR MMIISSCCHHOO —— CCAASSEE 339911//8855

26It seems to me that the arguments put forward in support of the second interpretation prove, in this case at least, that the connection between the conduct on the part of the Member State complained of and the compliance with the judgment of the Court is sufficiently close for the application brought by the Commission against Belgium for failure to fulfil its obligations under Article 171 to be regarded as admissible.

27It must therefore then be considered whether the registration tax must be regarded as a turnover tax within the meaning of Article 33 of the Sixth Directive.

28That article provides that 'without prejudice to other Community provisions, the provisions of this directive shall not prevent a Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, stamp duties and, more generally, any taxes, duties or charges which cannot be characterized as turnover taxes'.

29If the Belgian registration tax has the character of turnover tax, it is therefore quite simply prohibited.

30In its judgment of 27 November 1985 in Case 295/84 Rousseau Wilmot SA v Caisse de compensation de l'organisation autonome nationale de l'industrie et du commerce — Organic [1985] ECR 3759, the Court laid down guidelines as to what is meant by a turnover tax.

31In paragraph 16 of that judgment the Court stated as follows:

592 Ίn leaving the Member States free to maintain or introduce certain indirect taxes such as excise duties on the condition that they are not taxes which can be 'characterized as turnover taxes', Article 33 of the Sixth Directive seeks to prevent the functioning of the common system of value-added tax from being compromised by fiscal measures of a Member State levied on the movement of goods and services and charged on commercial transactions in a way comparable to value-added tax. The purpose of that provision cannot therefore be to prohibit the Member States from maintaining or introducing duties or charges which are not fiscal but have been introduced specifically in order to finance social funds and which are based on the activity of undertakings or certain categories of undertakings and calculated on the basis of the total annual turnover without directly affecting the price of goods or services.'

32I propose to examine the various criteria set out in that paragraph one by one.

33(a) First of all, it is clear that the contested tax is a fiscal measure. Moreover, the Kingdom of Belgium admits that it is intended to bring in an amount equivalent to the amount by which the VAT collected has been reduced as a result of the judgment of the Court. As a result of the tax, too, individuals are taxed in the same way as before, since in general it prevents price discounts or rebates granted by the seller from affecting the level of taxation (see paragraph 31 of the judgment of 10 April 1984).

34(b) It must also be acknowledged that this is a tax levied on the movement of motor vehicles.

35It is levied on the first use of a vehicle and is then charged on any change of ownership. In other words, it is levied on successive disposals of the same goods, although its minimum basis of assessment, expressed by a decreasing percentage of the list price, is reduced as the car becomes older (Article 10 of the general regulation on taxes equivalent to stamp duties, as amended by the regulation of 20 December 1984).

36(c) Is the tax charged on commercial transactions in a way comparable to the VAT, and does it directly affect the price of the goods concerned?

37From the way in which the basis of assessment is formally defined ('In the case of new saloon cars and new estate cars, the tax shall be charged on the list price in force on the date of registration of the vehicle' — Article 5 (1) introduced by the Law of 31 July 1984) it must be concluded that it is certainly charged on a commercial transaction, since the list price includes the price which was actually paid. In principle, the tax is charged not only on the rebate granted by the seller but also on the price actually paid by the purchaser, which also constitutes the assessment basis for VAT. Furthermore, in the table headed 'Example illustrating the effect of registration tax in practice', which was supplied to the Court by the Belgian Government in reply to the questions asked by the Court, there is a column entitled 'Base d'importation de principe = prix de catalogue' ('Basic taxable amount = list price').

38It is not until later that exemption from registration tax is granted in an amount equivalent to that which was used as the assessment basis for VAT (new Article 7 (2) of the code on taxes equivalent to stamp duties, introduced by the Law of 31 July 1984).

39As the Belgian Government stresses in paragraph 53 of its defence, the purchaser of the car is merely granted a 'tax credit' for the VAT paid by him. In my view, it may therefore be said that registration tax is charged on commercial transactions in the same way as VAT.

40If one turns away from the theoretical aspects and observes the way in which the system operates in practice, one finds that either the two taxes are paid simultaneously when the car is paid for (see for example the bill of sale submitted to the Court by the Commission) or the purchase price and VAT are paid and registration tax is paid separately. In both cases the actual taxable amount for the purposes of registration tax is the difference between the list price and the price actually paid, that is to say the discount granted by the seller.

41This is why the Belgian Government states in paragraph 26 of its rejoinder that the taxable amount for the purposes of registration tax 'is not the consideration for a transaction, expenditure on consumption or a fraction of turnover'. But can it still be said that, as things truly stand, registration tax is not charged on commercial transactions in a way comparable to VAT and does not directly affect the price of the goods in question, in accordance with the criterion laid down by the Court?

42In this connection it may first be noted that the taxable amount for registration tax purposes is quite different from that for the taxes which have already been held by the Court not to be turnover taxes.

43In Rousseau Wilmot, the tax was based on the total annual turnover of the companies concerned, and the Grad Case (judgment of 6 October 1970 in Case 9/70 Grad v Finanzamt Traunstein [1970] ECR 825) concerned a fixed sum of one pfennig per tonne per kilometer.

44By contrast, the registration tax 'affects the price of the goods concerned', since it increases the price which must be paid for the car by the consumer if he wishes to use it for the purpose for which it is intended. The case of a person wishing to purchase a car without also applying for a registration plate is in practice so unusual that it may be disregarded.

45It also seems to me that, even if only the actual basis on which the tax is charged, that is to say the difference between the list price and the actual price, were to be taken into account, it must be recognized that this can be ascertained only on the basis of the precise terms of the sale, that is to say of a commercial transaction, to which it is therefore inseparably linked.

46Does not the fact that registration tax may be charged by the garage owner, on behalf of the State, at the same time as VAT, also imply that registration tax is charged on the transaction in a way

594 comparable to VAT? Lastly, I would refer to the other similarities between the two taxes pointed out by the Commission, which need not be referred to once again here.

47The Belgian Government, however, maintains that the chargeable event for this tax is not the purchase of the car but solely its registration. The tax is merely a standard charge levied when a car is authorized to be used on the public highway.

48If that were so, however, the tax would have to be charged whenever a car was authorized to be used on the public highway. But that is not the case. Registration tax is not in fact charged at all when VAT has been charged on the basis of the list price or where an exemption from VAT has been granted (see Article 7 of the code on taxes equivalent to stamp duties, as amended by the Royal Decree of 17 October 1980 and by the Law of 31 July 1984).

49In my view, the fact that registration tax is so wholly interchangeable with VAT conclusively proves that it is a turnover tax prohibited by Article 33 of the directive.

50Would the position be different if VAT was charged at the same time as registration tax instead of being deducted from it?

51I would be inclined to say that prima facie that would not alter the legal nature of the registration tax and it would still be a turnover tax prohibited by Article 31. But that is a problem which requires a very close examination and which need not be resolved by the Court in these proceedings.

52Lastly, with regard to the concerns about tax evasion expressed by the Belgian Government, I would recall that in its judgment of 10 April 1984 the Court stated that measures of the kind which Article 27 from the rules laid down by Article 11 of the Sixth Directive allows to be retained further than is necessary to avoid the risk of 'may, where appropriate, entail the tax evasion or avoidance' (paragraph 30). application of standard amounts, provided That possibility might perhaps be worth that the special measures do not derogate exploring.

Conclusion

53For all the reasons set out above, I propose that the Court should declare that the Kingdom of Belgium, by retaining in practice in its Law of 31 July 1984 the list price as the basis for the taxation of new saloon cars and new estate cars, has not adopted the measures necessary to comply with the judgment of the Court of Justice of 10 April 1984, and should order the defendant to pay the costs.

Notes

(1) Judgment of 10 April 1984 in Case 324/82 Commission v Belgium [1984] ECR 1861.

(2) Official Journal 1977, L 145, p. 1.