Given the recent controversy surrounding the importation of second-hand cars from fellow member States in the EU, I believe it is worth our while to delve into (and quote from) a judgement given by the European Court on the 23 October 1997 C-375/95, Commission of the European Communities vs. Hellenic Republic. Interestingly enough, when searching for this decision the keywords are: Failure to fulfil obligations – Taxation of motor vehicles – Discrimination.

The Commission had taken the Greek government to task on the basis of the introduction of provisions concerning the taxation of used cars. The Commission had informed the Greek government that it considered the Greek system of private vehicle taxation to be contrary to Article 95 of the Treaty, on the grounds that it involved discrimination against used cars imported from the other member States in comparison with used cars bought in Greece. The court concluded that the Greek government had failed to fulfil its obligations under Article 95 of the Treaty. The Commission maintained that under the system used by the Greek government, 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.

The Commission also 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.

Thirdly, the Commission noted that imported used cars with non-polluting technology 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.

The Greek government replied that in the first place the system was intended to discourage old, polluting and dangerous vehicles from being put into circulation and that the system reflected actual depreciation of vehicles.

Secondly, it argued 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 insurmountable practical difficulties.

In addition, the Greek government 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.

The court accepted all three grounds for complaint put forward by the Commission. The court declared among other factors 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. Furthermore, the court also confirmed the findings of the Commission that in general the annual depreciation in the value of cars is considerably more than five per cent, 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.

In these 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.

As to the second grounds for complaint, the court noted that it was 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.

With regard to the third grounds for complaint, referring to the exclusion of imported used cars from the benefit of the reduced rates of special consumer tax applicable to anti-pollution technology cars, the court indicated from the outset 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. This third complaint was also upheld.

What this judgement did (does) is confirm, within the context here of used cars, that all member States are charged with the obligation of ensuring that there is no discrimination between one State and another when it comes to the importation of goods. This is, after all, essentially the raison d’être of the European Union and forms the basis of the oft referred to four freedoms which form the basic framework of the Union.

Thus, to conform with this judgment, and thereby to the Treaty, the rules relative to the importation of used cars into Malta must change.