WRITTEN QUESTION P-1662/00

by Ari Vatanen (PPE-DE) to the Commission

(18 May 2000)

Subject: Incompatibility of motor vehicle taxation in Finland with Community law

In 1998, when the Commission issued a letter of notice concerning taxation of second-hand motor vehicles imported into Finland from other Member States, it asked for any other violations of Community law relevant to the case to be reported to it. I therefore wish to mention three points.

Firstly, the basis for taxation of vehicles imported from Community countries is significantly more stringent than that for taxation of vehicles manufactured in Finland itself. The fundamental error in Finland's law on motor vehicle taxation is that the entire basis for assessment of tax on a vehicle manufactured in Finland is the cost of manufacture at the place of manufacture, whereas for vehicles imported from other Member States it is the customs value, which in the case of new vehicles is the importer's purchase price, while in the case of second-hand vehicles it is the Finnish importer's sale price.

Secondly, the linear system for calculating the decline in the value of a vehicle for purposes of Finnish taxation does not correspond with the actual decline in the value of vehicles. A seven-month old VW Golf imported from Germany, for instance, costs more than 160 000 marks after tax, whereas a similar vehicle could be bought new from a retailer for just 125 000 marks. Under the case law of the Court of Justice of the EC, the principle of neutrality is violated if a product imported from another Member State is taxed more heavily than a domestically produced product, even if only in individual cases.

Thirdly, Finland's taxation of motor vehicles violates the EC's Sixth Directive on VAT. Whereas the directive lays down quite clearly that VAT is to be levied on second-hand motor vehicles in the country of the vendor, in the case of second-hand vehicles imported into Finland VAT is levied in Finland as well as in the country of the vendor. This is done in such a way that in Finland VAT is levied on the car tax.

From the point of view of consumers in Finland, the EU's internal market is not working where the purchase of second-hand cars is concerned. Further evidence of this lies in the fact that fewer than 1 000 second-hand cars have been imported into Finland from other Member States per annum, while for example in 1998 some 50 000 were imported into Sweden from Germany alone. What will the Commission do to alter Finland's taxation of motor vehicles, which on the above three grounds violates Article 95 (Article 90) of the Treaty establishing the EC and the EC Directive on VAT? What urgent measures will the Commission take to protect the rights of consumers in Finland?

Answer given by Mr Bolkestein on behalf of the Commission

(30 June 2000)

The Finnish government has followed up the 1998 letter of formal notice by making a number of amendments to national law. In particular, it has increased the rate of depreciation used to calculate the assessment basis for the motor-vehicle tax from 6 % a year to 7,2 % a year for second-hand cars. For vehicles over eight years' old the rate is now 10,8 %, breaking with the linear system previously applied throughout a vehicle's life. It has also abolished the previous 75 % ceiling on depreciation, now recognising rates of depreciation in excess of that ceiling. The Finnish authorities have also abolished the limits on tax incentives for clean vehicles previously confined to new cars and extended them to second-hand cars satisfying the same criteria. Lastly, it has abolished the requirement that vehicles have at least 10 000 kilometres on the clock before they can be considered to be second-hand.

In view of these amendments and the improvements they represent for car-owning taxpayers, and taking account of the lack of clear rules on motor-vehicle taxation, which has still to be harmonised at Community level, the Commission considers the new legislation an acceptable response to the objections raised. It is, however, reserving its final conclusions until the Court of Justice has ruled on similar issues in Case C-393/98, Gomes Valente, in which a judgment is expected shortly. It will also be taking account of the information provided by the Honourable Member.

As for those parts of the Honourable Member's question not covered by the above-mentioned infringement procedure, namely those concerning the assessment basis applied to motor-vehicles made in Finland and those originating in other Member States, the rules governing the levying of VAT on vehicles and the statistics on vehicle imports into Finland, the Commission will look into these issues, drawing on all the information at its disposal and contacting the Finnish authorities wherever necessary, with a view to ensuring compliance with Community law.