IT WILL not have escaped the attention of anyone who has ever bought a second-hand car in Cyprus that they are expensive here. Very expensive, in fact, and far more expensive than the rest of Europe. Many of us also looked forward to the accession of Cyprus to the European Union, and unhindered access to a vast market of affordable cars. The Cypriot Customs Code Law, which entered into force on April 30, 2004, dashed these hopes at a stroke, completely ignoring both the prevailing European law on the subject as well as the fundamental principles of the Union itself.
For non-Greek speakers, the law has been helpfully summarized in English, by the Customs & Excise Department of the Ministry of Finance, and is available on its website. According to their summary, goods in free circulation in the EU can move from one member state to another without payment of further import duty. Certain goods are said, however, to be subject to ‘excise duty’, even if they arrive from another member state of the EU. Used motor vehicles are one such good.
Duty is based on engine capacity, and is dependant on which of the given bands of engine capacity the vehicle falls within. In an unusual gesture towards the green lobby, this figure is then nudged up or down according to carbon dioxide emissions.
A vehicle is considered to be ‘used’ if it has a mileage of more than 6,000 km and at the date of its transfer to Cyprus is more than six months old, calculated from the date of its registration for the first time in any EU country. Where a vehicle is more than five years old, the maximum uplift of 25 per cent is added for good measure. So, take one 1990 Jaguar Sovereign 4.0, with a respectable 100,000 miles on the clock. Yours for £2,000 sterling in mint condition off any forecourt in the United Kingdom. Yours for an absurd CY£45,790 in Cyprus, duty-paid.
European Union law applies in Cyprus, because on April 16, 2003 Cyprus signed the Treaty of Accession to say that it would. By doing so, Cyprus also signed up to the Treaty of Rome, the founding document of the European Economic Community, which asserts that no Member State may impose taxes which make the products of other Member States more expensive. Fine, thought the Cypriot parliament, as Cyprus doesn’t produce cars, all new and used cars must be imported and can be taxed as they come in, and that’ll be fair for everyone, right? Wrong.
As long ago as 1988, the European Commission took Denmark to the European Court of Justice, which ruled that used cars imported from other Member States may not be taxed more heavily than those being sold in the domestic market. Just because a Member State does not manufacture a product, that does not mean that the Treaty of Rome provisions can be side-stepped. Denmark argued that their tax was fair as the diminutive state didn’t manufacture cars. The Court held that whilst this was true, this does not mean that Denmark had no used car market. A product becomes a domestic ‘product’ as soon as it has been imported and placed on the market. In a nutshell, imported used cars and those bought locally constitute similar or competing products, and the playing field must be level.
The Court has also made it clear that even the most laudable aims still do not excuse discrimination. In 1995, the European Commission took action against Greece, whose government established a system of duties aimed at taxing older imported vehicles in particular, with the stated aim of discouraging old, dangerous and polluting vehicles from being put into circulation. Yet even this was still illegal since at the same time it protected the local market in the old, dangerous and polluting vehicles which were already chocking up the streets of Athens. Ever innovative, the Greek government then claimed that taxing older used imported cars would make no difference since older cars in Greece had always been worth more, as the kind climate slowed depreciation. This argument was dismissed out-of-hand by the Court: the whole idea was to allow even-handed competition, and it was for customers to judge condition and value.
The law is contrary to both the spirit, and more importantly the letter, of the European Union law to which Cyprus must abide. Presently, to import a car from another European Member State is, even discounting shipping costs, vastly more expensive than purchasing a similar model in Cyprus, which is in turn vastly more expensive than buying in another Member State. The vast right-hand drive market of the United Kingdom, for example, is effectively closed through an artificial distortion of the internal European market. Cyprus has no trains, trams or underground systems. Cars are essential tools for everyday life in Cyprus, and it is right that Cypriots should have full access to the competitive market in used vehicles that the European Union offers. Moreover, even though Cyprus is a small market, vendors of used vehicles from other Member States should have opportunities to those of Cyprus.
Benjamin Maltby, LL.B, Barrister of the Inner Temple, spent two years working as a consultant with a leading Cypriot law firm, before joining a marine consultancy in Limassol.
