European Commission v Ireland.
Date: 2017-09-19
5


The amount of registration tax to be paid is calculated for standard vehicles, in accordance with sections 132 and 133 of the Finance Act 1992, on the basis of:





–


the open market selling price of the vehicle, defined in section 133(3) of the Finance Act 1992 as being the price which the vehicle ‘might reasonably be expected to fetch on a first arm’s length sale thereof in the open market in the State by retail’. When calculating the open market selling price of a second-hand vehicle, the Revenue Commissioners typically have regard to a variety of factors and consult price lists, sales guides and websites;








–


the level of carbon dioxide emissions of the vehicle concerned, the most polluting vehicles (more than 225g/km) being subject to a registration tax equivalent to 36% of the open market selling price but no less than EUR 720, in accordance with the table at section 132 of the Finance Act 1992.
6


Certain categories of vehicles and persons are exempted from the obligation to pay the registration tax. Thus, section 135(1)(a), (b), (c) and (d) of the Finance Act 1992 exempts vehicles brought in temporarily by non-residents for their business or private use, by residents employed by an employer established in another Member State who provides them with a vehicle or by self-employed residents whose business is carried on solely or principally in another Member State, and special purpose vehicles not intended to be used in a public place.
28


The Court has consistently held that the purpose of the pre-litigation procedure is to give the Member State concerned an opportunity, on the one hand, to comply with its obligations under EU law and, on the other, to avail itself of its right to defend itself against the objections formulated by the Commission (judgments of 10 May 2001, Commission v Netherlands, C‑152/98, EU:C:2001:255, paragraph 23; of 5 November 2002, Commission v Germany, C‑476/98, EU:C:2002:631, paragraph 46; of 8 April 2008, Commission v Italy, C‑337/05, EU:C:2008:203, paragraph 19; and of 7 April 2011, Commission v Portugal, C‑20/09, EU:C:2011:214, paragraph 18).
29


The proper conduct of that procedure constitutes an essential guarantee required by the FEU Treaty not only in order to protect the rights of the Member State concerned, but also so as to ensure that any contentious procedure will have a clearly defined dispute as its subject matter. It follows from that function that the purpose of the letter of formal notice is, first, to delimit the subject matter of the dispute and to indicate to the Member State, which is invited to submit its observations, the factors enabling it to prepare its defence and, secondly, to enable the Member State to comply with its obligations before proceedings are brought before the Court (judgment of 10 April 2008, Commission v Italy, C‑442/06, EU:C:2008:216, paragraph 22).
34


As regards the alleged breach of the principle of sincere cooperation and the principle of good administration because of the date chosen for bringing the action, it should be recalled, first, that it is for the Commission to determine whether it is expedient to take action against a Member State and what provisions, in its view, the Member State has infringed, and to choose the time at which it will bring an action for failure to fulfil obligations; the considerations which determine that choice cannot affect the admissibility of the action (judgments of 1 June 1994, Commission v Germany, C‑317/92, EU:C:1994:212, paragraph 4; of 18 June 1998, Commission v Italy, C‑35/96, EU:C:1998:303, paragraph 27; of 1 February 2001, Commission v France, C‑333/99, EU:C:2001:73, paragraph 24; and of 8 December 2005, Commission v Luxembourg, C‑33/04, EU:C:2005:750, paragraph 66). Indeed, the Commission is entitled to decide, in its discretion, on what date it may be appropriate to bring an action and it is thus not for the Court, in principle, to review the exercise of that discretion (judgments of 10 May 1995, Commission v Germany, C‑422/92, EU:C:1995:125, paragraph 18, and of 4 March 2010, Commission v Italy, C‑297/08, EU:C:2010:115, paragraph 87).
35


Secondly, in accordance with the Court’s settled case-law, the question whether a Member State has failed to fulfil its obligations must be determined by reference to the situation prevailing in the Member State at the end of the period laid down in the reasoned opinion, and the Court therefore cannot take account of any subsequent changes (judgments of 19 June 2003, Commission v France, C‑161/02, EU:C:2003:367, paragraph 9; of 20 May 2010, Commission v Spain, C‑158/09, not published, EU:C:2010:292, paragraph 7; and of 28 October 2010, Commission v Lithuania, C‑350/08, EU:C:2010:642, paragraph 30).
36


Consequently, where, at the time when the period laid down in the reasoned opinion expires, the Commission considers that a Member State has failed to fulfil its obligations, the rules laid down in Article 258 TFEU must be applied without the Commission being obliged, in principle, to act at a specific time (see, to that effect, judgments of 28 October 2010, Commission v Lithuania, C‑350/08, EU:C:2010:642, paragraphs 33 and 34 and the case-law cited, and of 16 April 2015, Commission v Germany, C‑591/13, EU:C:2015:230, paragraph 14).
38


Finally, as regards the alleged ambiguity of the subject matter of the present action, it should be recalled that, in accordance with Article 120(c) of the Rules of Procedure and the related case-law, an application initiating proceedings must state the subject matter of the proceedings, the pleas in law and arguments relied on and a summary of those pleas in law. That statement must be sufficiently clear and precise to enable the defendant to prepare his defence and the Court to rule on the application. It is therefore necessary for the essential points of fact and of law on which a case is based to be indicated coherently and intelligibly in the application itself and for the form of order sought to be set out unambiguously so that the Court does not rule ultra petita or fail to rule on a complaint (judgments of 11 July 2013, Commission v Czech Republic, C‑545/10, EU:C:2013:509, paragraph 108 and the case-law cited; of 23 February 2016, Commission v Hungary, C‑179/14, EU:C:2016:108, paragraph 141; and of 22 September 2016, Commission v Czech Republic, C‑525/14, EU:C:2016:714, paragraph 16).
71


It should be recalled that, apart from certain exceptions not relevant to the present case, taxation of motor vehicles has not been harmonised at EU level. The Member States are thus free to exercise their powers of taxation in that area provided that they do so in compliance with EU law (judgment of 21 November 2013, X, C‑302/12, EU:C:2013:756, paragraph 23 and the case-law cited).
72


According to the Court’s settled case-law, a Member State may levy a registration tax on a vehicle made available to a person residing in that State by a company established in another Member State when that vehicle is intended to be used essentially in the first Member State on a permanent basis or is in fact used in that way (order of 27 June 2006, van de Coevering, C‑242/05, EU:C:2006:430, paragraph 24 and the case-law cited).
73


On the other hand, if the conditions set out in the previous paragraph are not satisfied, the connection with the territory of the first Member State is weaker, so that another justification for the taxation is necessary (see, to that effect, judgments of 15 September 2005, Commission v Denmark, C‑464/02, EU:C:2005:546, paragraph 79, and of 26 April 2012, van Putten, C‑578/10 to C‑580/10, EU:C:2012:246, paragraph 47, and order of 27 June 2006, van de Coevering, C‑242/05, EU:C:2006:430, paragraph 26).
74


Even if such a justification, founded on an overriding reason in the public interest, exists, it is also necessary for the tax to comply with the principle of proportionality (see, to that effect, order of 27 June 2006, van de Coevering, C‑242/05, EU:C:2006:430, paragraphs 22 and 27, and judgment of 26 April 2012, van Putten, C‑578/10 to C‑580/10, EU:C:2012:246, paragraph 53).
78


Such an obligation is liable to render the rental or leasing of vehicles from a company established in another Member State more onerous than when the rental or leasing contract is entered into with a company established in Ireland, in the light, in particular, of the discriminatory nature of such an obligation with respect to amortisation of the tax, to the detriment of rental or leasing undertakings established in another Member State (see, to that effect, judgment of 21 March 2002, Cura Anlagen, C‑451/99, EU:C:2002:195, paragraph 69, and order of 29 September 2010, VAV-Autovermietung, C‑91/10, not published, EU:C:2010:558, paragraph 20).
80


The finding that the obligation to pay the full amount of registration tax is liable to render the rental or leasing of vehicles from a company established in another Member State more onerous than that from a company established in Ireland is not called into question by the fact that, under section 135D of the Finance Act 1992, part of the registration tax may, under the conditions laid down in that article, be refunded.
81


Even though Ireland contests certain calculations made by the Commission, it concedes that the amount of registration tax levied initially may be more than double the amount of registration tax finally payable after a refund. As the Advocate General has observed in point 42 of his Opinion, such an approach entails the freezing of substantial funds and therefore represents a considerable cash-flow disadvantage for the person liable to pay the tax.
82


The obligation to pay in advance the full amount of registration tax is, therefore, liable to deter both Irish residents from calling on vehicle rental or leasing services offered by service providers established in other Member States and those service providers from offering vehicle rental or leasing services to Irish residents. Such an obligation thus constitutes a restriction on the freedom to provide services, prohibited, in principle, by Article 56 TFEU.
87


The fact that vehicle taxation falls within Ireland’s competence cannot therefore justify the restriction on the freedom to provide services.
89


Purely economic objectives cannot constitute an overriding reason in the public interest justifying a restriction on the freedom to provide services (see, to that effect, judgments of 15 April 2010, CIBA, C‑96/08, EU:C:2010:185, paragraph 48 and the case-law cited, and of 24 March 2011, Commission v Spain, C‑400/08, EU:C:2011:172, paragraph 74).
90


On the other hand, the overriding reasons in the public interest recognised by the Court include environmental protection (see, to that effect, judgments of 11 March 2010, Attanasio Group, C‑384/08, EU:C:2010:133, paragraph 50 and the case-law cited, and of 24 March 2011, Commission v Spain, C‑400/08, EU:C:2011:172, paragraph 74). In particular, discouraging the leasing or rental of vehicles with heavy fuel consumption may have a public-interest objective (see, to that effect, judgment of 21 March 2002, Cura Anlagen, C‑451/99, EU:C:2002:195, paragraph 68).
95


On the other hand, as Ireland moreover acknowledges, the Court ruled in the order of 29 September 2010, VAV-Autovermietung (C‑91/10, not published, EU:C:2010:558), on the compliance with EU law of national legislation under which a person residing or established in one Member State who uses in that Member State a motor vehicle registered and hired in another Member State must, upon the first use of that vehicle on the road network of the first Member State, pay the full amount of a tax the balance of which, calculated according to the duration of the use of the vehicle on that network, is reimbursed, without interest, after that use has ended. After having recalled that, in order to be consistent with the principle of proportionality, the amount of such a tax must be calculated by taking account of the duration of the contract for hiring the vehicle concerned or the duration of its use on the road network in question and having found that, in the case in point, that legislation required payment of the full amount of the tax without taking account of the duration of the contract for hiring the vehicle or that of its use on the road network of the Member State concerned, the Court held that that legislation did not comply with EU law, in particular Articles 56 to 62 TFEU (see, to that effect, order of 29 September 2010, VAV-Autovermietung, C‑91/10, not published, EU:C:2010:558, paragraphs 26, 27 and 30).
104


It should, however, be recalled, first of all, that, according to settled case-law of the Court, the need to prevent the reduction of tax revenue is not an overriding reason in the public interest capable of justifying a restriction on the freedom to provide services (see, to that effect, judgment of 22 December 2010, Tankreederei I, C‑287/10, EU:C:2010:827, paragraph 27 and the case-law cited). Also, administrative disadvantages are not of themselves sufficient to justify a barrier to the freedom to provide services (see, to that effect, judgments of 4 March 2004, Commission v France, C‑334/02, EU:C:2004:129, paragraph 29; of 14 September 2006, Centro di Musicologia Walter Stauffer, C‑386/04, EU:C:2006:568, paragraph 48; of 27 November 2008, Papillon, C‑418/07, EU:C:2008:659, paragraph 54; and of 9 October 2014, van Caster, C‑326/12, EU:C:2014:2269, paragraph 56).