Commission of the European Communities v Kingdom of Spain.
Date: 2009-10-06
28. It should be noted at the outset that, although direct taxation falls within their competence, Member States must none the less exercise that competence consistently with Community law (Case C-80/94 Wielockx  [1995] ECR I-2493, paragraph 16; Case C-264/96 ICI [1998] ECR I-4695, paragraph 19; Case C‑311/97 Royal Bank of Scotland  [1999] ECR I-2651, paragraph 19; Case C‑35/98 Verkooijen  [2000] ECR I-4071, paragraph 32, and Lindman , paragraph 18).
29. As the Court has already held in relation to the organisation of lotteries, the provisions of the Treaty relating to freedom to provide services apply to activities which enable users, in return for payment, to participate in gaming (see Lindman , paragraph 19). Moreover, the freedom to provide services is for the benefit of both providers and recipients of services (see Case C-42/07 Liga Portuguesa de Futebol Profissional and Bwin International  [2009] ECR I-0000, paragraph 51).
30. Furthermore, the Court has repeatedly held that whilst it is lawful for a Member State to restrict the grant of tax advantages to bodies pursuing certain of its charitable purposes, a Member State cannot however restrict the benefit of such advantages only to bodies established in that State whose activities are thus capable of absolving it of some of its responsibilities (see, in particular, Case C‑318/07 Persche  [2009] ECR I-0000, paragraph 44).
31. In particular, where a body recognised as having charitable status in one Member State satisfies the requirements imposed for that purpose by the law of another Member State and where its object is to promote the very same interests o f the general public, so that it would be likely to be recognised as having charitable status in the latter Member State, the authorities of that Member State cannot deny that body the right to equal treatment solely on the ground that it is not established in that Member State (see, to that effect, Case C-386/04 Centro di Musicologia Walter Stauffer [2006] ECR I-8203, paragraph 40; Case C-76/05 Schwarz and Gootjes-Schwarz  [2007] ECR I-6849, paragraph 81 and Persche , paragraph 49).
32. The Court has held that a body which is established in one Member State but satisfies the requirements imposed for that purpose by another Member State for the grant of tax advantages is, in respect of the grant by the latter Member State of tax advantages intended to encourage the charitable activities concerned, in a situation comparable to that of bodies recognised as having charitable purposes which are established in the latter Member State ( Persche , paragraph 50).
36. First of all, it should be pointed out that, although a certain number of overriding reasons in the public interest have indeed been recognised by the Court’s case-law, such as the objectives of consumer protection and the prevention of both fraud and incitement to squander money on gambling, as well as the general need to preserve the social order (see, in particular, Liga Portuguesa de Futebol Profissional and Bwin International , paragraph 56), which may justify a restriction on the freedom to provide services, the fact remains that those objectives cannot be relied upon to justify discriminatory restrictions (see, to that effect, Case C-55/94 Gebhard  [1995] ECR I-4165, paragraph 37; Gambelli and Others , paragraph 65; Placanica and Others , paragraph 49, and Liga Portuguesa de Futebol Profissional and Bwin International , paragraph 60).
37. It is also apparent from the Court’s case-law that, to the extent that a restriction, such as that at issue in the present case, is discriminatory, it is compatible with Community law only if it is covered by an express derogating provision, such as Article 46 EC, to which Article 55 EC refers, namely public policy, public security or public health (Case C-388/01 Commission  v Italy  [2003] ECR I‑721, paragraph 19).
38. Consequently, the restriction at issue in the present case can be justified only provided that the objectives pursued by the Spanish legislature fall within the category of public policy, public security or public health grounds for the purposes of Article 46(1) EC and that it is in conformity with the principle of proportionality. In that regard, it should be added that national legislation is appropriate for ensuring attainment of the objective pursued only if it genuinely reflects a concern to attain it in a consistent and systematic manner (Case C‑169/07 Hartlauer  [2009] ECR I‑0000, paragraph 55, and Liga Portuguesa de Futebol Profissional and Bwin International , paragraph 61).
39. With regard, first of all, to the objective of preventing money laundering and combating tax evasion, it is not necessary to determine whether that objective could fall within the definition of public policy. It need merely be pointed out in that respect that, as is apparent from the Court’s case-law, it is not justifiable for the authorities of a Member State to assume, in a general way and without distinction, that bodies and entities established in another Member State are engaging in criminal activity. Furthermore, to exclude in a general way such bodies and entities from the benefit of a tax exemption appears to be disproportionate, as it goes beyond what is necessary to combat crime. There are indeed a number of measures available to monitor their accounts and activities (see, to that effect, Gambelli and Others , paragraph 74 and Centro di Musicologia Walter Stauffer , paragraph 61).
40. With regard, second, to combating addiction to gambling, although it cannot be excluded that that objective could be regarded as falling within the definition of protection of public health, it is clear in this case, first, that the Kingdom of Spain has adduced no evidence capable of establishing that, in Spain, such an addiction has reached the point amongst the population at which it could be considered to constitute a danger to public health.
41. Next, as the Advocate General pointed out in point 85 of his Opinion, the exemption of winnings is likely to encourage consumers to participate in the lotteries, games of chance and betting able to benefit from such exemption and is therefore not a suitable and coherent means of ensuring the attainment of the objective supposedly pursued.
43. Concerning, third, to the Kingdom of Spain’s argument that the income received by the bodies and entities whose games of chance benefit from the exemption in question is used to finance socially-useful infrastructure and projects, it should be noted that the Court has already held that, although it is not irrelevant that lotteries and other types of gambling may contribute significantly to the financing of benevolent or public interest activities, that motive cannot in itself be regarded as an objective justification for restrictions on the freedom to provide services (see, in particular, Schindler , paragraph 60, and Zenatti , paragraph 36). It is moreover apparent from the Court’s case-law that economic grounds are also not included among the grounds in Article 46 EC which could justify a restriction of the freedom to provide services guaranteed by the Treaty (see, in particular, Commission  v Italy , paragraphs 19 and 22, and Gambelli and Others , paragraph 61).