C-252/86

OPINION OF MR MANCINI — CASE 252/86

O P I N I O N OF MR ADVOCATE GENERAL MANCINI delivered on 15 D e c e m b e r 1987 *

Mr President, Five courts, on the other hand, have already Members of the Court, resolved the problem, but of those only one — the Tribunal de grande instance, Cusset, by judgment of 21 May 1987 — has classified the tax at issue as a turnover tax. The other courts have decided that it is not a turnover tax, albeit on the basis of different reasoning, namely: Montbeliard on 1. In connection with a dispute as to 23 July 1986, because a tax described as an whether a tax on the operation of automatic indirect tax by the Code géneral des impôts entertainment machines can be classified as (the 'CGI') does not constitute a tax on a turnover tax, the Tribunal de grande turnover; Sens on 3 July 1986, because the instance (Regional Court), Coutances, has provisions of a directive cannot be relied asked this Court to interpret Article 33 of upon by private individuals to support an the Sixth Council Directive (77/388/EEC) action in a tax matter (that being the on the harmonization of laws on turnover well-known position of the Conseil d'État, taxes — Common system of value-added expressed in Judgment No 51811 of 1 July tax: uniform basis of assessment (Official 1985, RJF, 10/85, p. 1286); Auch on 26 Journal 1977, L 145, p.l) and two Articles November 1986, because the definition of a (95 and 30) of the EEC Treaty. tax as a turnover tax is a matter of domestic rather than Community law; and Nevers on 27 November 1987, because the charge in question is annual whereas the plaintiff had asked for relief in respect of a period of six months.

in respect of the annual tax on those referred to in Article 33 of the Sixth machines. Pointing out that they had been VAT Directive be interpreted as subject to VAT since 1 July 1985, Mr applying to taxes levied on operating Bergandi applied for relief from the portion receipts, regardless of whether tax is of the tax relating to the second half of charged on the basis of actual revenue 1985; and when his application was rejected or on an approximate basis where it is (31 December 1985) he instituted difficult to arrive at an exact determi- proceedings against the Directeur des nation of actual revenue? services fiscaux of the département of la Manche before the Tribunal de grande instance, Coutances, which has jurisdiction in matters relating to taxes classified as turnover and similar taxes. At the same time (3) More particularly, does the concept of he requested that the tax authorities should turnover taxes or any taxes, duties or be ordered to grant him relief in respect of a charges which may be characterized as principal sum of FF 38 000 and exemption turnover taxes referred to in Article 33 from penalties and should be ordered to of the Sixth VAT Directive include an reimburse to him the amounts already paid; annual, flat-rate fiscal charge which: in that regard, he submitted that the levying (a) is levied on all automatic machines of the State tax on the games machines for installed in public places and providing the period from 1 July to 31 December was visual or aural entertainment, a game contrary to Article 33 of the Sixth Directive or an amusement; (b) is introduced for and Articles 95 and 30 of the Treaty. the purpose of replacing a tax on the turnover of the operator of the machine; and (c) is broadly adjusted to take account of the profitability of each type of machine and, indirectly, of the operator's receipts? By judgment of 18 September 1986 the national court stayed the proceedings before it and referred the following questions to the Court for a preliminary ruling under Article 177: (4) If the replies to Questions 1 and 3 are in the affirmative, does the prohibition of the cumulative levying of value-added tax and other turnover taxes on the same revenue or turnover '(1) Must Article 33 of Directive mean that where value-added tax is 77/388/EEC be interpreted as prohi- applied for the first time at the biting Member States from continuing beginning of the second half of a year to levy turnover taxes on the supply of and when the turnover taxes levied in goods or the provision of services once addition to value-added tax must be such activities become liable to paid in a single instalment at the value-added tax? beginning of the calendar year (unless deferred payment has been permitted), one half of the sums due in respect of the taxes in the nature of turnover taxes for the year in which value-added (2) Must the concept of turnover taxes or tax was first applied must, in conse- any taxes, duties or charges which may quence of the introduction of VAT, be be characterized as turnover taxes reimbursed or not demanded.

(5) Must Article 95 of the EEC Treaty be 13 B (f) of the Sixth Directive — brought interpreted as prohibiting the levying against the French Republic on 23 on operating receipts of tax at a rate December 1983 (that case, Case 287/83, three times higher on products that are was removed from the register by order of principally of foreign origin than on 16 January 1985, not published). similar products that are principally of domestic manufacture?

According (6)Must Article 30 of the EEC Treaty be to the government bill, the tax was to be a interpreted as meaning that it is an fixed annual sum of FF 1 500 on each infringement thereof to make revenue from machine; but an amendment passed at the the operation of certain products liable to sitting on 27 November 1981 set different value-added tax pursuant to Community amounts for different types of machine. The legislation without abolishing existing taxes Minister for the Budget, Laurent Fabius, on such revenue even though certain of the considered the resultant system satisfactory. products operated are no longer manu- It distinguished 'entre les appareils qui ont factured in the Member State levying the une tres faible rentabilité, et pour lesquels le various taxes concerned and where, in any taux de prélèvement sera bas, les appareils event, the cumulative levying of such taxes intermédiaires qui seront soumis à un may result in a reduction in the imports of double taux, un taux moyen pour les such products from the rest of the communes urbaines et un taux assex faible Community?' pour les appareils mis en service depuis plus de trois ans qu'on trouve souvent dans les petits cafés des communes rurales, . . . et, enfin, les appareils qualifiés de jackpot, concernant les jeux d'argent et de hasard dont la taxation . . . peut être supérieure'.

That provision repealed Article 261-E-3 of the CGI which exempted from VAT receipts from the operation of all automatic machines subject to entertainment tax; and an incentive for its adoption was provided by the action In particular, Article 33 introduced Article under Article 169 of the Treaty which 564 septies and Article 564 octies. The first the Commission — considering that that provides that the tax is to apply to exemption was incompatible with Article automatic entertainment machines providing

(b) small-scale vehicles or animals on which Finally, I would mention that, after the children can sit; and period during which the dispute arose, Articles 564 septies and 564 octies were repealed by Article 35 I of the Finance Law for 1987 (Law No 86-1317, J O R F 1986, p. (c) coin-operated record-players (juke- 15820). In the report annexed to the boxes). government bill, it is stated that the tax was introduced 'dans l'attente de l'application de la taxe sur la valeur ajoutée'and that, once the latter tax had come into force, 'il (2) A tax of FF 5 000 is payable on convient de revenir au droit commun en machines on which games of chance are supprimant la taxe d'État'. played, even where a player requires skill in order to win, and which give prizes of game tokens or a number of free matches (slot machines, pin-ball, Roll-a-top, 'Astoria', 4. Let us first examine the question 'Rotamint', etc.). However, the manu- concerning the interpretation of Article 33 facture, possession, installation and of the Sixth Directive. The wording of the operation of such machines were prohibited provision is well known: 'Without prejudice by the Law of 12 July 1983 (Law No to other Community provisions, the 83-628, JORF 1983, p. 2154); provisions of this directive shall not prevent another Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, (3) All other machines (such as video stamp duties and, more generally, any taxes, games, the various types of billiards, mini- duties or charges which cannot be charac- bowling, and so on) are subject to a tax of terized as turnover taxes'. Among the FF 1 500, which is reduced to FF 1 000 if parties to the proceedings before this Court, the machines were brought into service the Commission of the European more than three years earlier. It is also Communities, the French Government and provided that machines put into service the German Government have taken the

But let us take things in their proper order, directing our attention first to the nature of the tax. In that regard it is appropriate to The Federal Republic of Germany, note that, with the exception of the German however, relies upon Article 33 of the Government, the parties before this Court directive and takes the view that it is inap- have referred to the judgment of 27 propriate to seek an 'exhaustive' definition November 1985 (Case 295/84 Rousseau of taxes which can be characterized as Wilmotx Organic [1985] ECR 3759) and, in turnover taxes since they may appear to be particular, paragraph 16 thereof. It states different by reason of the name given to that Anicie 33 of the Sixth Directive 'seeks them without in fact being different as far as to prevent the functioning of the common their purpose or nature is concerned. system of value-added tax from being Turnover taxes and Community VAT are compromised by fiscal measures of a characterized by the fact that they cover all Member State levied on the movement of possible categories of products and for that goods and services and charged on very reason are general taxes on commercial transactions in a way consumption. The fact that a tax is stated to comparable to value-added tax'. The relate to turnover is not therefore sufficient provision does not therefore preclude the reason to characterize it as a turnover tax. retention or introduction by Member States The latter relates both to imports of goods of 'charges which are not fiscal but have and to transfers of goods and the provision been introduced specifically in order to of services for consideration by a taxable finance social funds and which are based on person; on the contrary, often displaying the activity of undertakings without directly the features of proceeds from business, the affecting the price of the goods or services'. consideration received by the transferor or provider of services does not constitute the target of the tax but is merely the basis of assessment for it.

Government States that the legislature's 5. Personally, contrary to the view intention to introduce a charge replacing expressed by Germany, I consider that the the tax on turnover is of no importance answer to the question submitted by the as far as Article 33 is concerned, the Coutances court depends on the definition essential point being that the tax of a tax which can be characterized as a should display the requisite objective turnover tax within the meaning of Article features. It follows — concludes the 33 of the Sixth Directive. Moreover, the Commission — that, as regards the tax with German Government itself, which in any which the Coutances court's question is event regards any endeavour in that concerned, the chargeable event is not the direction as superfluous, succeeds only in transfer of goods or the provision of a identifying the tax under review here by service but, on the contrary, is closely reference to Community VAT. related to the basis of assessment. The tax is in fact levied on the use of a machine and does not vary according to the location where the machine is installed; quite apart from that fact, since it cannot be deducted as Community VAT under Article 17 of the Sixth Directive, it is not in the nature of a turnover tax. I would point out in the first place that the concept of a tax which can be characterized as a turnover tax is a Community concept. That follows ineluctably from the wording of Article 33 and the purposes of the system of which that article forms part. As the For its part, the French Government notes legislature made clear, the prohibition of that the tax at issue is unrelated to the overlapping does not apply to 'any taxes, purchase price of the machines; moreover, it duties or charges' which cannot be charac- is not intended to represent a deduction terized as turnover taxes; and it is clear from receipts but rather, as is apparent from that the very plurality of the terms the fact that it becomes due when the used — namely 'taxes', 'duties' and annual return is made in respect of the 'charges' — renders impossible any classifi- machine, it relates to the installation of the cation which is dependent upon the names machine. The annual nature of the tax also used or criteria adopted at national level. makes it utterly impossible for the adminis- The reason for this is clear and is to be tration to grant relief in respect of half- found, as I have pointed out, in the years. France adds that the tax at issue objectives of the system: VAT is a tax clearly cannot be regarded as being in the whose characteristics have been harmonized nature of a turnover tax if only because Mr at Community level and a percentage of the Bergandi brought his action before an revenue accruing from it goes towards ordinary court; as is well known, such financing the Community. courts have jurisdiction only for proceedings concerning indirect taxes.

The conclusion thus reached provides support for the arguments to the effect that A first comment: the use of the word the tax at issue here is not such a tax, which 'comparable' seems to me to imply that the rely on the fact that it is described in France features of a tax which can be characterized as an 'indirect tax' or on the fact that the as a turnover tax and those of VAT do not matter was brought before an ordinary necessarily have to coincide completely. court (when it is well known that disputes Comparability does not mean identicality. In concerning turnover taxes are a matter for the same way, the Court's reference to the the administrative courts). With respect to 'common system of VAT' does not relate the latter point, moreover, Mr Bergandi exclusively to the definition of VAT in informed us at the hearing that he merely Article 2 of the First Council Directive took the advice given to him by the French (67/227) of 11 April 1967 on the harmon- tax authorities. At the foot of the document ization of legislation of Member States in which the Directeur des services fiscaux concerning turnover taxes (Official Journal, de la Manche rejected his complaint it is in English Special Edition 1967, p. 14). The fact stated that 'si vous souhaitez contester terms used by the Court refer rather to the ce rejet, vous pouvez dans les deux mois system as a whole which, if not entirely assigner le Directeur des services fiscaux uniform, is at least 'common' (see the devant le Tribunal de grande instance de Opinion of Advocate General Rozès in Case Coutances'. 15/81. Schul v Inspecteur der Invoerrechten

en Accijnzen [1982] ECR 1437, at p. 1441). Nor can it be said — although the German The characteristics which a turnover tax Government does so — that the Sixth must have can be inferred from the rules Directive endows VAT with the feature of laid down on VAT in the Sixth Directive, generality. Certainly, generality is a particularly as regards the chargeable event, particular feature which distinguishes that the method of assessment of the tax and its tax from the other types of indirect taxation impact on the consumer. (see my Opinion in Rousseau Wilmot, part 4). But particular does not mean exclusive; so much so that as a result of the options and exemptions provided for by that directive the tax does not apply to all Let us consider the chargeable event first. economic transactions. As will be recalled, the Commission and France have expressed the view that there is a close relationship between that event and the basis of assessment, in so far as the tax at issue here is payable in respect of the Let us now examine the argument availability for use of the machines and is developed with particular vigour by the unrelated to their turnover. For my part, I French Government that the contested consider that: charge is not proportional to receipts and for that very reason is not intended to apply a real or flat-rate deduction to the turnover achieved by the machines. That argument (a) the Sixth Directive indicates an contains an element of truth. VAT is in fact intention to distinguish between the two calculated as a rule on the basis of the turnover declared and of the separate trans- factors by the very fact that they are actions represented by transfers of goods or dealt with in separate provisions the provision of services. But it is also true (Articles 10 and 11); that there are important exceptions to that rule, as in the case, for example, of the flat-rate system involving the possibility of exemptions and non-deduction available for (b) Article 10 allows for the possibility of small undertakings, farmers and travel derogations, whilst stating that the tax agencies (Articles 24 to 26 of the Sixth becomes chargeable when the goods are Directive). It follows that, if the basis of delivered or the service is performed; assessment does not take account of the totality of the turnover declared, the tax, although created on a flat-rate basis, remains ad valorem. (c) Article 10 (3) provides that, as regards imported goods, the chargeable event occurs 'when the goods enter the territory of the country'. An even clearer result is arrived at if the impact of the tax is considered. It will be remembered that in the Rousseau Wilmot judgment the Court stated that the tax can Thus, in the case of VAT — which is par be characterized as a turnover tax only if excellence a turnover tax — no direct and commercial transactions are affected in a individual relationship between the char- way comparable to that of VAT. But, as the geable event and the basis of assessment Commission itself concedes, the ways in appears to be identifiable. which VAT is passed on to the final

consumer of the goods or the recipient of It is clear from a review of the rules (point the service differ considerably. The transfer 3, supra) that (a) the tax is paid by the is sometimes direct (as where the amount of operator and not by the possessor of the the tax is separate from the price of the machine; it is not therefore a tax on goods or service) and sometimes indirect ownership or possession like for example (where, on the contrary, the tax forms part the road tax for motor vehicles; (b) the of the price) and at least in one case (that of amount varies according to the type of the flat-rate system) entirely non-existent. machine, takes account of the period for As is obvious, the same principles apply to which it has been in use and takes obso- taxes which can be characterized as lescence into consideration. Machines turnover taxes. intended for the entertainment of children bear a lesser burden than those providing recreation for adults; moreover, a reduction of half is available for machines brought into service in the second half of the year and, in the case of machines brought into service more than three years earlier, the tax is reduced by one third. As the Commission itself conceded, we are dealing with the taxation of an activity according to its Finally, a few words concerning the profitability or receipts. The latter — as is criterion — postulated only by the proved by the graduation of the tax — is Commission — whereby there must be a calculated on a flat-rate — and therefore relationship between the subjection of goods approximate — basis but, as we have just or services to the tax and their movement seen, it is also based on apparent, specific within the Community. As Mr Bergandi and almost unvarying factors. There is, in points out, that view relies upon interpreting short, no doubt that the operators include Article 33 as prohibiting overlapping only the tax in the price charged and hence pass where the tax affects trade between Member it on to the user of the service. States and not also where its effects are felt within one country. But that reading is unduly reductive; no-one can in fact fail to see that it is incompatible with a system such as the VAT system which requires equality of conditions of competition 'whether at national or Community level' (third recital in the preamble to the First Directive). The result to which this analysis leads seems to me to be clear: the contested tax — which is charged on operating receipts, however the tax basis is defined (that is to say according to the actual proceeds or, if they are not ascertainable, on a flat-rate basis), is in the nature of a tax on turnover and cannot therefore coexist with VAT. Furthermore, that conclusion is 7. Having thus determined the distin- corroborated by the travaux preparatoires guishing features of a 'tax which may be for the Finance Law for 1982. They make it characterized as a turnover tax', it is now clear that the legislature was moved by two necessary to establish whether the tax here intentions: on the one hand to overcome the displays those features. difficulties of applying VAT in an area in

which the Commission was taking action to to Article 33 of the Sixth Directive, to the secure the removal of the general tax prohibition of overlapping with VAT, that is created by Article 261-E of the CGI; and, to say with a burden which is itself also on the other, to subject the receipts of levied on the receipts obtained from use of machines to a tax whose amount reflected the machine. On that point the French their presumed profitability. Government maintains that the prohibition should not operate where the tax is annual and the law does not allow the grant of relief for periods of less than one year in the year in which VAT was first applied. With regard to the first purpose, in addition to the statement of Mr Fabius quoted earlier (in part 3 hereof) reference may be made to the observations of Christian Pierret, the Rapporteur General of the Finance That view, which was subscribed to in the Committee of the National Assembly, to the judgment of the Tribunal de grande effect that 'le contrôle de la recette est très instance, Nevers, mentioned earlier, is difficile et je ne m'étendrai pas sur les without foundation.

Le the one at issue here, the prohibition against Gouvernement ne pouvait donc s'orienter overlapping may be relied upon to prevent que vers une taxe forfaitaire' (JORF, the collection of the latter charge and the Débats, Ass. Nat., 4 November 1981, p. tax authorities are obliged to reimburse or 3058). The second purpose is highlighted by not require payment of the sums in respect the remarks of the Deputy Charles Josselin. of that part of the year during which VAT He expressed pleasure at the 'modulation de was applied for the first time. la taxe par type d'appareils, car on tient compte ainsi des revenus plus ou moins importants qu'ils procurent' and he considered 'que l'on ait pris en 9.

For the sake annuelle' (JORF. Débats, Ass. Nat., 17 of completeness I shall merely make the December 1981, p. 5063, and see also following observations: remarks by the member of the Senate, Francis Palmero, JORF, Débats, Senat 27 November 1981, p. 3252). (a) as regards Article 95, the tax is not levied on goods but on the profitability of the service provided and, in the absence of proof of the non-existence of

OPINION OF MR MANCINI —CASE 252/86

machines manufactured in other not provide grounds for applying it in Member States; conjunction with Article 95 (judgments of 22 March 1977 in Case 84/86 Ianelli (b) as regards Article 30, according to the e Volpi SpA v Paolo Meroni [1977] ECR decisions of this Court, obstacles of a 557, and of 7 May 1985 in Case 18/84 fiscal nature to imports are not covered Commission v French Republic [1985] by that provision and in any event do ECR 1339).

10. For all the reasons which I have given, I propose that the Court should give the following answer to the questions submitted to it by the Tribunal de grande instance, Coutances, by judgment of 18 December 1986 in the proceedings between Gabriel Bergandi and the Directeur des Services Fiscaux du Département de la Manche:

'The concept of a charge which can be characterized as a turnover tax, within the meaning of Article 33 of the Sixth Council Directive (77/338/EEC) of 17 May 1977, is to be interpreted as including a tax which is determined annually, is due from the operator of an automatic entertainment machine and is paid on the basis of criteria which take account, even though on a flat-rate basis, of the presumed profitability of the machine.

Article 33 of the Sixth Directive prohibits the imposition upon transfers of goods or the provision of services of any charges, duties or taxes which can be charac- terized as turnover taxes as from the time at which VAT is applied for the first time, regardless of the detailed arrangements laid down for the payment of the tax.'