The District Customs Office in Helsinki took the value of a comparable new vehicle to be DEM 41 100 and added DEM 3 880 for the extras. That resulted in a value, converted into Finnish Marks, of FIM 136 851. A lump sum of FIM 4 600 was deducted and a further sum of FIM 85 963 in respect of the age of the vehicle. The car tax was fixed at FIM 46 288 (approximately Euro 7 785) and the value added tax on it fixed at FIM 10 183 (approximately Euro 1 713). In Mr Siilin's opinion, the sales price of the Finnish Mercedes importer had been taken as the basis for the pre-tax list price. Although Mr Siilin paid the entire amount, he nevertheless submitted that the Finnish rules under which both the car tax and the "value added tax" were calculated are contrary to Community law and claimed a refund from the District Customs Office.

The matter reached the Finnish Supreme Administrative Court, which referred questions on the interpretation of the Community rules to the Court of Justice for a preliminary ruling.

After completion of the written procedure, the hearing was held on 12 September 2001. Mr Siilin, the Finnish Government and the European Commission submitted arguments at the hearing.

The Advocate General, Ms Christine Stix-Hackl, is delivering her Opinion in this case today.

The Advocate General's Opinion is not binding on the Court. It is the role of the Advocates General to propose to the Court, in complete independence, a legal solution to the case assigned to them.

Following her legal examination of the issues, the Advocate General differentiates when answering the question of the compatibility of national rules, such as the Finnish rules, with Community law.

1. The Finnish car tax rules

The yardstick in this respect is, according to the Advocate General, Article 90 of the EC Treaty, which prohibits Member States from imposing on products of other Member States any internal taxation in excess of that imposed on similar domestic products.

The Advocate General states that Article 90 of the EC Treaty prohibits a taxable amount which exceeds the actual value of the item being taxed. When used vehicles are taxed, actual depreciation must therefore be taken into account. The purpose of Article 90 of the EC Treaty is to create tax neutrality between goods already on the domestic market and imported goods. It prohibits rules which would nullify the competitive advantages of imported goods.

(a) Customs value as the value of the used vehicle

As regards the value of a used vehicle, Finnish law refers to Community customs law, i.e to the Community customs value rules of the Customs Code. The Advocate General points out that the Court of Justice has already held that a mere reference to the customs value Regulation in order to determine a taxable value does not infringe the EC Treaty.

(b) Determining the taxable value of a used vehicle by reference to abstract criteria

The Advocate General states, first, that, subject to certain requirements, it is permissible, when determining the taxable amount, to take as a basis the value of a new vehicle, as Finnish law does. Only a vehicle of the same kind can be used as a reference vehicle.

She then refers to the finding which the Court has already made to the effect that, subject to certain conditions, Article 90 of the EC Treaty does not preclude a determination of value by reference to general and abstract criteria. That applies, for example, to fixed scales, in which criteria such as age, mileage, extras, condition, method of propulsion, make or model of the vehicle, are included in order to calculate the value. Similarly, the application of an average price is permissible. However, it is a pre-condition of such an abstract calculation of value that it is not discriminatory. The tax amount resulting from that calculation may, therefore, not be higher than the amount which is contained in the value of a domestic vehicle of the same kind which has already been registered. It is for the national court toappraise that question.

(c)    The trading level relevant to determining the taxable value of a used vehicle

The Finnish Court had pointed out that, under the national rules, the tax value differs according to the trading level of the importer of the vehicle, i.e whether he is active at the level of the wholesaler, retailer or consumer. The Advocate General finds that there is discrimination in that, as is apparent from the calculations submitted, the taking into account of the trading level in principle results in the tax amount for a used vehicle, when measured pro rata to the value of that vehicle, being higher than the tax amount contained in the value of a new vehicle. If, even only in certain circumstances, imported used vehicles are taxed more heavily than used vehicles on the domestic market, that is inadmissible.

(d)    Paragraph 7 of the Finnish Car Tax Law in the version applicable until 14 January 1999;

@ Reduction of the tax value only after six months

@ Straight-line reduction of the tax value

Under Paragraph 7 of the Finnish Car Tax Law, tax on an imported used vehicle is levied as for a corresponding new vehicle, with a reduction being made in the tax in accordance with that provision. Until 14 January 1999 Paragraph 7 provided that the tax on the equivalent new car was to be reduced by 0.5% for every completed calender month, calculated from the time when the vehicle had been registered or in use for a period of six months. The Advocate General regards the fact that, in order to determine the value of a used vehicle, the value of a new vehicle is reduced only six months after first use or registration is an infringement of Article 90 of the EC Treaty, because the principle is that the actual loss of value is decisive. With regard to the straight-line, monthly reduction of 0.5%, the Advocate General states that used vehicles do not depreciate on a straight-line basis. A strict rule to that effect must therefore infringe the principle that the actual loss in value is to be taken into account. The Advocate General regards this too as an infringement of Article 90 of the EC Treaty.

2. The so-called "value added tax" levied on the car tax

The starting point is the Sixth Value Added Tax Directive (77/388/EEC). The Advocate General examines whether the tax levied on the car tax is a "value added tax" within the meaning of that directive. Applying the tests developed by the Court of Justice (taxation of added value, general applicability, levy at each stage of production and distribution etc), she concludes that this Finnish tax cannot be regarded as "value added tax" within the meaning of the directive. However, Article 33 of the directive allows the Member States to introduce "taxes, duties or charges which cannot be characterised as turnover taxes". Accordingly, this Finnish tax is permissible under that provision.

However, the Finnish tax must also satisfy Article 90 of the EC Treaty. The Advocate General states in that regard that, as the "value added tax" is levied on the car tax, it must essentially be regarded in the same way as the car tax. Inasmuch, therefore, as the amount of the tax levied on the car tax upon registration of an imported used vehicle exceedsthe amount contained in the value of a used vehicle in Finland, this tax is discriminatory and infringes Article 90 of the EC Treaty. The effect of the tax levied on the car tax is to remove the competitive advantage which a used vehicle imported from another Member State has over a used vehicle in Finland.

Note: After delivery of the Advocate General's Opinion, the judges of the Court of Justice of the EC begin their deliberation on the judgment, which they will deliver at a later date.

Unofficial document for media use only; not binding on the Court of Justice. Available in English, Finnish, French and German. For the full text of the Opinion, please consult our internet page www.curia.eu.int  at approximately 3 pm today. For additional information please contact Fionnuala Connolly: Tel: (00 352) 4303 3355; Fax: (00 352) 4303 2731.