Karlheinz Fischer v Finanzamt Donaueschingen.
Date: 1998-06-11
15 The Finanzgericht Baden-Württemberg, before which Mr Fischer brought proceedings, was, first, uncertain whether, in the light of Case 269/86 Mol v Inspecteur der Invoerrechten en Accijnzen [1988] ECR 3627 and Case 289/86 Happy Family v Inspecteur der Omzetbelasting [1988] ECR 3655, the transactions at issue in the main proceedings actually constituted supplies of services within the meaning of Article 2(1) of the Sixth Directive or whether, as unlawful activities, they fell outside the scope of that directive.  Secondly, if the services at issue were taxable under the Sixth Directive, it raised the question whether the method of calculating the taxable amount established by the Court in Case C-38/93 Glawe v Finanzamt Hamburg-Barmbek-Uhlenhorst [1994] ECR I-1679, which involved the taking into account of solely the net takings after payment of the players' winnings, applied in the case before it.  Thirdly, if that was not the case, another method of calculating the taxable amount needed to be established.
18 It should first be noted that the Sixth Directive expressly refers to forms of gambling in Article 13(B)(f), where it provides for their exemption, and in Article 33, where it states that its provisions are not to prevent the Member States from maintaining or introducing taxes on betting and gambling.  It is thus clear that such transactions do not, as such, fall outside the Sixth Directive.
19 It is appropriate, next, to consider the doubts expressed by the national court concerning the possibility of imposing VAT on unlawful activities.  In Case 294/82 Einberger v Hauptzollamt Freiburg [1984] ECR 1177, at paragraphs 19 and 20, Mol, cited above, at paragraph 15, Happy Family, cited above, at paragraph 17, and Case C-343/89 Witzemann v Hauptzollamt München-Mitte [1990] ECR I-4477, at paragraph 19, the Court held that illegal imports or supplies of narcotic drugs or counterfeit currency, whose release into the economic and commercial channels of the Community was by definition precluded and which could give rise only to penalties under the criminal law, were wholly alien to the provisions of the Sixth Directive and did not give rise to any VAT debt.
20 As the Court pointed out in Case C-111/92 Lange v Finanzamt Fürstenfeldbruck [1993] ECR I-4677, at paragraph 12, that principle relates only to products which, because of their special characteristics, may not be marketed or incorporated into economic channels.
21 By contrast, outside those cases where all competition between a lawful economic sector and an unlawful sector is ruled out, the principle of fiscal neutrality precludes a generalised distinction from being drawn in the levying of VAT between unlawful and lawful transactions. The Court has accordingly held that a ban on the export of certain products to specific destinations because they might be used for strategic purposes cannot in itself be sufficient to remove such exports from the scope of the Sixth Directive (Lange, paragraphs 16 and 17).
22 The foregoing considerations relating to the import or supply of goods apply equally to the supply of services such as the organisation of games of chance.  Those games, and roulette in particular, are lawfully played in a number of Member States.  Since the unlawful transactions at issue in the main proceedings are in competition with lawful activities, the principle of fiscal neutrality precludes their being treated differently as regards VAT.
25 It is clear from the very wording of that provision that gambling is in principle to be exempted from VAT.  The Member States retain the power to lay down the conditions and limitations of that exemption.
27 In that regard, it must be pointed out that the exemptions provided for by Article 13(B) are to be applied in accordance with the principle of fiscal neutrality inherent in the common system of VAT (see, to that effect, Case C-45/95 Commission v Italy [1997] ECR I-3605, paragraph 15).  That requirement also applies when the Member States exercise their power under Article 13(B)(f) to lay down the conditions and limitations of the exemption.  In according that power to the Member States, the Community legislature did not authorise them to undermine the principle of fiscal neutrality which underlies the Sixth Directive.
28 As pointed out in paragraph 21 of this judgment, it is clear from the judgment in Lange that the principle of fiscal neutrality precludes a generalised distinction from being drawn in the levying of VAT between unlawful and lawful transactions.  It follows that Member States cannot reserve the exemption solely to lawful games of chance.
29 It cannot be contended, as the German Government has done, that the conditions in which lawful games take place are not comparable to those pertaining in the case of unlawful games on the ground that licensed casinos are subject to a levy calculated on the basis of their profits.
30 First, the common system of VAT would be distorted if Member States could adjust its application on the basis that there are other, unharmonised, taxes.  Secondly, as the German Government itself acknowledged at the hearing, there is nothing to prevent levies of the same kind as those payable by licensed casinos from also being imposed on organisers of unlawful games of chance.
31 The answer to the first question must therefore be that the unlawful operation of a game of chance, in the event roulette, falls within the scope of the Sixth Directive. Article 13(B)(f) of that directive must be interpreted as meaning that a Member State may not impose VAT on that activity when the corresponding activity carried on by a licensed public casino is exempted.
Questions 2 and 3