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Polish government prepares for possible loss in EU car tax case

The European Union's highest court will rule in a case tomorrow that may force the Polish government to repay consumers millions of zloty in car registration taxes.

An adviser to the Luxembourg-based European Court of Justice  in an opinion in September agreed with Maciej Brzezinski, who brought the challenge, that his country's practice of putting higher levies on second-hand cars imported from other EU countries than on domestic cars broke the law. The court follows its advisers' opinions in a majority of cases. Poles have imported about 2.5 million used cars since their country's accession to the EU in 2004, according to monitoring company Samar.

Registration taxes, which range from 3.1% to 65% of the value, have totaled more than 2 billion zloty ($669 million) in that period, finance ministry data shows. „This case will be important for its budgetary and financial impact,” Mariusz Aleksandrowicz, a tax partner in the Warsaw office of law firm Linklaters, said in an interview today. „It is generally assumed that the Polish authorities will lose this case tomorrow,” although the government is unlikely to be forced to pay back the full amount it has collected, he said. It is the first time the EU court will rule on a Polish tax case since the country joined the bloc, Aleksandrowicz said. The government introduced a revised tax law on December 1, 2006, in line with the court's opinion, he said.

Brzezinski had appealed after failing to recoup 855 zloty in registration taxes for a 15-year-old Volkswagen Golf he imported to Poland in 2004. A Polish court referred the case to Luxembourg seeking more clarity on how to interpret EU rules, and asked the court to limit the effects of a negative ruling on Poland. A court adviser in an opinion on September 21 rejected Poland's policy as illegal. „The excise duty in question is incompatible” with EU rules because it exceeded the fees that would be levied on a comparable used car registered in Poland, said Advocate General Eleanor Sharpston. The EU court ruled in October that a similar tax in Hungary was discriminatory and had to be repealed. „A special team within the finance ministry has been working on the issue, keeping in mind the Hungarian case,” Jakub Lutyk, a spokesman for the Polish finance ministry, said in a telephone interview yesterday.

Still, lawyers and government officials said the court ruling won't force the government to return all of the fees. „There is no basis for catastrophic expectations that the amount could total 2 billion zloty,” said Lutyk. „The return, if ruled, will not equal the amount received as the return will need to be calculated by using another methodology.” Refunds would be in the millions of zloty and not in the billions, said Lutyk. A decision against Poland would support European Commission efforts to harmonize car registration taxes in the 27-nation bloc. The Brussels-based regulator last year ordered Poland to bring its rules in line with EU law, which bans countries from adding tax to other EU products „in excess of that imposed on similar domestic products.” EU court cases have helped resolve some of the „problems of tax discrimination that European citizens face when they move cars from one country to another,” László Kovács, the EU's tax commissioner said in a statement in July, adding that his office will continue to take action against countries that don't comply. (Bloomberg)