Staatssecretaris van Financiën v Coffeeshop "Siberië" vof.
Date: 1999-06-29
14 It should be noted at the outset that the Court has held that the principle of fiscal neutrality prevents there being any general distinction in the levying of VAT as between lawful and unlawful transactions.  However, that is not true in the case of the supply of products such as narcotic drugs which have special characteristics, inasmuch as, because of their very nature, they are subject to a total prohibition on marketing in all the Member States, with the exception of strictly controlled economic channels for use for medical and scientific purposes.  In a specific situation of that kind, where all competition between a lawful economic sector and an unlawful sector is precluded, the fact that no liability to VAT arises cannot affect the principle of fiscal neutrality (see inter alia Happy Family, paragraph 20, and Case 269/86 Mol v Inspecteur der Invoerrechten en Accijnzen [1988] ECR 3627, paragraph 18).
15 Siberië considers that those judgments are fully applicable in the main proceedings, with the result that the rent for the table is not subject to VAT.  Providing a table for an authorised dealer and informing customers of the café thereof should be regarded as collusion in drug dealing and undoubtedly amounts to a criminal offence which must be treated in the same way as the supply of drugs itself.
16 The Netherlands Government and the Commission maintain that VAT must be charged on the activity in question.  A distinction must be made between supplying drugs and actions ancillary thereto.  Renting out the table is an act which is not prohibited as such; there is a lawful market in that regard, which is in competition with the unlawful market.  Consequently, such a supply is subject to VAT, as the Court held with regard to the unauthorised export of computer systems (Case C-111/92 Lange v Finanzamt Fürstenfeldbruck [1993] ECR I-4677), counterfeit perfumes (Case C-3/97 Goodwin and Unstead [1998] ECR I-3257) and the organisation of illegal gaming (Case C-283/95 Fischer v Finanzamt Donaueschingen [1998] ECR I-3369), on the ground that they were not goods or services outside normal economic channels or in a situation where all competition between a lawful economic sector and an unlawful sector was precluded.
17 Should the Court nevertheless rule that the activity in question is subject to the same rules as the actual supply of drugs, it will be necessary, the Netherlands Government submits, to take into account the significant change in the attitude of the authorities in the Netherlands with regard to the use of `soft' drugs over the last few years.  Whilst the sale of `soft' drugs in coffeeshops remains a criminal offence in the Netherlands, so-called `instructions' issued by the Netherlands Public Prosecutors indicate that such activity in coffeeshops may be tolerated subject to certain conditions, including agreement at local level between the municipal authorities, the police and the Public Prosecutor's Office.   In those circumstances, there is no longer a total prohibition on placing `soft' drugs on the market to justify exemption from the principle of fiscal neutrality.
18 In addition, the Commission points out that the Court has consistently held that economic activities must be assessed for the purposes of applying the common system of VAT itself independently of their purposes or effects and in the light of the economic reality (Case 235/85 Commission v Netherlands [1987] ECR 1471, paragraph 8, and Case C-260/95 Commissioners of Customs and Excise v DFDS [1997] ECR I-1005, paragraph 23).
19 It should be noted that the activity to be taxed in this case is not the sale of narcotic drugs, but a supply of services consisting in making available a place where the sale of those products is effected with the agreement of the supplier of the service.  Consequently, the reasoning in Happy Family cannot be transposed directly to the facts in this case.
20 It is therefore necessary to consider whether the reasoning is to be extended to activities linked in any way at all to dealing in drugs.
21 As noted in paragraph 14 of this judgment, the Court has consistently held that the principle of fiscal neutrality prevents any general distinction in the levying of VAT as between lawful and unlawful transactions.  Consequently, the mere fact that conduct amounts to an offence is not sufficient to justify exemption from VAT.  The exception applies only in specific situations where, owing to the special characteristics of certain products or certain services, any competition between a lawful economic sector and an unlawful sector is precluded.