European Court Of Justice: Romanian Pollution Tax Contrary To EU Law

"The pollution tax introduced by Romanian legislation, levied on vehicles on first registration in Romania, is contrary to EU law. [It] has the effect of discouraging the import and placing in circulation of second-hand vehicles purchased in other Member States," says a Court of Justice (ECJ) press release published Thursday.

The ECJ judgment was issued on the request of the Court of Sibiu, which is hearing the case of a Romanian national who has taken the state to court, as he considers the "first registration" pollution tax illegal. The Sibiu Court has asked the ECJ about the tax's compatibility with EU law.

The ECJ replied that "European Union law prohibits all Member States from imposing on products of the other Member States internal taxation in excess of that imposed on similar domestic products. That prohibition seeks to guarantee the complete neutrality of internal taxation as regards competition between products already on the domestic market and imported products."

Although the Court notes that the taxation system introduced by Romania "does not distinguish between vehicles according to their origin or between the owners of those vehicles according to their nationality," the tax may be indirectly discriminatory, given its effects.

The Court finds that "the Romanian legislation has the effect that imported second-hand vehicles of considerable age and wear are - despite the application of a large reduction in tax to take account of depreciation - subject to a tax which may approach 30% of their market value, while similar vehicles offered for sale on the domestic second-hand vehicle market are not burdened by such a tax charge."

"In those circumstances, the legislation has the effect of discouraging the import and placing in circulation in Romania of second-hand vehicles purchased in other Member States," says the ECJ.

Although the EU does not prevent member states from introducing new taxes, community legislation does require the members to select and arrange their taxation system so that it does not promote the sale of domestic second-hand vehicles, thereby discouraging the import of similar vehicles, says the Court.

In the press release, the ECJ says the case heard by the Court of Sibiu was brought by a Romanian national named Tatu, who in July 2008 bought a used car in Germany, for EUR6,600: "The vehicle had a cylinder capacity of 2 155 cm3 and complied with pollution standard Euro 2. It was manufactured in 1997 and registered in Germany in that year."

To register his car in Romania, Tatu was required to pay 7,595 lei (about EUR2,200) as pollution tax. "As he considered the tax to be contrary to European Union law, he sought reimbursement of the amount paid. His argument is that the tax is incompatible with European Union law because it is charged on all second-hand vehicles imported into Romania from other Member States and registered for the first time in Romania, whereas it is not charged on similar vehicles already registered in Romania when they are resold as second-hand vehicles," says the press release.

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