OPINION OF MR ADVOCATE GENERAL

VERLOREN VAN THEMAAT

DELIVERD ON 24 JANUARY 1984 ( 1 )

Mr President,

Members of the Court,

1. Subject-matter of the proceedings

The case which I shall deal with today, Case 324/82, concerns proceedings brought by the Commission under Article 169 of the EEC Treaty, in which it requests the Court to declare that the Kingdom of Belgium has acted in breach of Article 11 of the Sixth Directive on turnover taxes (77/388/EEC of 17 May 1977, Official Journal 1977, L 145, p. 1) as regards the calculation of the basis for charging tax on new cars and so-called “voitures de direction” [cars appropriated by car manufacturers or dealers for their own private or business use].

The Belgian rules governing the basis for charging turnover tax on new cars (that is to say, the “taxable amount”) are contained in Royal Decree No 17 of 20 July 1970. They provide that the minimum basis for charging tax on new cars is to be the catalogue price and not the actual purchase price, which is clearly at variance with Article 11 of the directive. For the purpose of calculating the basis for charging tax in respect of the use and subsequent sale of voitures de direction, the Belgian tax authorities also apply fixed rules which are laid down in Circular No 4 of 12 January 1971 and Circular No 74 of 11 July 1972. Those fixed rules are also at variance with Article 11 of the directive. Under the rules the treatment for tax purposes depends on the length of time such cars are used as voitures de direction. If a car is sold within six months from the date when it was first used, the dealer pays no tax in respect of his own use of the vehicle but the VAT to be paid by the purchaser is still charged on the basis of the catalogue price, which is again at variance with Article 11 of the directive. Other points of divergence concern the basis for charging tax on cars used for more than six months and the notional sale values which are then applicable.

For further details of the Belgian rules I refer to the Report for the Hearing. The only relevant point for the rest of my argument is that in many, if not most, cases the notional values applied by the Belgian legislature and authorities produce a higher taxable amount than that prescribed by Article 11 of the directive. As I have stated, Article 11 provides that sales are to be taxed on the actual sale price. As regards a dealer's own use of a car, the Commission considers Article 11 A. 1 (b) and (c) applicable.

2. The relevant exceptions contained in the directive

The Belgian Government acknowledges that its legislation departs from Article 11 in the ways described above, but defends it by reference to Article 27 (5) of the directive.

Article 27 (5) is worded as follows:

“Those Member States which apply on 1 January 1977 special measures of the type referred to in paragraph (1) above may retain them providing they notify the Commission of them before 1 January 1978 and providing that where such derogations are designed to simplify the procedure for charging tax they conform with the requirements laid down in paragraph (1) above.”

The special measures of the type referred to in paragraph (1) are measures designed “to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance”. The requirement contained in the second sentence of Article 27 (1) that such measures must not, except to a negligible extent, affect the amount of tax due at the final consumption stage applies solely to “measures intended to simplify the procedure for charging the tax”. The special measures in question were notified to the Commission by the Belgian Government on 23 December 1977 in accordance with Article 27 (5). It is not disputed that they were already in force on 1 January 1977. Consequently, to that extent it is clear that Article 27 (5) is applicable.

3. Differences between this case and Case 95/82, Commission ν France, (the “racehorse” case)

At the hearing the Commission argued that the questions of interpretation arising in this case are essentially the same as those arising in the “racehorse” case brought against France. However, that argument seems wrong to me inasmuch as in that case France pleaded the desire to “simplify the procedure for charging the tax”. I refer in that regard to the Opinion which Mr Advocate General Mancini delivered in Case 95/82 on 29 June 1983. In this case, however, Belgium relies upon the exception contained in Article 27 (5) regarding measures “to prevent certain types of tax evasion or avoidance”. Moreover, the Commission admits that the Belgian system of a minimum charge to tax based on the catalogue value is a good means of preventing tax evasion.

That difference from Case 95/82 seems crucial to me because, as I have already pointed out, the requirement contained in the second sentence of Article 27 (1) (to which Article 27 (5) refers) that the measures in question should not, except to a negligible extent, affect the amount of tax due at the final consumption stage applies only to simplification measures. In my view there is therefore no question in this case of a breach of the letter of Article 27 (5). Consequently, the question remaining is whether the aim and scheme of the directive imply that Article 27 (5) may not be interpreted as allowing Article 11 to be set aside as regards an entire, important sector of the economy. That, basically, is the Commission's main contention which I shall now examine separately.

4. The alleged breach of Article 11 of the directive

Contrary to what the Belgian Government states in its second submission, the Commission does take the view that only Article 11 of the directive is applicable in this case. The Commission's views are as follows: Article 27 does not apply to tax rules which apply systematically to an entire sector of the economy and which, by fixing a minimum basis for charging VAT, derogate from the fundamental provision, Article 11. That article establishes a uniform basis of assessment for VAT for all the Member States. Article 27 (5) of the directive contains the implicit limitation that the measures falling within its ambit must respect the scheme of the Sixth Directive and in particular the essential rules of Article 11. In each case the special measures to prevent evasion must comply with the principle of proportionality and not depart further from Article 11 than is strictly necessary for preventing tax evasion. The essential matters are, first, that VAT must be calculated on the basis of the actual price and not on a notional basis and, secondly, it must be possible for the necessary fiscal control to be carried out in a manner which is in greater conformity with the directive.

As regards new and imported cars, the Belgian system in incompatible with Article 11 A. 1 (a) and 11 B. 1 and 2 of the Sixth Directive. As far as voitures de direction are concerned, the Belgian system is contrary to Article 11 A. 1 (b) and (c). For a more detailed account I refer to the Report for the Hearing. Although that detailed account undoubtedly makes clear the nature and extent of the Belgian derogations from Article 11, it is only of minor importance as far as the assessment of the Commission's main contention is concerned. The Commission's argument that the measures at issue in this case are not simplification measures is also irrelevant in that regard, because in its defence the Belgian Government does not rely on the exception regarding simplification measures but on the exception regarding measures designed to prevent tax evasion or avoidance. Moreover, the Commission has not actually disputed that this is the main aim of the Belgian measures.

The objections of inadmissibility raised by the Belgian Government will be examined briefly in the last part of my Opinion.

As far as the substance of the case is concerned, the Belgian Government relies mainly on the exception contained in Article 27 (5) which I have already discussed. On the question of the prevention of tax evasion, the Belgian Government also points out that, unlike in the case of simplification measures, the wording of that provision does not contain any substantive restrictions on the nature of the measures adopted where it is clear that their exclusive aim is the prevention of tax evasion, as in this case; nor is there to be found in the provision any basis for a principle of proportionality of the kind suggested by the Commission. The statement contained in the minutes of the meeting of the Council at which the directive was adopted, to which the Belgian Government refers in support of that view, can be disregarded in view of the Court's decisions on such statements. On the other hand, the reference made by the Belgian Government to the legal practice adopted by the Commission and the Council for the application of Article 27 (1) has some relevance. It appears in fact from Annex IV to the Commission's reply that in at least one case the Council and the Commission have accepted a minimum taxable base to prevent tax evasion (paragraph 10 (5) of the German Turnover Tax Law). Similar measures have also been accepted in some cases in which they were not individual measures but formed part of a system of measures designed to prevent tax evasion in different areas (including the field of direct taxation and social security contributions). Yet, in 1980 the Commission opposed the introduction of a new-Belgian measure dealing with secondhand cars on grounds similar to those advanced now. However, according to Annex IV, the Council did not entirely agree with the Commission's dissenting opinion. This new case is still pending as a result. In the annex the Commission accordingly suggests, wrongly, that this new case provides decisive support for the arguments which it now puts forward. In view of the Council's clearly different opinion, the Belgian Government is just as entitled to rely on that case as the Commission. In my view, the precedents, considered as a whole, contain on balance roughly as many arguments for the Commission's view as for the Belgian Government's view in these proceedings. Consequently, the arguments put forward in these proceedings should finally resolve the matter.

Turning now to an examination of those arguments, I shall, first of all, make the assumption that the text of Article 27 (5) of the directive does not, as I stated earlier, rule out the Belgian measures. In that regard I attach decisive significance to the second sentence of paragraph (1) of that article, to which paragraph (5) expressly refers; that sentence contains substantive restrictions only with regard to simplification measures.

In principle, however, I agree with the Commission that special measures of the kind allowed by way of exception by Article 27 may not, owing to the nature of such an exceptional provision, depart further from the normal rules of the directive than is justified by the aims mentioned in that article. It is clear from paragraph (1), to which paragraph (5) refers, that the “special measures for derogation from the provisions of this directive” may only be used “in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance”. A meaningful interpretation of that provision indeed requires that departures from the provisions of the directive must not go further than is justified by the aims mentioned. In other words, in the present case there must be a sufficiently compelling relationship between the aim pursued by the anti-evasion measures and the means used for achieving that aim; furthermore, the main aims of the directive must not in my view be substantially undermined by the exceptional measures.

In my view the Commission has not proved that the fraudulent practices in the motor trade which the measures in question are intended to curb occur only sporadically.

Nor, in my view, has it specifically proved that an equally acceptable result could be achieved by means of less drastic departures from the normal system without imposing an unduly heavy burden on the tax authorities and their inspectors. The Commission merely makes vague and abstract assertions in this regard. It does not refer, for example, to equally effective rules applied in other Member States which do not depart so far from Article 11. In my view, the Commission's assertion that the measures must relate only to the collection of the tax and not to the basis of assessment is not supported by the wording of Article 27. In principle that provision makes possible departures from the — and hence from all — provisions of the directive.

Finally, the Commission has not in my view proved that the attainment of the main aims of the directive is fundamentally jeopardized by the Belgian measures in question.

The first aim mentioned in the preamble to the directive is the creation of the Communities' own resources “by applying a common rate of tax on a basis of assessment determined in a uniform manner according to Community rules”. In my view, that aim is not jeopardized. On the contrary, the contested measures help to achieve that aim by ensuring that the revenue from VAT on cars is at least the amount intended by the directive.

The other aims referred to — the removal of restrictions on inter alia the movement of goods and services and the competitive neutrality of turnover tax — are in my view not endangered by the Belgian measures either: imported cars are not taxed more heavily than cars manufactured or assembled in Belgium itself; no distinction is made between integrated and non-integrated undertakings or between “official” imports and “parallel” imports. The Commission has not advanced submissions on any of those points. Even the question of deflections of trade distorting competition, of the kind arising in the French “racehorse” case, is not raised in this case. ¡Nor is the ultimate aim of abolishing the imposition of tax on imports and the remission of tax on exports made more difficult to achieve by the Belgian measures.

The ninth recital in the preamble, which relates in particular to Article 11, simply states that: “... the taxable base must be harmonized so that the application of the Community rate to taxable transactions leads to comparable results in all the Member States”. Measures which could at most lead to Belgium charging slightly too much tax on cars cannot fundamentally jeopardize that aim. The objections which Belgian consumers could perhaps raise against the system are purely a national matter. The directive does not protect consumers against the much greater price differences caused by the considerable differences in the rates of tax between the Member States.

I am accordingly of the opinion that the Commission's submission that the measures in question are contrary to Article 11 of the directive must also fn.il since it has not specifically proved that the evasion of tax could be prevented just as effectively by less drastic departures from Article 11 or that the aims of Article 11 can be fundamentally frustrated by the Belgian measures.

5. Closing observations and conclusion

Since the Commission's action must in my view be dismissed on substantive grounds, I consider it unnecessary to consider in detail the three objections of inadmissibility raised by the Belgis.n Government.

The Commission has rightly defended the charge that it did not react to the Belgian exceptional measures for two years after their notification by referring to its duty under Article 155 of the EEC Treaty to exercise constant supervision and to the fact that it was inappropriate to institute proceedings in respect of infringements until it had become acquainted with the implementing measures in force in all the Member States.

The second objection of the Belgian Government is based on the fact that the Commission has not charged Belgium with infringing Article 27 but solely with infringing Article 11. Although the Commission incorrectly stated, in reply to that objection, that Article 27 is merely a procedural provision (which, as is clear from my analysis of the provision, is not the case), earlier in my Opinion I came to the conclusion, for different reasons, that the Commission could not in fact base its case solely on Article 27. Where it is claimed that an exceptional rule is inapplicable, reference must in general be made to the main rule which is said to have been infringed.

Finally, the objection of inadmissibility raised against the Commission's reliance on the principle of proportionality must fail, because the Commission, in referring to that principle, was clearly elaborating the objections which it had already raised in the administrative procedure. In that regard I refer in particular to the reasoned opinion of 25 March 1981, appended as Annex II to the application.

Finally, on the basis of my analysis of the arguments concerning the substance of the base, I conclude that the Court should:

1. Dismiss the Commission's action against the Kingdom of Belgium;

2. Order the Commission to pay the costs.

( 1 ) Translated from lhe Dutch.