C-370/95 Careda and Others v Administración General del Estado

JUDGMENT OF THE COURT (Fifth Chamber)

26 June 1997"

In Joined Cases C-370/95, C-371/95 and C-372/95,

REFERENCES to the Court under Article 177 of the EC Treaty by the Audiencia Nacional, Spain, for a preliminary ruling in the proceedings pending before that court between

Careda SA (C-370/95),

Federación Nacional de Operadores de Máquinas Recreativas y de Azar (Femara) (C-371/95),

Asociación Española de Empresarios de Máquinas Recreativas (Facomare) (C-372/95)

and

Administración General del Estado,

on the interpretation of Article 33 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1),

* Language of the case: Spanish.

THE COURT (Fifth Chamber),

composed of: J. C. Moitinho de Almeida, President of the Chamber, C. Gulmann, D. A. O. Edward, J.-P. Puissochet and M. Wathelet (Rapporteur), Judges,

Advocate General: P. Léger, Registrar: H. A. Rühi, Principal Administrator,

after considering the written observations submitted on behalf of:

— Careda SA and Federación Nacional de Operadores de Máquinas Recreativas y de Azar (Femara), by Miguel Ángel García Campos, of the Madrid Bar,

— the Spanish Government, by Alberto José Navarro González, Director-General of Legal Coordination and Community Affairs, assisted by Gloria Calvo Díaz, Abogado del Estado, of the State Legal Service, acting as Agents,

— the Commission of the European Communities, by Miguel Diaz-Llanos La Roche, of its Legal Service, acting as Agent,

having regard to the Report for the Hearing,

after hearing the oral observations of Careda SA and Federación Nacional de Operadores de Máquinas Recreativas y de Azar (Femara), represented by Miguel Ángel García Campos, assisted by Zornoza Pérez, Professor of Law at the Carlos III University in Madrid, of the Spanish Government, represented by Luis Pérez de Ayala Becerril, Abogado del Estado, of the State Legal Service, acting as Agent, and of the Commission, represented by Carlos Gómez de la Cruz, of its Legal Service, acting as Agent, at the hearing on 16 January 1997,

after hearing the Opinion of the Advocate General at the sitting on 27 February 1997,

gives the following

Judgment

Legal context and the dispute

1 By orders of 4 July (C-370/95), 13 September (C-371/95) and 15 November (C-372/95) 1995, received at the Court on 30 November 1995, the Audiencia Nacional (National High Court) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty two questions on the interpretation of Article 33 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1, hereinafter 'the Sixth Directive').

2 Those questions were raised in proceedings between Careda SA (hereinafter 'Careda') and the Administración General del Estado (Spanish Ministry for the Economy and Finance) concerning an assessment under the tax heading of the supplementary charge to the fiscal levy on games of chance, betting and gambling, laid down by Article 38(2), point 2, of Law No 5/1990 of 29 June 1990 (BOE of 30 June 1990) and two applications brought by the Federación Nacional de Opera dores de Máquinas Recreativas y de Azar (hereinafter 'Femara') and the Asociación Española de Empresarios de Máquinas Recreativas (hereinafter 'Facomare') for annulment of Ministerial Decree No 23472 of 6 September 1990 (BOE of 22 September 1990, hereinafter 'the Decree of 6 September 1990'), which forms part of the legal basis of the tax in question.

3 Royal Decree-Law No 16/1977 of 25 February 1977 (BOE of 7 March 1977) regulates the penal, administrative and fiscal aspects of games of chance, betting and gambling in Spain. In particular, it introduced a fiscal levy on those activities (hereinafter 'the gambling tax') which is defined by Article 3 as follows:

'Article 3. Irrespective of any national and local taxes to which they are subject by virtue of the legislation in force, companies or undertakings pursuing the activities to which this royal decree applies, casinos and other establishments, places of business or premises authorized for gambling, are subject to the fiscal levy on [gambling], as follows:

1Taxable event: the taxable event is the authorization or organization of gambling.

2Taxable persons: organisers and undertakings the activities of which include the organization of gambling are accountable for the tax.

The owners and operators of premises where gambling is organized are jointly and severally liable for payment of the tax.

3Taxable base: the taxable base is the gross turnover which casinos derive from gambling or the sums that players spend on gambling which takes place in the various buildings, places of business or premises where games of chance, betting or gambling are organized.

The taxable base is calculated directly or at a fixed rate. In the first case, the taxable person must pay the tax in the manner and in the circumstances laid down by regulation.

4 Rate of tax: the rate of tax is:

(a) in respect of casinos ...

(b) in respect of other buildings, places of business or premises: 20% of the taxable base.

5 Chargeable event:

1. The obligation to pay the tax arises, in general, at the moment the gambling is authorized or, failing that, organized.

2. As regards automatic gaming devices and machines the tax is chargeable by calender year and is due on 1 January of each year in respect of machines authorized during previous years. ...'

4Article 3(4) of Decree-Law No 16/1977 has been amended a number of times. Thus, in respect of amusement machines with winnings, so-called Type B machines, tax is now charged at a fixed rate. This rate was updated by Article 38(2), point 1, of Law No 5/1990 as follows:

'Fixed rates: ...

A. Amusement machines with winnings or Type B:

(a) annual rate: PTA 375 000.

(b) [modification of rates according to whether the machine is for use by two or three or more players].'

5Article 38(2), point 2, of Law No 5/1990 also introduced, in respect of 1990 only, a supplementary levy which applied specifically to Type B machines (hereinafter 'the supplementary levy').

6According to that provision, the amount of the supplementary levy is equal to the difference between the fixed rates set out in point 1 of Article 38(2) and those determined by Decree-Law No 7/1989 of 29 December 1989 (BOE of 30 December 1989, p. 8325). The sums to be collected by way of the supplementary levy were also specified in the Ministerial Decree of 6 September 1990.

7In the proceedings which they brought before the Audiencia Nacional, Careda, Femara and Facomare claimed that the supplementary levy collected pursuant to the Ministerial Decree of 6 September 1990 was contrary to Article 33 of the Sixth Directive in so far as it exhibited the same essential qualities and characteristics as value added tax (hereinafter 'VAT').

8Article 13(B)(f) of the Sixth Directive provides:

'Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:

(f) betting, lotteries and other forms of gambling, subject to conditions and limitations laid down by each Member State;

J

9However, the version of Article 33 of the Sixth Directive in force at the time the events material to this case arose provided:

'Without prejudice to other Community provisions, the provisions of this directive shall not prevent a Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, stamp duties and, more generally, any taxes, duties or charges which cannot be characterized as turnover taxes.'

10In order to determine whether the tax at issue and, more specifically, Law No 5/1990 and its legal base, the Decree of 6 September 1990, are compatible with Community law, the Audiencia Nacional considered it necessary to request a preliminary ruling from the Court on the following questions:

'1. Does the concept of passing on the tax to the consumer, within the meaning of the Sixth Directive (77/388/EEC) of 17 May 1977 and of the rest of the Community legal order, and for determining the concept of turnover tax, require always and in every case the law concerning the tax in question to lay down expressly that the said tax may be passed on to the consumer or is it sufficient, on the other hand, if the tax can be deemed, on a reasonable interpretation of such law, to be actually included in the price paid by the consumer?

2. May a tax which is levied as a fixed charge of a large amount on the total turnover or revenue generated and which takes account of such turnover, if it is ultimately paid by the consumer, be regarded as a turnover tax although there is no express record (invoice) of passing on the tax to the consumer, the transactions in question being automatic, by the use of coins, and there being a price for use. As so framed, does it infringe Article 33 of the Sixth Directive (77/388/EEC) on value added tax and is it therefore incompatible with that directive?'

First question

11In its first question, the national court essentially asks whether Article 33 of the Sixth Directive is to be interpreted as meaning that, in order for a tax to be characterized as a turnover tax, the relevant national legislation must expressly provide that it may be passed on to the consumer.

12In order to answer this question, it is first necessary to consider whether the concept of turnover tax, within the meaning of Article 33 of the Sixth Directive, necessarily implies that the tax may be passed on in the price of the goods or services in such a way that it is definitively borne by the consumer.

i3 According to settled case-law (see, in particular, Case 295/84 Rousseau Wilmot [1985] ECR 3759, paragraph 16, and Case C-347/90 Bozzi [1992] ECR 1-2947, paragraph 9), in leaving Member States free to maintain or introduce certain indirect taxes, such as excise duties, on the condition that they are not taxes which can be 'characterized as turnover taxes', Article 33 of the Sixth Directive seeks to prevent the functioning of the common system of VAT from being compromised by fiscal measures of a Member State levied on the movement of goods and services, and charged on commercial transactions in a manner comparable to VAT.

u Taxes, duties and charges which exhibit the essential characteristics of VAT must always be considered as such even if they are not identical in every respect to VAT. As the Court has already held on more than one occasion, these characteristics are as follows: VAT applies generally to transactions relating to goods or services; it is proportional to the price of those goods and services, irrespective of the number of transactions which take place; it is charged at each stage of the production and distribution process; and, finally, it is imposed on the added value of goods and services, since the tax payable on a transaction is calculated after deducting the tax paid on the previous transaction (see, in particular, Case 252/86 Bergandi [1988] ECR 1343, paragraph 15; Joined Cases 93/88 and 94/88 Wisselink and Others [1989] ECR 2671, paragraph 18; Case C-109/90 Giant [1991] ECR 1-1385, paragraphs 11 and 12; Case C-200/90 Dansk Denkavit and Poulson Trading [1992] ECR 1-2217, paragraph 11, and Bozzi, cited above, paragraph 12). The Court also pointed out in Bergandi, at paragraph 8, with regard to its essential characteristics, that VAT is definitively borne by the final consumer.

is It follows from the above that, in order to be characterized as a turnover tax, within the meaning of Article 33 of the Sixth Directive, the tax in question must be capable of being passed on to the consumer.

i6 It is now necessary to consider whether Article 33 of the Sixth Directive also requires, in order for a tax to be classified as a turnover tax, that the relevant national legislation should expressly provide that it may be passed on to the consumer.

i7 In this respect, it should be noted that, in view of the purpose of Article 33 of the Sixth Directive, as recalled in paragraph 13 of this judgment, the classification of a tax and, consequently, the appraisal of its compatibility with Community law must be based not only on the wording of the relevant national provisions, but also on the essential characteristics of the tax.

is The answer to the first question must therefore be that Article 33 of the Sixth Directive is to be interpreted as meaning that, in order for a tax to be characterized as a turnover tax, it is not necessary for the relevant national legislation expressly to provide that it may be passed on to the consumer.

Second question

i9 In its second question, the national court essentially asks whether Article 33 of the Sixth Directive is to be interpreted as meaning that, in order for a tax to be characterized as a turnover tax, it is necessary for the passing on of the tax to the consumer to be recorded in an invoice or other document serving as invoice.

20 It is apparent from the file that, in practice, it is not possible for an invoice or any other document of that kind to be issued to users of amusement machines because of the automatic and repetitive nature, over a short period of time, of the activity in respect of which tax is charged.

2i Article 22(3)(a) of the Sixth Directive provides that the issue of an invoice is compulsory, first, in respect of goods and services supplied by a taxable person to another taxable person (first paragraph), and second, in respect of payments on account made by a taxable person to another taxable person before the supply of goods or services is effected or completed (second paragraph), without prejudice to the option granted to Member States by Article 22(8) of the directive to impose other obligations in order to ensure the correct levying and collection of the tax and the prevention of fraud.

22 Moreover, in order for a taxable person to be able to exercise the right to deduct set out in Article 17(2)(a) of the Sixth Directive, Article 18(l)(a) thereof requires him to hold an invoice drawn up in accordance with Article 22(3).

23 It is apparent from those provisions that the holding or issue of an invoice is not required, in all circumstances, by the directive, in particular, as the Advocate General notes in point 40 of his Opinion, in relations between taxable persons and the final consumer. The holding or issue of an invoice cannot therefore constitute an essential characteristic of turnover tax within the meaning of Article 33 of the Sixth Directive.

24 That being so, it should be noted that the purpose of Article 33 of the Sixth Directive is to prevent the introduction of taxes, duties and charges which could jeopardize the functioning of the common system of VAT.

25 In the main proceedings, the national court must therefore establish whether the tax at issue is capable of being charged on the movement of goods and services in a manner comparable to VAT, by examining whether it exhibits the essential characteristics of VAT. That will be the case if it is generally applicable, if it is proportional to the price of the services, if it is charged at each stage of the production and distribution process and is imposed on the added value of the services, and if, in the light of these conditions, it may be passed on to the consumer.

26 The answer to the second question must therefore be that Article 33 of the Sixth Directive is to be interpreted as meaning that, in order for a tax to be characterized as a turnover tax, it is not necessary for the passing on of the tax to the consumer to be recorded in an invoice or other document serving as invoice. For the purposes of the application of this provision, it is in any event for the national court to establish whether the tax at issue is capable of being charged on the movement of goods and services in a manner comparable to VAT, by examining whether it exhibits the essential characteristics of VAT. That will be the case if it is generally applicable, if it is proportional to the price of the services, if it is charged at each stage of the production and distribution process and if it is imposed on the added value of the services.

Costs

27 The costs incurred by the Spanish Government and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Fifth Chamber),

in answer to the questions referred to it by the Audiencia Nacional by orders of 4 July, 13 September and 15 November 1995, hereby rules:

1. Article 33 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment is to be interpreted as meaning that, in order for a tax to be characterized as a turnover tax, it is not necessary for the relevant national legislation expressly to provide that it may be passed on to the consumer.

2. Article 33 of the Sixth Directive 77/388 is to be interpreted as meaning that, in order for a tax to be characterized as a turnover tax, it is not necessary for the passing on of the tax to the consumer to be recorded in an invoice or other document serving as invoice. For the purposes of the application of this provision, it is in any event for the national court to establish whether the tax at issue is capable of being charged on the movement of goods and services in a manner comparable to VAT, by examining whether it exhibits the essential characteristics of VAT. That will be the case if it is generally applicable, if it is proportional to the price of the services, if it is charged at each stage of the production and distribution process and if it is imposed on the added value of the services.

Moitinho de Almeida Gulmann Edward

Puissochet Wathelet

Delivered in open court in Luxembourg on 26 June 1997.

R. Grass J. C. Moitinho de Almeida

Registrar President of the Fifth Chamber

Opinion of Mr Advocate General Léger delivered on 27 February 1997. - Careda SA (C-370/95), Federación nacional de operadores de máquinas recreativas y de azar (Femara) (C-371/95) and Asociación española de empresarios de máquinas recreativas (Facomare) (C-372/95) v Administración General del Estado. - Reference for a preliminary ruling: Audiencia Nacional - Spain. - Tax on the use of gaming machines - Turnover tax - Passing on to consumers. - Joined cases C-370/95, C-371/95 and C-372/95. European Court reports 1997 Page I-03721

1The questions referred to the Court by the Audiencia Nacional (National High Court) in these three joined cases seek clarification of certain aspects of the concept of turnover tax referred to in Article 33 of the Sixth VAT Directive (1) (hereinafter the `Sixth Directive') in order to characterize, with regard to that article, the supplementary charge to the fiscal levy on games of chance, betting and gambling, introduced by the Spanish authorities for 1990 (hereinafter `the supplementary levy'). To that end, the national court is seeking a better understanding of the condition that the tax is to be passed on to the consumer and of the role played by invoices in establishing that the tax is passed on.

I - The relevant national legislation

2It is apparent from the order for reference in Case C-370/95 (hereinafter `the order for reference') and the submissions of the applicants (2) that the questions referred by the national court arose, firstly, in the context of an action challenging a tax assessment drawn up by the Spanish Ministry of the Economy and Finance in respect of the supplementary levy, applicable to gaming machines with winnings (so-called type `B' machines) (3) and, secondly, of two actions brought before the Audiencia Nacional for annulment of the Ministerial Decree of 6 September 1990 (4) which forms part of the legal basis of the tax at issue. The action against the assessment resulted in a judgment of the Tribunal Económico-Administrativo Central (Central Economic Administrative Court) dated 13 November 1992, against which an appeal was lodged before the Audiencia Nacional.

3Although the national proceedings from which these cases arise relate to the supplementary levy, the national court refers to the rules governing both the fiscal levy on games of chance, betting and gambling (hereinafter the `fiscal levy on gambling') as well as to the supplementary levy. (5)

4The characteristics of the two taxes are largely the same, as is apparent from the following provisions of Law No 5/1990 (6) introducing the supplementary levy:

`1. The supplementary levy applies to automatic type "B" or "C" (7) gaming machines and devices ... in respect of which the fiscal levy for 1990 fell due before this law entered into force.

2. The persons accountable for the supplementary levy are those accountable for the fiscal levy on games of chance, betting or gambling.' (8)

5It appears from the order for reference (9) and the relevant legislation (10) that the main characteristics of the rules governing the fiscal levy on gambling are as follows.

6The fiscal levy on gambling applies throughout the territory of Spain when the gambling is authorized or, failing that, organized. Organizers and undertakings, whose activities include the organization of gambling, are accountable for the tax. The taxable base is the gross revenue which casinos derive from gambling or the sums which players spend on gambling in the various buildings, places of business or premises where games of chance, betting or gambling are organized.

7The differences between the two taxes essentially relate to the period in respect of which they are due and the rate at which they are charged.

8The fiscal levy on gambling is payable by calendar year and is due on 1 January of each year in respect of machines authorized during previous years. The supplementary levy is due only in respect of 1990.

9As regards the rate of the fiscal levy on gambling, the national court states that `there is a general reference rate, which was originally applied, of 20% on the income obtained ... which at a later stage was deferred by the application of charges supposedly fixed in proportion to the turnover from the machine.' (11) The rate of the supplementary levy is obtained by calculating the difference between two types of fixed rate. (12) In practice, it seems that the supplementary levy made it possible to increase the level of the gambling tax applicable to type `B' machines for 1990.

II - The questions submitted by the national court

10The differences between the two taxes are not relevant in the context of the questions raised, which relate essentially to the passing on of the tax to the consumer; I will thus refer without distinction to the rules governing the two taxes, since, as the Government of the Kingdom of Spain observes, (13) they are of the same type.

11In the proceedings before both the national court and this Court, the applicants claim that there was an infringement of Article 33 of the Sixth Directive, (14) which provides:

`Without prejudice to other Community provisions, the provisions of this directive shall not prevent a Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, stamp duties and, more generally, any taxes, duties or charges which cannot be characterized as turnover taxes.'

12They claim that the tax charged in respect of type `B' machines in Spain is a tax `which [has] the same qualities and essential characteristics as value added tax, and by its very nature infringes the prohibition set out in Article 33 of the Sixth Directive'. (15) In contrast, the Government of the Kingdom of Spain and the Commission consider that the taxes at issue do not exhibit the characteristics of a turnover tax which would render it incompatible with Article 33. (16)

13The Court has consistently held that Article 33 `does not preclude the maintenance or introduction of stamp duties or other kinds of taxes, duties or charges which do not have the essential characteristics of VAT'. (17) Member States are even permitted to apply taxes, duties or charges other than turnover taxes concurrently with VAT. (18)

14The national court considers there to be no doubt that, in establishing the fixed charges applicable to the various types of gaming machines, the turnover generated by those machines must have been taken into account and that, `although the rules regulating the gambling tax and the supplementary levy do not expressly provide that it is to be passed on to the consumer, it is clear, as the Tribunal Supremo (Supreme Court) has consistently held, that the final user is the consumer, to whom the fiscal burden is ultimately transferred'. It concludes that in the case of the Spanish gambling tax `the requirements which would render it incompatible with Article 33 of the Sixth Directive appear to be fulfilled'. (19)

15However, in order to be certain the Audiencia Nacional is seeking clarification of the concept of `passing on' taxes to the consumer, (20) in particular where passing on is not expressly provided for by law. It also raises the question whether the fact that no document is issued to record the passing on affects the character of the Spanish taxes.

16The Spanish court has accordingly referred the following questions to the Court under Article 177 of the Treaty:

`(1) Does the concept of passing on the tax to the consumer, within the meaning of the Sixth Directive 77/388/EEC of 17 May 1977 and of the rest of the Community legal order, and for determining the concept of turnover tax, require always and in every case the law concerning the tax in question to lay down expressly that the said tax may be passed on to the consumer or is it sufficient, on the other hand, if the tax can be deemed, on a reasonable interpretation of such law, to be actually included in the price paid by the consumer?

(2) May a tax which is levied as a fixed charge of a large amount on the total turnover or revenue generated and which takes account of such turnover, if it is ultimately paid by the consumer, be regarded as a turnover tax although there is no express record (invoice) of passing on the tax to the consumer, the transactions in question being automatic, by the use of coins, and there being a price for use. As so framed, does it infringe Article 33 of the Sixth Directive 77/388/EEC on value added tax and is it therefore incompatible with that directive?'

17Contrary to the approach taken by the interveners, which involves an overall analysis of the legal character of the taxes at issue, the wording of the questions indicates that the Audiencia Nacional is not asking the Court to rule on the interpretation of Article 33 of the Sixth Directive in order to evaluate every characteristic of a tax such as the one introduced by the Spanish law.

18It is true that the last sentence of the second question, which is drafted in general terms, relates to the compatibility with Article 33 of the Sixth Directive of a tax exhibiting the characteristics of the fiscal charge on gambling and the supplementary levy. The wording of that sentence does not make clear whether the national court's question is limited to that part of the Court's interpretation of Article 33 which makes the passing on of the tax to the consumer part of the definition of turnover tax, or whether it also relates to the criteria applied by the courts when considering national taxes with regard to Article 33 which were not mentioned in the order for reference, or whether it simply concerns the interpretation of Article 33 as a whole.

19That uncertainty is dispelled on reading the order for reference, which, as indicated above, (21) makes it clear that the Audiencia Nacional considers itself to be sufficiently informed as to the existence and scope of some of the criteria laid down by the Court to be able to interpret Article 33 of the Sixth Directive.

20It therefore seems that, in order to rule on this case, the Spanish court only requires an interpretation of that part of Article 33 which makes the passing on of a tax to the consumer an essential characteristic of turnover tax. It seems to me that, by undertaking an overall analysis of the taxes at issue with regard to Article 33 of the Sixth Directive and the criteria set out in the case-law of the Court, the interveners are going beyond the scope of the questions referred.

21The Court has consistently held, as regards the extent of its jurisdiction in proceedings for a preliminary ruling, that `the considerations which may have led a national court or tribunal to its choice of questions as well as the relevance which it attributes to such questions in the context of a case before it are excluded from review by the Court of Justice'. (22) Therefore, I do not consider it appropriate for the Court to rule, as the interveners suggest, on the relevance of the reasoning of the national court which led it to consider certain elements of the definition of turnover tax to have been established, even though it might seem that those conditions are not in fact fulfilled. I need only call to mind the criteria elicited from the case-law of the Court, which make it possible to determine the nature of a national tax with regard to Article 33 and which were not considered by the national court.

22The Court has identified the distinguishing features of compulsory deductions which fall within the definition of taxes, duties and charges having the character of a turnover tax. If we recall those principles, we can situate the concept of `passing on' in that definition.

III - Concept of turnover tax

23The prohibition on applying other charges or taxes characterized as turnover tax concurrently with VAT can be explained by the fact that there exists a harmonized system in the form of a common system of VAT.

24The first VAT directive (23) (hereinafter the `First Directive') lays down the basic principles of that system. It states that the aim of the system is `to achieve such harmonization of legislation concerning turnover taxes as will eliminate, as far as possible, factors which may distort conditions of competition ...'. (24) According to the rationale of the First Directive, harmonization requires `the abolition of cumulative multi-stage taxes' (25) applied in certain countries of the Community, the principal characteristic of which is the levying of a tax, on every transaction, on the whole price, without the possibility of deducting tax paid at the previous stage. Such a system of taxation is not neutral since, by virtue of its mechanical effect, it favours integrated economic circuits and increases the price of goods and services more where the value added in the initial stages of production was high.

25The second VAT directive (26) (hereinafter the `Second Directive') establishes the system which is based on a Community definition of VAT, and replaces national systems. Member States retain competence in respect of tax matters, except in the specific field of VAT.

26Article 33 of the Sixth Directive is intended to ensure the coherence and continuity of the common system by only authorizing taxes other than those which meet the definition of turnover tax to be laid down by Community law. The goal of harmonization would not be achieved if Member States were permitted to charge both VAT and other taxes and charges having the same characteristics.

27That is the interpretation given by the Court in Rousseau Wilmot, in which it stated that:

`In leaving the Member States free to maintain or introduce certain indirect taxes such as excise duties on the condition that they are not taxes which can be "characterized as turnover tax", Article 33 of the Sixth Directive seeks to prevent the functioning of the common system of value added tax from being compromised by fiscal measures of a Member State levied on the movement of goods and services and charged on commercial transactions in a way comparable to value added tax.' (27)

28Article 33 of the Sixth Directive does not specify what is to be understood by a tax which can `be characterized as a turnover tax'. The Court has held that `taxes, duties and charges must ... be regarded as being imposed on the movement of goods and services in a way comparable to VAT if they exhibit the essential characteristics of VAT'. (28)

29The case-law of the Court has identified those essential characteristics, stating that `VAT applies generally to transactions relating to goods or services; it is proportional to the price of those goods or services; it is charged at each stage of the production and distribution process; and finally, it is imposed on the added value of goods and services since the tax payable on a transaction is calculated after deducting the tax paid on the previous transaction'. (29)

30Furthermore, VAT is `a general tax on consumption' (30) which is not paid by undertakings but is ultimately borne by the final consumer. (31) It is therefore clear that a tax levied in such a way that it may not be passed on to the consumer is entirely different from turnover tax within the meaning of the VAT directives. Such a tax is charged directly on the production process and therefore cannot fulfil the same functions as VAT.

31Therefore, a turnover tax, within the meaning of Article 33 of the Sixth Directive, is one which may be passed on to the consumer. That being so, is it necessary for the law to state this expressly?

IV - Express reference in the law to the concept of `passing on the tax to the consumer'

32I do not accept the argument that a tax may not be passed on, or that this should be considered to be the case, simply because a piece of legislation, such as the Spanish law at issue, does not expressly provide for it.

33As the Commission recalls by reference to the case-law of the Court, (32) Article 33 of the Sixth Directive is to be given a purposive interpretation. It is intended to prevent Member States from adopting or maintaining taxes which, irrespective of the wording of the legislation applicable thereto, would, in practice, operate in the same way as turnover tax. The effect of a measure is more important than the actual wording used which, in the event of a conflict with the manner in which the tax operates in practice, should be considered secondary.

34That is apparent, moreover, from an analysis of the VAT system. The concept of `passing on to the consumer' is one of the characteristics of that tax, even though it is not expressly mentioned in the definition set out in the First Directive. That directive only refers to VAT as a tax `on consumption' in order to express the idea that it is payable in respect of the transfer of goods or the provision of services, not to indicate that liability for the tax transfers to the person receiving the goods or services. From the above, it follows that, what matters, more than the wording of the law itself, is the fact that the mechanism established enables a trader, in his dealings with consumers, to incorporate in the price charged, or to add to it, the amount of tax paid by him in respect of that transaction, in such a way that the fiscal burden is not borne by him.

35Besides, none of the interveners supports the view that the law should expressly provide for the tax to be passed on. The applicants in the main proceedings, in particular, submit that, in order for a tax to constitute a turnover tax, `it is not necessary for the relevant legislation expressly to provide that that tax may be passed on to the consumer' but `on the contrary, it is sufficient that the legislation permits or, at least does not prevent, the tax being directly or indirectly passed on and that the tax may be deemed to be included in the price paid by the consumer for goods or services'. (33) Similarly, the Commission considers that `the fact that the national law does not expressly refer to the criteria defining turnover tax is not relevant in determining whether a particular tax is compatible with Article 33 of the Sixth Directive'. (34)

V - Absence of documents recording the passing on of the tax to the consumer

36Although satisfied that the taxes are passed on to the consumer and that they are proportional to turnover, the national court none the less raises the question whether those criteria are sufficient for the taxes to be characterized as turnover taxes, since there is no express record of their being passed on to the consumer.

37It is not possible in practice for an invoice or other document serving as invoice to be issued to users of gaming machines because of the automatic and repetitive nature, over a short period of time, of the activity in respect of which tax is charged.

38In fiscal matters, invoices play an essential role in the monitoring of financial transactions, intended to ensure that the tax is collected efficiently. In the specific field of VAT, an invoice is evidence of the right to deduction. It enables a taxable person to set against the tax payable in respect of goods produced or services rendered by him, the tax paid on each element of the cost price. In respect of the provision of most services, Article 18(1)(a) of the Sixth Directive makes the right to deduction subject to the taxable person holding an invoice drawn up in accordance with Article 22(3).

39Article 22(3)(a) requires an invoice to be issued in two circumstances: first, in respect of goods and services supplied by a taxable person to another taxable person and second, in respect of payments on account made to a taxable person by another taxable person, before the supply of goods or services is effected or completed.

40In the field of VAT, therefore, the requirement that an invoice should be issued does not concern dealings between a person providing services and the final consumer. Final consumers are not considered to be `taxable persons' within the meaning of the Sixth Directive (35) and may not therefore claim the right to deduction, so that the issue of an invoice would serve little purpose in that respect. The issue of an invoice cannot therefore constitute an obligation characterizing turnover tax applicable to dealings between organizers of gambling and users of gaming machines.

41As worded, the question also expresses the idea that, in the absence of proof, the tax might be deemed not to be passed on to the consumer, notwithstanding that it actually is passed on. I do not accept that the condition that the tax is to be passed on to the consumer is not fulfilled merely because no provision is made for any document to record the fact, since the court could determine for itself whether that condition is fulfilled by analysing the way in which the tax at issue operates, which would reveal that the taxable person is able to pass it on.

42For the sake of completeness, I should point out that if, for the reasons set out above, a tax which is levied as a fixed charge of a large amount on the total turnover or revenue generated and which takes account of such turnover may be regarded as a turnover tax, even though there is no express record of the tax being passed on to the consumer, it is on condition that the other criteria enabling the tax to be classified as a turnover tax are also met. In addition to the matters raised in its decision, therefore, the national court must establish:

- that the tax has a general character, which implies that it applies to every transaction concerning the transfer of goods or the provision of services;

- that it is collected at each stage of the production and distribution process;

- that it relates to the added value alone.

Conclusion

43In the light of the above, I propose that the questions be answered as follows:

The Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States concerning turnover tax - Common system of value added tax: uniform basis of assessment and, in particular, Article 33 thereof, is to be interpreted as meaning that it is not necessary for a national law introducing a tax expressly to mention the possibility of `passing the tax on to the consumer' in order for the passing on to be recognized as one of the essential characteristics of turnover tax. It is sufficient for that law to permit the tax to be passed on to the consumer, or at least not to prevent it.

The Sixth Directive (77/388) and, in particular, Article 33 thereof, is to be interpreted as meaning that the classification as a turnover tax of a tax which is passed on to the consumer, is levied as a fixed charge of a large amount on the total turnover, and takes account of such turnover, is not subject to the requirement that the person providing services should draw up an invoice, or other document serving as invoice, which expressly records the passing on of the tax to the consumer.

The Sixth Directive (77/388) and, in particular, Article 33 thereof, is to be interpreted as meaning that it only prevents the introduction or maintaining of a national tax exhibiting the features set out above if that tax has a general character, is charged at each stage of the production and distribution process and is imposed on the added value of services.

(1) - Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1).

(2) - Page 2, paragraph 1, of the French translation of their written submissions. Although the questions referred by the national court arise in three separate national proceedings, only Careda SA and Femara have intervened in this case.

(3) - Case C-370/95.

(4) - Cases C-370/95 and C-372/95.

(5) - See, in particular, page 6, point 6, and page 7, point 7, of the English translation of the order for reference (Case C-370/95).

(6) - Law of 29 June 1990 (BOE of 30 June 1990, p. 3587).

(7) - Law No 5/1990 distinguishes amusement machines with winnings (type `B') and gaming machines (type `C'). According to the explanations given at the hearing by the applicants, type `B' machines make it possible to win sums of money corresponding to a legally established minimum of 60% of the sum played. The level of winnings of type `C' machines is higher and they may only be used in casinos.

(8) - Article 38(2), point 2, of Law No 5/1990, which amends Article 3(4) of Royal Decree Law No 16/1977 of 25 February 1977 (BOE of 7 March 1977, p. 780).

(9) - Pages 6 and 7 of the English translation.

(10) - Article 3 of Decree Law No 16/1977.

(11) - Page 7, point 6, of the English translation of the order for reference. Article 38(2), point 1, of Law No 5/1990 amended Article 3 of Decree Law No 16/1977 by substituting a fixed annual rate of PTA 375 000 for the rate of 20% in respect of type `B' machines.

(12) - Article 38(2), point 2(3), of Law No 5/1990 provides that `the amount of the tax is equal to the difference between the fixed rates set out in point 1 above and those specified by Decree Law No 7/1989 of 29 December'. In respect of type `B' machines, this amount is therefore the difference between the fixed rate of PTA 375 000 and that of PTA 141 750 (Article 39 of Decree No 7/1989, BOE of 30 December 1989, p. 8325).

(13) - Page 12 of the French translation of its written submissions.

(14) - Page 3, paragraph IV, of the English translation of the order for reference.

(15) - Page 7 of the French translation of the written submissions.

(16) - See, in particular, page 15 of the French translation of the written submissions of the Spanish Government, and page 12 of the French translation of the written submissions of the Commission.

(17) - See, recently, Case C-208/91 Beaulande [1992] ECR I-6709, paragraph 13.

(18) - Case 73/85 Kerrutt [1986] ECR 2219, paragraph 22, and Joined Cases 93/88 and 94/88 Wisselink and Others [1989] ECR 2671, paragraph 14.

(19) - Page 9, point 10, of the English translation of the order for reference. It should be noted that the applicants in the main proceedings also refer to the case-law of the Tribunal Supremo. As it held in its judgment of 19 December 1990, as cited on page 6, point 2, of the French translation of their written submissions, `there is no doubt that the person ultimately accountable for the tax is the player, on to whom the fiscal burden is passed'. According to the judgments of that court of 23 February and 5 May 1990, which are also cited by the applicants in the main proceedings, `the so-called "fiscal levy" on type "B" gaming machines is a fixed annual rate calculated on the basis of the presumed yield of the machine'.

(20) - Page 10 of the English translation of the order for reference. The Audiencia Nacional states that `this concept of passing on gives rise to the doubts which have been set out below'.

(21) - See point 14 of this Opinion.

(22) - Case 26/62 Van Gend en Loos [1963] ECR 1, 11. See also Case 83/78 Pigs Marketing Board [1978] ECR 2347, paragraph 25.

(23) - First Council Directive 67/227/EEC of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes (OJ, English Special Edition 1967, p. 14).

(24) - Third recital in the preamble to the directive.

(25) - Fourth recital in the preamble to the directive.

(26) - Second Council Directive 67/228/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes - Structure and procedures for application of the common system of value added tax (OJ, English Special Edition 1967, p. 16).

(27) - Case 295/84 [1985] ECR 3759, paragraph 16, and, more recently, Case C-347/90 Bozzi [1992] ECR I-2947, paragraph 9.

(28) - Beaulande, paragraph 12, emphasis added.

(29) - Case C-200/90 Dansk Denkavit and Poulsen Trading [1992] ECR I-2217, paragraph 11. See also Case 252/86 Bergandi [1988] ECR 1343, paragraph 15; Wisselink and Others, cited above, paragraph 18; Case C-109/90 Giant [1991] ECR I-1385, paragraph 12; Bozzi, cited above, paragraph 12; and Beaulande, cited above, paragraph 14.

(30) - Article 2 of the First Directive.

(31) - Bergandi, cited above, paragraphs 8 and 17.

(32) - Point 8 of the written submissions referring to the Bergandi case, cited above, paragraph 14, according to which `[in] order to decide whether a tax can be characterized as a turnover tax it is necessary, in particular, to determine ... whether it has the effect of compromising the functioning of the common system of VAT by levying a charge on the movement of goods and services and on commercial transactions in a way comparable to VAT'.

(33) - Page 16, point 1, of the French translation of the written submissions.

(34) - Point 9 of the written submissions.

(35) - Article 4(1) defines a taxable person as `any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity'. Paragraph 2 refers to `all activities of producers, traders and persons supplying services including mining and agricultural activities and activities of the professions' and operations involving `the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis'.