OPINION OF ADVOCATE GENERAL

delivered on 17 July 1997 (*1)

The Tribunal de Grande Instance (Regional Court), Briey has referred the following questions to the Court for a preliminary ruling:

‘Is Article 95 of the [EC] Treaty to be interpreted as precluding the application of a method for establishing the fiscal horsepower value of vehicles which results in a higher such value being conferred on certain vehicles, which consumers are therefore deterred from buying, where all the vehicles in the highest tax categories are imported vehicles standing in direct competition with similar vehicles sold in France which are in more favourable tax categories?

Is Article 95 of the [EC] Treaty to be interpreted as precluding the simultaneous use of two sets of rules for establishing the fiscal horsepower value of vehicles where the more unfavourable set is applied in particular to vehicles imported from other Member States which French consumers are consequently deterred from buying, to the advantage of similar vehicles sold in France?’

This case is the latest in a line of cases concerning road taxes in France. It concerns in particular the method by which fiscal horsepower is determined. Mr Tabouillot, plaintiff in the main proceedings, claims that the method which is used to determine the road tax for which he is liable as the owner of a Chevrolet Corvette is contrary to Article 95 of the Treaty. That method is laid down in an administrative circular dating from 1956, which applies in exceptional cases and differs from the standard method laid down in an administrative circular dating from 1977. Before recounting the facts of the case I will set out the relevant French legislation and the previous rulings of the Court. I will set out the legislation on the basis of information available from the Court's case-law and from the observations of the French Government and the Commission, since the order for reference does not contain an adequate description of the applicable rules.

The relevant French legislation and previous rulings of the Court

Articles 1599 C to 1599 J of the Code General des Impôts (General Tax Code) lay down the basic provisions governing the differential road tax. The structure of the tax is established at the national level but it is levied by each département. Every type of vehicle placed on the market in France is given for tax purposes a ‘power rating’ calculated according to a complex formula, to which I will return. The power ratings are divided into bands, each containing two or three ratings. A coefficient is fixed at the national level for each tax band. Each year a basic rate of tax is fixed for each département by its own authorities. The basic tax thus fixed is multiplied by the coefficients to determine the amount of the differential tax payable for the corresponding tax bands. Thus, the amount of tax payable on any given vehicle may vary from one département to another but the structure of the tax is established nationwide and is the same throughout the country.

The Court has already had occasion to give four rulings on the compatibility of the French road tax system with Article 95 of the Treaty. In the first case, Humblot, the Court was asked whether it was compatible with Article 95 of the Treaty to impose both a differential tax on cars rated at 16 CV or less and a special tax, levied at a single and considerably higher rate, on vehicles of more than 16 CV. The Court first of all made the following general observation concerning progressive systems of road tax:

‘... 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 the power for tax purposes, which may be determined in various ways’.

The Court added however that such a system of domestic taxation is compatible with Article 95 only in so far as it is free from any discriminatory or protective effect.

The Court considered that that requirement was not met by a system such as the French one where the special tax was several times the highest amount of the progressive tax payable on cars of 16 CV or less and where the only cars subject to the special tax were imported, in particular from other Member States.

The French legislature then adopted Article 18 of Law No 85/695 of 11 July 1985 in order to comply with that judgment. Article 18 abolished the special fixed tax on cars with a power rating of over 16 CV. Thus, only the differential system remained. It operated as described above. However, Article 18 of that Law created four new tax bands with the result that there were nine tax bands in total, namely: up to 4 CV, from 5 to 7 CV, 8 and 9 CV, 10 and 11 CV, from 12 to 16 CV, 17 and 18 CV, 19 and 20 CV, 21 and 22 CV, and 23 CV and over. It also fixed a coefficient for each tax band (1; 1.9; 4.5; 5.3; 9.4; 14.1; 21.1; 31.7; 47.6 respectively). The formula for calculating the power rating was laid down in an administrative circular of 23 December 1977.

In the second case, Feldain, the Court was asked whether the system, as modified following the judgment in Humblot by Law No 85/695 of 11 July 1985, was compatible with Article 95 of the Treaty. One of the issues was whether it was compatible with Article 95 of the Treaty to establish a system whereby the progression of the coefficients became ‘exponential’ beyond the 12 to 16 CV tax band, which was the last one to include vehicles manufactured in France. The Court held that the progression did not display any significant difference of such a kind as to indicate that there was any discriminatory or protective effect. However, the Court did find that the tax system was discriminatory in two respects.

First, the arrangement of the tax bands was such that top-of-the-range cars manufactured in France fell in the 12 to 16 CV tax band and only vehicles from other Member States came within the tax bands above 16 CV. Because the 12 to 16 CV band was a broad one (the only one containing five power ratings whereas all the others comprised two or three power ratings) top-of-the-range cars manufactured in France were protected from the normal progression of the tax.

Second, the method of determining the power rating itself, as laid down in the administrative circular of 23 December 1977, was not objective and favoured cars manufactured in France. That method was expressed in the following formula:

P = m (0.0458. C/K) 1.48

In that formula, P stands for the power rating for tax purposes, m is 1 for petrol and 0.7 for diesel fuel, C is the cylinder capacity of the engine expressed in cubic centimetres. The cylinder capacity was divided by a factor, known as factor K, which was equal to the ‘average of the speeds which would in theory be attained by the vehicle concerned at an engine speed of 1000 revolutions per minute for each ratio of the gearbox’. The Court found, however, that for vehicles whose actual power rating exceeds 100 kW, the factor K was subject to a ceiling of 21.

The Court established that, by limiting the factor K as described above, the rules at issue had the effect of attributing to cars with a manual gearbox and a cylinder capacity exceeding 3109.7 ce a power rating which exceeded 16 CV. Moreover, where the factor K was limited the cylinder capacity alone determined the power rating for tax purposes. Since the cylinder capacity was raised to the power of 1.48, the result of any increase in cylinder capacity was to bring those cars within the highest tax bands.

The Court also found that no French manufactured car had a cylinder capacity exceeding 3109.7 cc. Consequently, the effect of limiting the factor K to 21 was to place in the higher tax bands only imported vehicles, whereas, without such a limitation, those cars would be given lower power ratings for tax purposes. Such a limitation was not justified by considerations relating to fuel consumption. There was no significant difference in that respect between vehicles affected by the limitation of the factor K and other comparable cars not affected by it. The Court therefore held that that method of determining the power rating for tax purposes was not objective in character and favoured cars manufactured in France.

The Court came to the same conclusions as those reached in Feldain in the third case, Seguela.

The French legislature adopted new legislation to comply with the judgment in Feldain. Article 20 of Law No 87-1061 of 30 December 1987 amended Article 1599 G of the Code General des Impôts by splitting the old band of 12 to 16 CV into two, creating a total of 10 instead of 9 bands. Consequently, there is now a band for 12 to 14 CV and another for 15 to 16 CV. Furthermore, a new administrative circular of 12 January 1988 modified the method of determining the power rating which was laid down in the circular of 23 December 1977. The new circular changed that part of the method which the Court held to be contrary to Article 95 of the Treaty, by removing the ceiling on the factor K. Law No 93/859 of 22 June 1993 gave force of law with retroactive effect to that circular.

The Court was thereafter again confronted with the French differential road tax in Jacquier, where it decided that Article 95 of the Treaty did not preclude a progressive taxation system such as the one resulting from the latest amendments of the French rules. The Court did not in that case consider the method of determining the power rating of cars.

It is that method which is again in issue in the present case. It appears that the 1977 circular, as amended, is not applied in all cases. There is a second method, laid down in an administrative circular of 28 December 1956, which appears still to be applied in essentially three types of case:

(a)Motor vehicles for which type approval was obtained in France before 1 January 1978;

(b)Motor vehicles not matching a model for which type approval was obtained in France after 1 January 1978;

(c)Motor vehicles which do match a model for which type approval was obtained after 1 January 1978 but which are considered nonequivalent with that model from the perspective of power rating.

The method laid down by the 1956 circular is expressed in the following formula:

P = K n D² L ω

in which P stands for the power rating for tax purposes, K is a numerical coefficient, n is the number of cylinders, D is the cylinder diameter in centimetres, L is the piston trajectory in centimetres and ω is the rotation speed in revolutions per second.

In its written observations the Commission states that that formula can be more easily expressed as the multiplication of the cylinder capacity in litres by a coefficient of 5.7294 in the case of vehicles using petrol, and by a coefficient of 4.0106 in the case of vehicles using diesel fuel. In reply to a written question put by the Court the French Government confirmed that, under the formula, the power rating of vehicles is strictly proportional to the cylinder capacity of the vehicle.

Also in reply to a written question the French Government pointed out that the above formula is used only in those cases where information on the technical features of the vehicle required for the application of the standard formula contained in the 1977 circular cannot be obtained, or can be obtained only with great difficulty (for example by dismantling the vehicle). The cylinder capacity, by contrast, can as a rule be easily established.

The circular of 1956 was in issue in the case of Bresle, but there the Court made an order declaring the reference inadmissible for lack of information.

The facts and the main proceedings

Mr Tabouillot is the owner of a Chevrolet Corvette motor car first put on the road on 1 January 1980. On 10 September 1994 he was reported by the police for failing to display a tax disc on his car. He was asked to pay FF 6031 in tax together with FF 11710 as the fine laid down by Article 1840 N quater of the Code General des Impôts. Mr Tabouillot complained against that assessment, but the Administration Fiscale (Tax Administration) rejected his complaint. He then brought an action seeking (a) a declaration that the provisions relating to the differential tax imposed on motor vehicles of more than 16 CV did not comply with Article 95 of the Treaty and are therefore inapplicable, and (b) an order annulling the tax demand and payment notice received by him.

It appears from the order for reference that Mr Tabouillot objected both to the progressivity of the French road tax and to the method which is used to determine the power rating of his vehicle. That method is the one laid down by the circular of 1956. The referring court rejected the first objection on the basis of the judgment in Jacquier and referred the questions cited above in connection with the method of determining power rating.

Admissibility

In its written observations, although not at the hearing, the French Government contested the admissibility of the reference. It essentially argued that the order for reference did not provide sufficient information. The order does not set out the complex method of determining power rating pursuant to the 1956 circular, nor does it indicate in which cases that method is to be applied. It does not, moreover, make clear on what grounds the referring court has doubts on the compatibility of the French rules with Community law. The order for reference accordingly did not permit other Member States or other interested parties to submit observations pursuant to Article 20 of the Court's Statute.

There may well be doubt, in my view, whether it would be appropriate for the Court to give a reply to the questions referred, for the following reasons.

First, it is well established that, in order to arrive at an interpretation of Community law which will be helpful to the national court, it is necessary for the national court to define the factual and legislative context of the questions it is asking or, at the very least, to explain the factual circumstances on which they are based. That requirement is not satisfied in the present case, since there are several elements of basic information missing in the order for reference. The order does not state the origin of Mr Tabouillot's vehicle (a point to which I will return below). It does not set out the relevant national rules in sufficient detail: the two existing formulas for calculating power rating are not described, nor is it explained in precisely what circumstances the formula laid down in the 1956 circular is applied. The order does not state what effect the choice of formula has on the taxation of motor vehicles in France generally, nor does it state the effect on the taxation of motor vehicles imported from other Member States in particular. It follows that the referring court has not explained its doubts on the compatibility of the French rules with Article 95 of the Treaty. Lastly, the order does not state in what way the Court's judgment could be relevant for the main proceedings (again a point to which I will return): if the application of the 1956 circular were contrary to Community law, would that mean that the 1977 circular should be applied and, if so, would that result in a different level of taxation?

It is true that the Court has accepted that the requirement for the national court to define the factual and legislative context is less pressing where the questions relate to specific technical points and enable the Court to give a useful reply even where the national court has not given an exhaustive description of the legal and factual situation. In this particular case much information can be distilled from the Court's previous case-law, from the Commission's observations, and from the replies of the French Government and Mr Tabouillot to the written questions put by the Court. It is questionable however whether all of that information is an appropriate basis for a meaningful ruling by the Court. For example, it appeared at the hearing that the Commission and the French Government did not concur (a) on the circumstances in which the 1956 circular is applied and (b) on the incidence of such application on trade between Member States. In order to arrive at a meaningful reply to the referring court's questions this Court would need to make various assumptions and would thus risk delivering a hypothetical judgment. It would also be delivering a general ruling on the compatibility of the French system with Community law, and it seems to me that that should rather be done in the context of infringement proceedings pursuant to Article 169 of the Treaty (provided, of course, that the Commission is of the view that such proceedings should be initiated).

Even if the Court were prepared to try to overcome those objections there still remains the point that, as the Court has stated previously, information provided in decisions making references not only enables the Court to give helpful answers but also enables the Governments of the Member States and other interested parties to submit observations pursuant to Article 20 of the Statute of the Court. It is the Court's duty to ensure that the opportunity to submit observations is maintained, bearing in mind that, by virtue of the abovementioned provision, only the decisions making references are notified to the interested parties. I am not satisfied that the Court would be observing that duty in this case if it were to reply to the referring court's questions.

28.In addition to the lack of information in the order for reference there are further reasons why the present reference might be regarded as inadmissible. The Court has consistently held that it is for the national courts alone to determine, having regard to the particular features of each case, both the need for a preliminary ruling to enable them to give judgment and the relevance of the questions which they refer to the Court. A request for a preliminary ruling from a national court may be rejected only if it is obvious that the interpretation of Community law sought by that court bears no relation to the actual nature of the case or the subject-matter of the main action. (19) In the present case it is questionable whether the interpretation of Community law sought by the referring court does indeed bear any relation to the subject-matter of the main action, for two reasons.

29.First, Mr Tabouillot has stated, in reply to a written question by the Court, that he bought his car in the United States; it appears that he bought it in New Jersey on 27 August 1991 and imported it directly into France, where it was admitted by the French authorities on 29 May 1992. Therefore the dispute with which the referring court is confronted does not in any event come within the scope of Article 95 of the Treaty, which refers expressly to ‘products of other Member States’. It is true that those terms include products originating in third countries which have been imported into a Member State and are subsequently in free circulation within the Community. (20) Mr Tabouillot's Chevrolet Corvette is not however such a product. It was directly imported into France from the United States and cannot therefore benefit from the free movement of goods within the Community. It seems doubtful whether the referring court, if it had had knowledge of those facts, would have considered that a ruling by this Court on the interpretation of Article 95 of the Treaty was necessary to enable the referring court to give judgment, as Article 177 of the Treaty requires.

30.At the hearing counsel for Mr Tabouillot argued that, by virtue of the principle of equal treatment of taxpayers in French law, Mr Tabouillot could none the less rely on a ruling by the Court on the incompatibility of the French system with Article 95 of the Treaty. However, there is no suggestion in the national court's order for reference to that effect; on the contrary, the national court has put its questions on the assumption that the car was imported from another Member State. In any event, it is difficult to see how any principle of equal treatment of taxpayers could apply. It seems doubtful whether a taxpayer whose car was directly imported from a nonmember country is in the same position as a taxpayer whose car was imported from another Member State.

31.Secondly, the relevance of at least the second question referred is in doubt because, according to the French Government, it makes no difference for tax purposes whether the power rating of Mr Tabouillot's car is calculated in accordance with the circular of 1956 or, alternatively, in accordance with the circular of 1977: because of its large cylinder capacity the Chevrolet Corvette in issue, at present rated at 33 CV, would in any event be rated higher than 23 CV and thus come within the highest tax band. Mr Tabouillot did not dispute that statement, and the Commission's observations appear to confirm it. Indeed the Commission claims, on the basis of an analysis of the incidence of both methods of determining power rating on a wide range of car models, that the difference is never more than 3 CV. Given that it is precisely the simultaneous existence in France of two different methods of determining power rating whose compatibility with Article 95 of the Treaty is doubted in the present case, it would therefore seem that the Court's judgment can have no bearing on the main action.

32.For the above reasons the present reference may well be regarded as inadmissible. However, it may be useful in any event to consider briefly the substance of this case.

Substance

33.In the light of the paucity of information in the order for reference any discussion of the questions referred by the national court must of necessity be fairly general. Those questions essentially concern the issue under what circumstances it is permissible for a Member State to employ, in a system of differential and progressive road taxes, two different methods of determining the fiscal power rating of vehicles. That issue should be addressed against the following background: it seems uncontested that the application of one method (the 1956 formula) consistently results in a higher power rating, and thus often also in higher taxation, than the application of the second, standard method (the 1977 formula). That is indeed borne out by figures produced by the Commission, which are not contested. What is contested, however, is (a) whether the application of the 1956 circular primarily affects imported cars, and (b) whether that circular is only applied where it is materially impossible to apply the 1977 circular.

34.It is clear from the Court's case-law that progressive taxation is permissible, provided it is neutral in its effects on domestic products and imports. That requirement of neutrality also applies, in the case of motor vehicles, to the method of determining power rating. (21) Where two different methods are used which result in different levels of taxation, as seems to be the case here, the system must again be neutral: the rules determining the choice of method must be based on objective criteria which do not discriminate against similar imported products and are not such as to afford protection to domestic production.

35.It is by no means clear whether the French system is in accordance with those requirements, and it seems that, as the Commission points out, there is a lack of transparency in its actual application. In that respect the Court has stated that, where there is a lack of transparency, the onus is on the Member State concerned to prove that the system in question does not engender any possibility of discriminatory effects. (22) Although that statement was made in infringement proceedings, brought under Article 169 of the Treaty, it must clearly be of general application. Article 95 of the Treaty has direct effect and must be enforceable in the national courts. A system of taxation which is so lacking in transparency that the national courts are unable to decide whether it is discriminatory or not would make it impossible for the taxpayer to rely on Article 95. Such a system must for that reason alone be contrary to Article 95. The effectiveness of the prohibition of fiscal discrimination could be singularly reduced if a Member State were allowed to introduce or maintain a nontransparent tax system, in particular where the tax is differential and progressive and applies to a product which is highly tax sensitive and traded across borders in large quantities, as is the case with cars.

36.The same principle of effectiveness has led the Court to hold that the prohibition of discrimination in other fields, notably the principles of equal treatment and equal pay for men and women, must be enforceable in the national courts; it has led the Court to condemn as contrary to Community law a system whose lack of transparency prevents any form of supervision by the national courts, and to hold that in certain cases adjustments to national rules on the burden of proof may be required for the effective implementation of the principle of equality. (23)

37.For similar reasons the principle that the rules determining the choice of method must be objective and neutral in my view also extends to evidentiary requirements. If the less favourable method of determining tax is applied only where the technical characteristics of the imported product permitting the application of the more favourable method are unavailable, it must be open to a taxpayer to prove those technical characteristics by all reasonable means. Again, doubts were raised in that respect, the Commission and Mr Tabouillot claiming that in some cases the French administration did not accept reliable technical information which would permit the application of the more favourable 1977 circular.

Conclusion

Accordingly there are in my opinion serious doubts about the admissibility of this reference. If however the questions were to be answered, they should be answered as follows:

(1)Article 95 of the EC Treaty does not preclude the application by a Member State of a method for establishing the fiscal horsepower of vehicles based on objective criteria which apply without discrimination to vehicles produced in that Member State and to vehicles imported from other Member States.

(2)Article 95 of the Treaty does not preclude the application by a Member State of two sets of rules for establishing the fiscal horsepower of vehicles provided that the choice between the two sets of rules is based on objective criteria which do not discriminate against similar imported products and are not such as to afford protection to domestic production.

(3)Where there is a lack of transparency in the system used by a Member State to establish the fiscal horsepower of vehicles, the onus lies on the Member State to satisfy the national court that the system does not engender any possibility of discriminatory effects.

*1) Original language: English.

1) Case 112/84 Humblot v Directeur des Services Fiscaux [1985] ECR 1367.

2) Paragraph 12 of the judgment.

3) Paragraph 13 of the judgment.

Case 433/85 Feldain v Services Fiscaux du Département du Haut-Rhin [1987] ECR 3521.

(Paragraph 13 of the judgment.)

(Paragraph 14 of the judgment.)

(Paragraphs 15 and 16 of the judgment.)

(Paragraph 6 of the judgment.)

(Paragraph 15 of the judgment.)

(Paragraph 16 of the judgment.)

Joined Cases 76/87, 86/87 to 89/87 and 149/87 Seguela v Administration dei Impôts [1988] ECR 2397.

(Case C-113/94 Jacquier v Directeur Général des Impôts [1995] ECR I-4203.)

(C-257/95 [1996] ECR I-233.)

Cited in note 12.

At paragraph 1.

Sec, inter alia. Joined Cases C-320/90 to C-322/90 Televisione Italiana v Ministero delle Poste e delle Telecomunicazioni [1993] ECR I-393, paragraph 6 of the judgment; Case C-157/92 Bonchero [1993] ECR I-1085, paragraph 4 of the Order; Case C-378/93 La Pyramide [1994] ECR I-3999, paragraph 14; Case C-458/93 Saddik [1995] ECR I-511, paragraph 12; and Bresle, cited in note 13, paragraph 16.

(Case C-316/93 Vaneeweld [1994] ECR I-763, paragraph 13 of the judgment and Saddik, cited in note 16, paragraph 14 of the Order.)

See Joined Cases 141/81 to 143/81 Holdijk [1982] ECR 1299, paragraph 6 of the judgment and Saadik, cited in note 16, paragraph 13 of the Order.

See, inter alia. Case C-126/80 Salonia v Poidomani and Ciglio [1981] ECR 1563, paragraph 6 of the judgment; Case C-343/90 Lourenço Dial v Director da Alfândega do Porto [1992] ECR I-4673, paragraph 18; Case C-143/94 Furlanis v Anai and Itinera [1995] ECR I-3633, paragraph 12; Case C-129/94 Ruiz Bernaldez [1996] ECR I-1829, paragraph 7; Joined Cases C-283/94, C-291/94 and C-292/94 Denkavit Internationaal and Others v Bundesamt für Finanzen [1996] ECR I-5063, paragraph 44; and Joined Cases C-320/94, C-328/94, C-329/94 and C-337/94 to C-339/94 Aeri Televisive Italiane v Ministero delle Poste e Telecommunicazione [1996] ECR I-6471, paragraph 23.

Case C-193/85 Co-Frutta v Amministrazione delle Finanze dello Stato [1987] ECR 2085, paragraphs 24 to 29 of the judgment.

See paragraphs 10 to 12 above.

See Case C-152/89 Commission v Luxembourg [1991] ECR I-3141, paragraph 25 of the judgment and Case C-153/89 Commission v Belgium [1991] ECR I-3171, paragraph 16.

See Case C-318/86 Commission v France [1988] ECR 3559, paragraph 27 of the judgment and Case 109/88 Handels-og Kontorfunktionærernes Forbund i Danmark v Dansk Arbejdsgiverforening, acting on behalf of Danfoss [1989] LCR 3199.