Commissioners for Her Majesty’s Revenue and Customs v The Rank Group plc.
Date: 2011-11-10
32. According to settled case-law, the principle of fiscal neutrality precludes treating similar goods and supplies of services, which are thus in competition with each other, differently for VAT purposes (see, inter alia, Case C-481/98 Commission  v France  [2001] ECR I-3369, paragraph 22; Case C-498/03 Kingscrest Associates and Montecello  [2005] ECR I-4427, paragraphs 41 and 54; Case C-309/06 Marks & Spencer  [2008] ECR I-2283, paragraph 47, and Case C-41/09 Commission v Netherlands  [2011] ECR I-0000, paragraph 66).
34. Accordingly, the actual existence of competition between two supplies of services does not constitute an independent and additional condition for infringement of the principle of fiscal neutrality if the supplies in question are identical or similar from the point of view of the consumer and meet the same needs of the consumer (see, to that effect, Case C‑109/02 Commission v Germany  [2003] ECR I-12691, paragraphs 22 and 23, and Joined Cases C-453/02 and C-462/02 Linneweber and Akritidis  [2005] ECR I-1131, paragraphs 19 to 21, 24, 25 and 28).
35. That consideration is also valid as regards the existence of distortion of competition. The fact that two identical or similar supplies which meet the same needs are treated differently for the purposes of VAT gives rise, as a general rule, to a distortion of competition (see, to that effect, Case C-404/99 Commission  v France  [2001] ECR I-2667, paragraphs 46 and 47, and Case C-363/05 JP Morgan Fleming Claverhouse Investment Trust and The Association of Investment Trust Companies  [2007] ECR I-5517, paragraphs 47 to 51).
36. Having regard to the foregoing considerations, the answer to Question 1(b) and (c) in Case C-259/10 is that the principle of fiscal neutrality must be interpreted as meaning that a difference in treatment for the purposes of VAT of two supplies of services which are identical or similar from the point of view of the consumer and meet the same needs of the consumer is sufficient to establish an infringement of that principle. Such an infringement thus does not require in addition that the actual existence of competition between the services in question or distortion of competition because of such difference in treatment be established.
Question 1(a) in Case C‑259/10 and the first question in Case C‑260/10
39. That exemption is based on practical considerations, in that gambling transactions do not lend themselves easily to the application of VAT, and not, as is the case with certain public interest services supplied in the social sector, on a desire to afford those activities more advantageous VAT treatment (see Case C-89/05 United Utilities  [2006] ECR I-6813, paragraph 23, and Case C-58/09 Leo-Libera  [2010] ECR I-0000, paragraph 24).
40. It is apparent from the actual wording of Article 13B(f) of the Sixth Directive that that provision leaves a broad discretion to the Member States as regards the exemption or the taxation of the transactions concerned since it allows those States to fix the conditions and the limitations to which entitlement to that exemption may be made subject ( Leo-Libera , paragraph 26).
41. However, when the Member States exercise their power under that provision to lay down the conditions and limitations of the exemption and, therefore, to determine whether or not transactions are subject to VAT, they must respect the principle of fiscal neutrality inherent in the common system of VAT (see Case C‑283/95 Fischer  [1998] ECR I‑3369, paragraph 27, and Linneweber and Akritidis , paragraph 24).
43. In order to determine whether two supplies of services are similar within the meaning of the case-law cited in that paragraph, account must be taken of the point of view of a typical consumer (see, by analogy, Case C-349/96 CPP  [1999] ECR I-973, paragraph 29), avoiding artificial distinctions based on insignificant differences (see, to that effect, Commission  v Germany , paragraphs 22 and 23).
44. Two supplies of services are therefore similar where they have similar characteristics and meet the same needs from the point of view of consumers, the test being whether their use is comparable, and where the differences between them do not have a significant influence on the decision of the average consumer to use one such service or the other (see, to that effect, Case C-481/98 Commission v France , paragraph 27, and, by analogy, Joined Cases C-367/93 to C-377/93 Roders and Others  [1995] ECR I-2229, paragraph 27, and Case C‑302/00 Commission v France  [2002] ECR I-2055, paragraph 23).
45. In accordance with settled case‑law, as regards the levying of VAT, the principle of fiscal neutrality precludes any general distinction between lawful and unlawful transactions (see, inter alia, Case 269/86 Mol [1988] ECR 3627, paragraph 18; Case C-158/98 Coffeeshop ‘Siberië’  [1999] ECR I-3971, paragraphs 14 and 21, and Joined Cases C-439/04 and C-440/04 Kittel and Recolta Recycling [2006] ECR I-6161, paragraph 50). The Court concluded that Member States cannot reserve the exemption solely to lawful games of chance ( Fischer , paragraph 28). The lawful or unlawful nature of the operation of a game of chance thus cannot be taken into account in the examination of the similar nature of two games of chance.
46. It is also clear from the case-law of the Court of Justice that, in assessing whether games of chance or gaming machines are similar, the identity of the operators of the games and the legal form by means of which they exercise their activities are, as a rule, irrelevant (see Linneweber and Akritidis , paragraphs 25 and 29, and the case-law cited).
48. Finally, according to paragraphs 29 and 30 of Fischer , the fact that only one of two types of game is subject to an unharmonised tax is not such as to justify the conclusion that those types of game are not comparable. The common system of VAT would be distorted if the Member States could adjust its application on the basis that there are other, unharmonised, taxes.
50. That outcome is not called into question by the fact that, in certain exceptional cases, the Court has accepted that, having regard to the specific characteristics of the sectors in question, differences in the regulatory framework or the legal regime governing the supplies of goods or services at issue, such as whether or not a drug is reimbursable or whether or not the supplier of a service is subject to an obligation to provide a universal service, may create a distinction in the eyes of the consumer, in terms of the satisfaction of his own needs (Case C-481/98 Commission v France , paragraph 27, and Case C-357/07 TNT Post UK [2009] ECR I-3025, paragraphs 38, 39 and 45).
53. It must first be observed that, if Article 13B(f) of the Sixth Directive and the discretion which that provision grants to the Member States, mentioned in paragraph 40 of this judgment, are not to be deprived of all useful effect, the principle of fiscal neutrality cannot be interpreted as meaning that betting, lotteries and other games of chance must all be considered to be similar services within the meaning of that principle. A Member State may thus limit the VAT exemption to certain forms of game of chance (see, to that effect, Leo-Libera , paragraph 35).
54. It follows from that judgment that that principle is not breached where a Member State imposes VAT on services supplied by means of slot machines while exempting horse-race betting, fixed-odds bets, lotteries and draws from VAT (see, to that effect, Leo-Libera , paragraphs 9, 10 and 36).
56. It is apparent from paragraphs 43 and 44 of the present judgment that the determination whether games of chance which are taxed differently are similar, which it is for the national court to make in the light of the circumstances of the case (see, to that effect, Joined Cases C-443/04 and C-444/04 Solleveld and van den Hout-van Eijnsbergen  [2006] ECR I-3617, paragraphs 42 and 45, and Marks & Spencer , paragraph 48), must be made from the point of view of the average consumer and take account of the relevant or significant evidence liable to have a considerable influence on his decision to play one game or the other.
61. In that regard, it must be recalled that the principle of fiscal neutrality was intended to reflect, in matters relating to VAT, the general principle of equal treatment (see, inter alia, Case C‑174/08 [2009] ECR  I‑10567, paragraph 41, and Case C‑262/08 CopyGene  [2010] ECR I-0000, paragraph 64).
62. Although a public administration following a general practice may be bound by that practice (see, to that effect, Case 268/84 Ferriera Valsabbia  v Commission  [1987] ECR 353, paragraphs 14 and 15, and Joined Cases C‑189/02 P, C‑202/02 P, C‑205/02 P to C‑208/02 P and C‑213/02 P Dansk Rørindustri and Others  v Commission  [2005] ECR I‑5425, paragraph 211), the fact remains that the principle of equal treatment must be reconciled with the principle of legality, according to which a person may not rely, in support of his claim, on an unlawful act committed in favour of a third party (see, to that effect, Case 188/83 Witte v Parliament [1984] ECR 3465, paragraph 15; Case 134/84 Williams  v Court of Auditors  [1985] ECR 2225, paragraph 14, and Case C‑51/10 P Agencja Wydawnicza Technopol  v OHIM  [2011] ECR I‑0000, paragraphs 75 and 76).
69. Accordingly, Article 13B(f) of the Sixth Directive has direct effect in the sense that it can be relied on by an operator of games of chance or gaming machines before national courts to prevent the application of rules of national law which are inconsistent with that provision (see Linneweber and Akritidis , paragraph 38).
70. Such direct effect of a provision of a directive depends neither on the existence of a deliberate wrongful act or negligence by the member State concerned when transposing the directive at issue into national law, nor on the existence of a sufficiently serious breach of Union law (see, to that effect, Case C‑62/00 Marks & Spencer  [2002] ECR I‑6325, paragraphs 25 and 27; Joined Cases C‑397/01 to C‑403/01 Pfeiffer and Others [2004] ECR I‑8835, paragraph 103, and Case C‑309/06 Marks & Spencer , paragraph 36).