C-453/02 Linneweber and Akritidis

JUDGMENT OF THE COURT (Second Chamber)

17 February 2005'*

In Joined Cases C-453/02 and C-462/02,

REFERENCES for a preliminary ruling under Article 234 EC from the Bundesfinanzhof (Germany), made by decisions of 6 November 2002, received at the Court on 13 and 23 December 2002, in the proceedings

Finanzamt Gladbeck

ν

Edith Linneweber (C-453/02)

and

Finanzamt Herne-West

ν

Savvas Akritidis(C-462/02),

* Language of the case: German.

THE COURT (Second Chamber),

composed of C.W.A. Timmermans, President of the Chamber, C. Gulmann and R. Schintgen (Rapporteur), Judges,

Advocate General: C. Stix-Hackl, Registrar: M.-F. Contet, Principal Administrator,

having regard to the written procedure and further to the hearing on 26 May 2004,

after considering the observations submitted on behalf of:

— Mrs Linneweber, by M. Nettesheim, Rechtsanwalt,

— the German Government, by W.-D. Plessing, acting as Agent, and D. Sellner, Rechtsanwalt,

— the Commission of the European Communities, by E. Traversa and K. Gross, acting as Agents, and A. Böhlke, Rechtsanwalt,

after hearing the Opinion of the Advocate General at the sitting on 8 July 2004, gives the following

Judgment

Legal context and the dispute

1The questions referred for a preliminary ruling concern the interpretation of Article 13B(f) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation 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, 'the Sixth Directive').

2Those questions were referred in the course of litigation between, first, the Finanzamt Gladbeck and Mrs Linnweber, as the universal heir of her husband, who died in 1999, and, second, the Finanzamt Herne-West and Mr Akritidis concerning the payment of value added tax ('VAT') on income from the operation of games of chance.

Legal background

The Community legislation

3Article 2 of the Sixth Directive, which constitutes Title II thereof, entitled 'Scope', provides:

'The following shall be subject to value added tax:

1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;

...'

4Under Article 13B(f ) of the Sixth Directive, the Member States are to exempt from VAT:

'betting, lotteries and other forms of gambling, subject to conditions and limitations laid down by each Member State'.

The national legislation

5Paragraph 1(1) of the Umsatzsteuergesetz 1993 (1993 law on turnover tax, BGBl. 1993 I, p. 565, the 'UStG') provides that supplies and other services effected for consideration by a trader in Germany in the course of business are to be subject to VAT.

6Under Paragraph 4(9)(b) of the UStG, turnover within the scope of the Betting and Lotteries Act (Rennwett- und Lotteriegesetz) and the turnover of licensed public casinos, which arises through operation of a casino are exempt from VAT. The main proceedings and the questions referred for a preliminary ruling

Case C-453/02

7Mrs Linneweber is the universal heir of her husband, who died in 1999. The latter had an administrative authorisation to provide to the public, for consideration, gaming and entertainment machines in restaurants and amusement arcades owned by him. Mrs Linneweber and her husband declared the income generated by the operation of those machines in the 1997 and 1998 tax years as exempt from VAT on the ground that income from the operation of gaming machines by licensed casinos is exempt from that tax.

8However, the Finanzamt Gladbeck took the view that the income at issue was not exempt under Paragraph 4(9)(b) of the UStG since it was not subject to betting, racing or lottery tax and was not derived from the operation of a licensed public casino.

9The matter was brought before the Finanzgericht Münster (Germany) which upheld the action brought by Mrs Linneweber, on the ground that, by analogy with the judgment of the Court of Justice in Case C-283/95 Fischer [1998] ECR I-3369, the income from gaming machines must be exempted from VAT under Article 13B(f) of the Sixth Directive. In paragraph 28 of that judgment, the Court of Justice held that the principle of fiscal neutrality precludes a generalised distinction from being drawn between unlawful and lawful transactions in the levying of value added tax.

10In support of its appeal on a point of law ('Revision') before the Bundesfinanzhof, the Finanzamt Gladbeck pointed out that the stakes and winning opportunities in the case of gaming machines installed in casinos are significantly higher than those in the case of gaming machines which are lawful outside casinos. Accordingly, contrary to the argument upheld by the Finanzgericht Münster, there was no competition between those two types of machine.

11Taking the view that the dispute before it turned on the interpretation of the Sixth Directive, the Bundesfinanzhof decided to stay proceedings and refer the following questions to the Court of Justice:

'1 Is Article 13B(f) of [the Sixth Directive] to be interpreted as precluding a Member State from making the organisation of gambling subject to value added tax if it is exempt when organised by a licensed public casino?

2 Does Article 13B(f) of [the Sixth Directive] prohibit a Member State from making the operation of a gaming machine subject to value added tax if the operation of a gaming machine by a licensed public casino is exempt, or must the game of chance machines operated outside casinos also be comparable for that purpose in essential respects, for example as regards the maximum stake and the maximum winnings, with the gaming machines in the casinos?

3 Is the installer of the machine permitted to rely on the exemption laid down in Article 13B(f) of [the Sixth Directive]?'

Case C-462/02

12According to the case-file forwarded to the Court of Justice by the referring court, between 1987 and 1991 Mr Akritidis operated a casino in Herne-Eickel (Germany). He organised games of roulette and card games there. Under the terms of the licence he held, those games had to be organised according to rules laid down under a clearance certificate ('Unbedenklichkeitsbescheinigung') issued by the competent authorities.

13Between 1989 and 1991 Mr Akriditis did not comply with the rules laid down by the competent authorities in either the roulette games or the card games. For instance, amongst other things, card racks were not used, higher stakes were accepted and he kept no record of turnover from the games.

14The Finanzamt Herne-West assessed the turnover for that period taking the unlawful income from the roulette and card games into account. Following an objection by Mr Akriditis and in the light of the judgment in Fischer, cited above, the Finanzamt Herne-West decided that the income from the roulette games should not be subject to VAT. However it decided to treat the unlawfully operated card game as taxable and made a flat-rate assessment of the proportion of the turnover relating to the organisation of that game.

15Mr Akriditis brought an action against that decision before the Finanzgericht Münster. That court held that, in line with the principles outlined by the Court of Justice in its judgment in Fischer, the card game at issue should be exempt from VAT pursuant to Article 13B(f) of the Sixth Directive. It also took the view that Mr Akriditis could rely on that provision directly before the national courts. There was no reason to limit the application of the principles established by the Court in that judgment to the roulette game.

16In support of its appeal on a point of law ('Revision') before the Bundesfinanzhof, the Finanzamt Herne-West argued that the principles to which the Finanzgericht Münster referred were not applicable by analogy to the card game at issue in this case. In fact, unlike the game at issue in the case leading to the judgment in Fischer, there was no competition between the card game organised by Mr Akriditis and those organised by casinos, since those games were not really comparable. Mr Akriditis, for his part, submits that the card game as played in his establishments is equivalent to the 'Black Jack' game played in licensed public casinos.

17Taking the view that the dispute before it turned on the interpretation of the Sixth Directive, the Bundesfinanzhof decided to stay proceedings and refer the following questions to the Court of Justice for a preliminary ruling:

'1 Does Article 13B(f) of [the Sixth Directive] prohibit a Member State from making the organisation of a card game subject to value added tax solely if the organisation of a card game by a licensed public casino is exempt, or must card games organised outside casinos also be comparable for that purpose in essential respects, for example as regards the game rules, the maximum stake and the maximum winnings, with card games in the casinos?

2 Is the installer of the machine permitted to rely on the exemption laid down in Article 13B(f) of [the Sixth Directive]?'

18By order of the President of the Court of 6 February 2003 Cases C-453/02 and C-462/02 were joined for the purposes of the written procedure, the oral procedure and judgment.

The questions referred

The first question in Case C-453/02

19As a preliminary point, it must be observed, first, that Paragraph 4(9) (b) of the UStG exempts from VAT the turnover made by licensed public casinos from games of chance or gaming machines without defining the form or the details of the organisation and operation of such games and machines.

20Second, as the Bundesfinanzhof pointed out in its order for reference, it must be observed that licensed public casinos are not subject to any restriction as regards the games of chance and gaming machines they may operate.

21Thus, games of chance and gaming machines such as those at issue in the main proceedings may, regardless of the detailed arrangements for their organisation, be operated by licensed public casinos, without the turnover they make from the operation of those games being subject to VAT.

22Against that background, the first question in Case C-453/02 must be understood as seeking essentially to know whether Article 13B(f) of the Sixth Directive must be interpreted as meaning that it precludes national legislation which provides that the operation of all games of chance and gaming machines is exempt from VAT where it is carried out in licensed public casinos, while that activity does not enjoy that exemption when carried out by traders other than those running casinos.

23In order to reply to the question as reformulated, it must be observed that it is clear from Article 13B(f) of the Sixth Directive that gambling is in principle to be exempted from VAT but that the Member States retain the power to lay down the conditions and limitations of that exemption (Fischer, paragraph 25).

24However, in exercising that power, the Member States must respect the principle of fiscal neutrality. According to the case-law of the Court of Justice, that principle precludes, in particular, treating similar goods and supplies of services, which are thus in competition with each other, differently for VAT purposes, so that those goods or supplies must be subjected to a uniform rate (see, inter alia, Case C-267/99 Adam [2001] ECR I-7467, paragraph 36, and Case C-109/02 Commission ν Germany [2003] ECR I-12691, paragraph 20).

25It is clear from that case-law and from the judgments in Case C-216/97 Gregg [1999] ECR I-4947, paragraph 20, and Fischer, that the identity of the manufacturer or the provider of the services and the legal form by means of which they exercise their activities are, as a rule, irrelevant in assessing whether products or services supplied are comparable.

26As the Advocate General pointed out in points 37 and 38 of her Opinion, in order to determine whether the activities at issue in the case leading to the judgment in Fischer were comparable, the Court only examined the comparability of the activities at issue and took no account of the argument that the games of chance differed for the purposes of the principle of fiscal neutrality, for the simple reason that they are organised by or in public casinos.

27Thus, in paragraph 31 of its judgment in Fischer, the Court of Justice held that Article 13B(f) of the Sixth Directive must be interpreted as meaning that a Member State may not impose VAT on the unlawful operation of a game of chance organised outside a licensed public casino when the operation of the same game by such a casino is exempted.

28Since the identity of the operator of a game of chance is not relevant where it falls to be determined whether the unlawful organisation of that game must be considered to be in competition with the lawful organisation of the same game, it must a fortiori be so where it falls to be determined whether two games of chance or two gaming machines operated lawfully must be considered to be in competition with one another.

29It follows that, in exercising their powers under Article 13B(f ) of the Sixth Directive, that is to say, the power to determine the conditions and limitations subject to which the operation of games of chance and gaming machines is to be exempted from the VAT provided for by that provision, the Member States cannot validly make that exemption dependent upon the identity of the operator of such games and machines.

30In the light of those considerations, the answer to the first question referred in Case C-453/02 must be that Article 13B(f) of the Sixth Directive precludes national legislation which provides that the operation of all games of chance and gaming machines is exempt from VAT where it is carried out in licensed public casinos, while the operation of the same activity by traders other than those running casinos does not enjoy that exemption.

The second question in Case C-4S3/02 and the first question in Case C-462/02

31In the light of the answer given to the first question in Case C-453/02 there is no need to answer the second question in that case or the first question in Case C-462/02.

The third question in Case C-453/02 and the second question in Case C-462/02

32By these questions the referring court seeks to know essentially whether 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.

33On this point, it should be noted that wherever the provisions of a directive appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise, they may, in the absence of implementing measures adopted within the prescribed period, be relied on against any national provision which is incompatible with the directive or in so far as they define rights which individuals are able to assert against the State (see, inter alia, Case 8/81 Becker [1982] ECR 53, paragraph 25, Case C-141/00 Kügler [2002] ECR I-6833, paragraph 51, and Joined Cases C-465/00, C-138/01 and C-139/01 Österreichischer Rundfunk and Others [2003] ECR 1-4989, paragraph 98).

34As regards more specifically Article 13B of the Sixth Directive, it is apparent from the case-law that, whilst that provision undoubtedly confers upon the Member States a discretion as regards laying down the conditions for the application of certain of the exemptions it provides for, a Member State may not rely, as against a taxpayer who is able to show that his tax position actually falls within one of the categories of exemption laid down in the directive, upon its failure to adopt the very provisions which are intended to facilitate the application of that exemption (Becker, cited above, paragraph 33).

35It must be added that the fact that Article 13B(f) of the Sixth Directive confirms the discretion which the Member States have by specifying that they have the power to lay down the conditions and limitations to which the exemption for games of chance and gambling is subject, is not such as to call that interpretation into question. Since those games are, as a rule, exempt from VAT, any operator of such games can directly rely on that exemption provided that the Member State concerned has waived the power expressly conferred on it by Article 13B(f) of the Sixth Directive or has failed to exercise that power.

36It is important to note, moreover, that the principle which applies where a Member State has not exercised the powers conferred on it by Article 13B(f) of the Sixth Directive must apply a fortiori where, in exercising that power, a Member State has adopted national provisions which are not compatible with the directive.

37It follows that, as the Advocate General pointed out in point 72 of her Opinion, where, as in the cases in the main proceedings, the conditions or limitations which a Member State imposes on the exemption from VAT for games of chance or gambling are contrary to the principle of fiscal neutrality, that Member State cannot rely on such conditions or limitations to refuse an operator of such games the exemption which he may legitimately claim under the Sixth Directive.

38Accordingly, the answer to the third question in Case C-453/02 and the second question in Case C-462/02 must be that 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.

The effect ratione temporis of this judgment

39In its oral observations, the German Government made the point that it was possible for the Court, if it held national legislation such as that at issue in the cases in the main proceedings to be incompatible with the Sixth Directive, to limit the effects ratione temporis of this judgment.

40In support of its argument, that government, first, drew the attention of the Court to the adverse financial consequences of a judgment ruling that a provision such as Paragraph 4(9) of the UStG is incompatible with the Sixth Directive. Second, it argued that the conduct adopted by the Commission following the judgment in Case C-38/93 Glawe [1994] ECR I-1679 had led the Federal Republic of Germany to believe that Paragraph 4(9) of the UStG was compatible with the Sixth Directive.

41In that connection, regard must be had to the settled case-law of the Court to the effect that the interpretation which, in the exercise of the jurisdiction conferred on it by Article 234 EC, the Court gives to a rule of Community law clarifies and defines the meaning and scope of that rule as it must be or ought to have been understood and applied from the time of its entry into force. It follows that the rule as thus interpreted may, and must, be applied by the courts even to legal relationships which arose and were established before the judgment ruling on the request for interpretation, provided that in other respects the conditions for bringing a dispute relating to the application of that rule before the competent courts are satisfied (see, in particular, Joined Cases C-367/93 to C-377/93 Roders and Others [1995] ECR I-2229, paragraph 42, and Case C-347/00 Barreira Pérez [2002] ECR I-8191, paragraph 44).

42It is only exceptionally that, in application of a general principle of legal certainty which is inherent in the Community legal order, the Court may decide to restrict the right to rely upon a provision it has interpreted with a view to calling in question legal relations established in good faith (Case C-104/98 Buchner and Others [2000] ECR I-3625, paragraph 39, and Barreira Pérez, cited above, paragraph 45).

43As regards the cases in the main proceedings, it must be held, first, that the conduct of the Commission following the judgment in Glawe, cited above, cannot validly be relied on in support of the contention that Paragraph 4(9) of the UStG can reasonably be considered to be in conformity with the Sixth Directive. The case giving rise to that judgment concerned only the determination of the basis of assessment for the turnover generated by the operation of gaming machines and did not in any way relate to the difference of treatment accorded in general as regards VAT between licensed public casinos and other operators of games of chance.

44Second, the financial consequences which might ensue for a Member State from a preliminary ruling have never in themselves justified limiting the temporal effect of such a ruling (see, in particular, Roders and Others, cited above, paragraph 48, and Buchner and Others, paragraph 41).

45Accordingly, there is no need to limit the effect of this judgment ratione temporis.

Costs

46Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Second Chamber) rules as follows:

1. Article 13B(f) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment precludes national legislation which provides that the operation of all games of chance and gaming machines is exempt from VAT where it is carried out in licensed public casinos, while the operation of the same activity by traders other than those running casinos does not enjoy that exemption.

2. 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.

[Signatures]

OPINION OF ADVOCATE GENERAL STIX-HACKL delivered on

I — Introduction

1The questions referred to the Court by the Bundesfinanzhof (Federal Finance Court) for a preliminary ruling in these two joined cases concern the interpretation of Article 13B(f) 2 of Sixth Directive 77/388/EEC ('Sixth Directive').

2These proceedings concern the extent to which a Member State may, under that provision, differentiate in the levying of value added tax between, on the one hand, games of chance organised lawfully or unlawfully outside a licensed public casino and, on the other hand, games of chance organised in a licensed public casino.

1 — Original language: German.

2 — Council Directive of 17 May 1977 on the harmonisation 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).

8 July 2004 1

3The Court is thus called upon to clarify further its ruling in the Fischer judgment 3 on the scope of the principle of fiscal neutrality with regard to the levying of VAT on games of chance.

II — Legislative background

A — Community law

4Under the heading 'Other exemptions' Article 13B of the Sixth Directive provides inter alia for the following:

'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

3 - Judgment in Case C-283/95 [1998] ECR I-3369.

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;

Β — National law

5Pursuant to Paragraph 4(9)(b) of the German Umsatzsteuergesetz (Turnover Tax Law) 1993 ('UStG') the following is exempt from tax:

'turnover within the scope of the Rennwett-und Lotteriegesetz (Betting and Lotteries Act) and the turnover of licensed public casinos which arises through operation of the casino. ...'

III — Facts, proceedings and questions referred

A - Case C-453/02

6Mrs Linneweber is the universal heir of her husband, the (original) taxpayer, who died in 1999. The latter provided, with official approval, gaming and entertainment machines for consideration in restaurants and amusement arcades owned by him.

7Mrs Linneweber and the taxpayer declared the income from the operation of the gaming machines as tax-exempt turnover, whereas the Finanzamt (Tax Office) took the view that that income did not fall within the tax exemption under Paragraph 4 (9)(b)oftheUStG.

8The Finanzgericht Finance Court at Münster, to which an application was subsequently made, ruled in favour of the exemption of the transactions in question, relying on the Court's judgment in the 4 Fischer case and the interpretation therein of the principle of fiscal neutrality.

4 — Judgment in Case C-283/95 (cited in footnote 3).

9However, the Bundesfinanzhof, the referring court, before which the appeal against that ruling was brought, considers the exemption of the transactions under Article 13B(f) of the Sixth Directive allowed by the Finanzgericht to be open to question. The referring court points out that in the Fischer judgment the Court focused on the unlawful organisation of games of chance, whereas the present case concerns officially approved gaming machines. However, the gaming machines in public casinos generally differed considerably from the gaming machines installed in restaurants and commercial amusement arcades, especially with regard to stakes, winnings and the percentage of the stakes distributed as winnings.

10The referring court questions the relevance in Community law of the distinction between lawful and unlawful games of chance. In its view, it is also conceivable that Article 13B(f) of the Sixth Directive must be interpreted as meaning that a Member State may not impose VAT on the (lawful or unlawful) operation of a game of chance when the corresponding activity carried on by a licensed public casino is exempted.

11In order to clarify the scope of the exemption, the Bundesfinanzhof referred the following questions to the Court for a preliminary ruling by order of 6 November 2002.

1. Is Article 13B(f) of Directive 77/388/ EEC to be interpreted as precluding a Member State from making the organisation of gambling subject to value added tax if it is exempt when organised by a licensed public casino?

2. Does Article 13B(f ) of Directive 77/388/ EEC prohibit a Member State from making the operation of a gaming machine subject to value added tax if the operation of a gaming machine by a licensed public casino is exempt, or must the game of chance machines operated outside casinos also be comparable for that purpose in essential respects, for example as regards the maximum stake and the maximum winnings, with the gaming machines in the casinos?

3. Is the installer of the machine permitted to rely on the exemption laid down in Article 13B(f) of Directive 77/388/EEC?

Β — Case C-462/02

12Mr Akritidis ran the 'Monte-Carlo' casino in Herne-Eickel from 1987 to 1991, providing roulette and card games under a commercial licence. He was permitted inter alia to run memory card-games using a 'card rack' next to the gaming table. He failed, however, to comply with the official requirements in respect of both roulette and the card games. For instance, the card rack was not used, and higher stakes were accepted.

13In the tax notices of 1 April 1996 the Finanzamt initially included the unapproved roulette and card game turnover in the assessment to tax. In response to an objection from Mr Akritidis it then exempted the roulette on the basis of the Court's judgment in the Fischer case, but continued to treat the unlawfully organised card games as taxable.

14The Finanzgericht, to which an application was then made, came to the conclusion, however, that the turnover on card games should similarly be exempted from turnover tax under Article 13B(f) of the Sixth Directive and that the trader could therefore rely directly on that provision in this respect.

15The Finanzamt opposes this view in the appeal before the Bundesfinanzhof, the referring court. The Finanzamt argues that, as the card games organised by the applicant are comparable to the card games offered in public casinos to only a limited degree, the competitive situation found by the Court in the Fischer case did not exist. Mr Akritidis, on the other hand, claims that the card games organised by him are equivalent to those played in casinos and, like them, should therefore be exempt from tax.

16Having regard to the Fischer judgment, in which the Court found that the (unlawful) game organised by Karlheinz Fischer resembled the roulette played in duly licensed public casinos, the referring court raises the question whether it is sufficient, for the exemption under Article 13B(f) of the Sixth Directive to apply, for card games to be organised both in and outside public casinos or whether they must be comparable in essential respects. There also seemed to be some doubt as to whether an individual was entitled to rely on the aforementioned provision of the directive.

17Against that background the Bundesfinanzhof referred the following questions to the Court for a preliminary ruling by order of 6 November 2002:

1. Does Article 13B(f) of Directive 77/388/ EEC prohibit a Member State from making the organisation of a card game subject to value added tax solely if the organisation of a card game by a licensed public casino is exempt, or must card games organised outside casinos also be comparable for that purpose in essential respects, for example as regards the game rules, the maximum stake and the maximum winnings, with card games in the casinos?

2. Is the installer of the machine permitted to rely on the exemption laid down in Article 13B(f) of Directive 77/388/EEC?

IV — Answers to the questions referred

A — The scope of the principle of fiscal neutrality in respect of the taxation of games card game — by a licensed public casino is exempt from value added tax or only where the games of chance organised by a licensed public casino are also comparable, in terms of the essential characteristics of the game, to the games of chance organised outside such casinos.

1. Main arguments of the parties

19Mr Akritidis has made no submissions in these joined proceedings.

20Mrs Linneweber submits before this Court — contrary to her submission in the main action — that the taxation of turnover from the gaming machines operated by her husband does not breach Article 13B(f) because those machines differed fundamen of chance (first and second questions in Case C-4S3/02 and first question in Case C-462/02)

18. The first two questions in Case C-453/02 and the first question in Case C-462/02, which must be considered together here, essentially ask whether Article 13B(f ) of the Sixth Directive precludes the levying of value added tax on the organisation of gambling where the organisation of games of chance of the same kind — such as the operation of a gaming machine or the organisation of a tally from the gaming machines installed in public casinos. She argues that it is for the Member States to lay down the conditions and limitations of the exemption of games of chance under Article 13B(f) of the Sixth Directive provided that, as the Court ruled in the Fischer judgment, the principle of fiscal neutrality is respected. That principle was, however, infringed only if a different turnover tax was imposed on comparable activities. Two services were comparable if — from the consumer's point of view — they were in sufficiently close competition with each other. The assessment of this aspect must take account of all factors affecting the benefit and value of the service to the consumer, and it is crucial in this context to look not only at the outward manifestation of the service in the abstract but also at the conditions under which it could be used, its exact nature and the advantages and disadvantages for the consumer associated with its use.

21The differences between the gaming machines at issue in the main action and gaming machines in licensed public casinos as regards the places and times at which they were available, the users, the technical arrangements (minimum duration of games, maximum stakes, minimum distribution ratios) and the environment in which they were used were so great that, seen from the consumer's point of view, the two forms of gambling did not compete with each other and could therefore be treated differently in the light of the principle of fiscal neutrality. Even if the two forms of gambling were assumed to be comparable, equality of taxation was, however, achieved through the collection of the casino levy on slot machines in licensed public casinos.

22The German Government similarly emphasises that the gaming machines and card games at issue in the two main actions differ significantly from the machines installed and card games organised in licensed public casinos (as regards, for example, rules of play, the chances of winning, the duration of games and the stakes). The distinction for tax purposes made between games of chance organised in licensed public casinos and those organised elsewhere was consequently not only an objective requirement but also compatible with Community law, and especially the principle of fiscal neutrality, and lay within the discretionary powers accorded to the Member States.

23Although, as the Fischer judgment revealed, the principle of fiscal neutrality prohibited a general distinction for tax purposes between lawful and unlawful services, it did not require the imposition of identical taxes and levies on all lawful games of chance if those games were in fact different in nature. The German legislature had accordingly attached different legal consequences to different lawful types of gambling and gambling locations. In view of the major differences in the nature and scale of games of chance organised in licensed public casinos and those organised elsewhere there was no competition between them. To determine whether two games competed with each other, the principles developed by the Community institutions to determine the 'relevant product and geographical market' for the purposes of Article 82 EC could also be applied.

24The German Government also takes the view that it is entitled to impose value added tax on games of chance organised outside public casinos because that tax is imposed on games of chance in public casinos in the form of the casino levy.

25The Commission maintains that Article 13B(f) of the Sixth Directive focuses on the organisation of 'gambling' only in material terms, the criteria underlying taxation in Germany, i.e. the person of the organiser or the place at which games of chance are organised, being unimportant. The principle of fiscal neutrality prohibited, in particular, any difference in the treatment for VAT purposes of economic operators undertaking similar activities. In any case, it was evident from the Fischer judgment that the Member States could not deny tax exemption to lawful games of chance. According to the Sixth Directive, the sole determining factor was whether, notwithstanding any differences in procedures, one and the same game of chance was essentially involved. It was for the national court or the national authorities to determine this in individual cases.

2. Appraisal

26As all the parties in the two actions have rightly stated, the Fischer judgment 5r eveals that, while the Member States are empow

5 — Judgment in Case C-283/95 (cited in footnote 3), paragraph 27.

ered by Article 13B(f) to lay down the conditions and limitations of the exemption of gambling from tax, they must observe the principle of fiscal neutrality on which the common system of value added tax is based.

27It is settled case-law that, as the principle of fiscal neutrality prohibits in particular different treatment for VAT purposes of similar and therefore competing goods or services, such goods or services must be subject to the same tax rate. 6

28Accordingly, it should first be borne in mind that the principle of fiscal neutrality is linked to the similarity of the activities rather than to the person or legal form of the economic operator carrying on those activ7 ities.

29Rules like those laid down in the German Umsatzsteuergesetz, according to which, as the referring court's order reveals,

6 — See, for example, the judgments in Case C-384/01 Commission ν France [2003] ECR I-4395, paragraph 25, Case C-267/99 Christiane Adam [2001] ECR I-7467, paragraph 36, and Case C-481/98 Commision ν France [2001] ECR I-3369, paragraph 22.

7 — For this aspect see, in particular, the judgments in Case C-144/00 Hoffmann [2003] ECR 1-2921, paragraph 27, Case C-141/00 Kügler [2002] ECR I-6833, paragraph 30, and Case C-216/97 Gregg [1999] ECR I-4947, paragraph 20.

the exemption of gambling activities depends on whether they are carried on by licensed public casinos, are therefore bound to sit uneasily with that principle.

30Although the German Government has indicated that the German Umsatzsteuergesetz assumes a distinction between activities carried on within public casinos and those carried on elsewhere, it has emphasised, especially during the hearing, that this distinction is ultimately based on the considerable differences that actually exist between the games of chance — including the environment in which they are played and their accessibility in terms of location — and is therefore compatible with the principle of fiscal neutrality.

31I question the soundness of this line of argument for a number of reasons.

32For one thing, it is evident from the referring court's order, as the Commission has pointed out, that there is in principle nothing to stop public casinos offering games of chance for which a commercial licence is required and which are thus permissible outside public casinos.

33It also emerges from the Fischer judgment, however, that it must not be generally assumed that a distinction between games of chance organised within public casinos and games of chance organised elsewhere corresponds to the distinction permitted for tax purposes in the light of the principle of fiscal neutrality. I have a number of observations to make on that judgment below.

34The Fischer case concerned the question of the equal treatment for tax purposes of a game of chance organised outside licensed public casinos, that game resembling roulette as operated in duly licensed public casinos.

35It should be remembered that in that case the organisation of roulette outside the licensed public casino was also unlawful and that, in the final analysis, the Court based its answer to the question as to the compatibility of the taxation of that game of chance with the principle of fiscal neutrality primarily on the lawfulness/unlawfulness of a game of chance. Thus, referring to the judgment in 8 Case C-111/92, it ruled that 'the principle of fiscal neutrality precludes a generalised distinction from being drawn in the levying of VAT between unlawful and lawful trans 9 actions.'

8 - ludgment in Case C-lll/92 Lange [1993] ECR I-4677, paragraphs 16 and 17.

9 — Judgment in Case C-283/95 (cited in footnote 3). paragraph 28.

36From this it follows, on the one hand, that games of chance may not be treated differently for tax purposes solely because they differ in terms of lawfulness. This is of relevance in Case C-462/02, which concerns a card game offered unlawfully outside licensed public casinos.

37On the other hand, the proposition that games of chance differ for the purposes of the principle of fiscal neutrality for the simple reason that they are organised by or in public casinos must, however, also be refuted on the basis of the Fischer judgment. For the Court ruled in that judgment that a Member State may not impose VAT on a game of chance — albeit one that is organised outside a licensed public casino — if the organisation of such a game of chance by a licensed public casino is 10 exempt.

38The Court could not have given this ruling if it were indeed true that the games of chance offered by public casinos already differed significantly from those offered by commercial operators because of the difference in accessibility, the gambling environment, the 'gambling culture' or the different circle of user.

39The central question still to be answered, however, is whether and under what condi

10 — Judgment in Case C-283/95 (cited in footnote 3), paragraph 31.

tions the games of chance at issue in the main actions — gaming machines and card games — are to be regarded, as the Fischer judgment has it, as games of chance organised by licensed public casinos and exempted from tax.

40What all forms of gambling have in common where tax law is concerned, as I have already stated in my Opinion in the Town & County Factors case, 11 is at least the essential characteristic that they are geared to the payment of winnings which are linked with the gambler's 'consideration', his stake, by means of an element of chance, i.e. the possibility of winning. To what extent, however, are games of chance to be distinguished from one another in the present context because of differences in form and design?

41It should first be noted that not all forms of gambling can be regarded as similar services for the purposes of fiscal neutrality and should, as such, be taxed at the same rate.

11 — Opinion in Case C-498/99 Town & County Factors (Judgment [2002J ECR I-7173, paragraph 70).

42This would deprive the Member States of practically all discretion in laying down the 'conditions and limitations' of exemption pursuant to Article 13B(f). Yet that discretion is specifically intended to enable the Member States to impose VAT on certain 12 forms of gambling.

43In other words, a Member State may indeed limit the taxation of games of chance — or, conversely, their exemption from tax — to certain forms of gambling. It thus cannot be forced by the principle of fiscal neutrality to adopt an all-or-nothing solution, which would mean that once it exempts one game of chance or one form of gambling it would have to exempt all other games of chance or forms of gambling.

44However, the various different games of chance or forms of gambling are by their very nature difficult to distinguish from one another, and it is thus hard to determine whether or not games of chance are similar. While I am inclined to regard, say, card games, roulette and gaming machines as different forms of gambling when compared with one another, the question does not arise in such general terms in the present instance, since the Linneweber case concerns gaming machines and the Akritidis case concerns card games.

12 — Sec my Opinion in Case C-498/99 (cited in footnote 11). paragraph 69. and, earlier, the Opinion of Advocate General lacobs in Case C-38/93 Clawe (judgment [19941 ECR 1-1679, paragraph 10).

45On the other hand, it would doubtless be going too far simply to regard all card games, for example, as comparable to one another, the possible options being too numerous for it to be assumed without more that all forms of games of chance based on cards are similar services for the purposes of the principle of fiscal neutrality.

46To my mind, however, minor differences in the arrangement or structure of the card games to be compared in a given instance do not matter.

47As innumerable variants of games of chance are conceivable, the principle of fiscal neutrality would be largely frustrated if the Member States were permitted to make distinctions based on minor differences in the structure, procedures and rules of a game as regards the imposition of VAT. There is no denying that, as Mrs Linneweber has stated, the Court focused on the specific design of the structure and course of the various games in the Glawe and Town & 13 County Factors judgments, but those cases, unlike the ones here under discussion, did not concern the question of the similarity of games of chance for the purposes of fiscal neutrality and the question of taxation as such: the aim was to calculate the taxable

13 — See also my comments in my Opinion in Case C-498/99 (cited in footnote 11). paragraphs 68 to 74, and the judgment in Case C-38/93 (cited in footnote 12).

amount and especially to assess the consideration actually received, as a function of the specific design of the game of chance.

48When it comes to assessing the similarity of games of chance for the purposes of fiscal neutrality, what needs to be borne in mind is that this principle entails the equal treatment of 'similar goods [and services], which are thus in competition with each other' and, therefore, is also, as the Court has already ruled, an expression of the principle of the elimination of distortion in competi-14 tion.

49Accordingly, in the judgments in Cases 15 16 C-481/98 and C-384/01 the Court assessed the similarity of activities to see whether the activities in question were in competition with each other and different fiscal treatment therefore posed the risk of distorting competition.

50Contrary to the Commission's arguments, the fact that the cases referred to in the previous paragraph concern a reduced tax rate does not preclude the applicability of

14 — As expressly stated in the judgment in Case C-481/98 (cited in footnote 6), paragraph 22; see also paragraph 27 above. 15 — Judgment in Case C-481/98 (cited in footnote 6), paragraphs 27 and 28.

16 — Judgment in Case C-384/01 (cited in footnote 6), paragraph 30.

that case-law to the current two cases, since the question there is at least whether or not certain supplies of goods or services must be afforded equal fiscal treatment in accordance with the principle of fiscal neutrality.

51If, then, the similarity of goods or services depends on whether or not they are in competition with each other, there is a strong argument for an analogy with the Court's case-law on the second paragraph of Article 90 EC. In that case-law the Court states that, when the similarity of goods is being assessed, it must be considered 'whether they have similar characteristics and meet the same needs from the point of view of consumers, the test being not whether they are strictly identical but whether their use is similar and compar 17 able.'

52By focusing on the consumer's decision to purchase, the Court adopted this approach, for example, in the case of Commission v France in order to consider whether, in keeping with the principle of fiscal neutrality, reimbursable and non-reim bursable medicinal products must be regarded as similar products in competition 18 with each other.

17 — Inter alia the judgments in Case C-302/00 Commission v France [2002] ECR I- 2055, paragraph 23, and Joined Cases C-367/93 to C-377/93 Roders and Others [1995] ECR I-2229, paragraph 27.

18 — Judgment in Case C-481/98 (cited in footnote 6), paragraph 27.

53If this is applied to forms of gambling, they are thus to be regarded as similar provided that they 'meet the same needs' of the consumer, a gambler, and their use is thus comparable, i.e. if, for example, differences between two games of chance of the same type, e.g. two card game variants, do not influence the consumer's decision to participate in one or other game of chance. In such a case, as the use of the games of chance in question is, from the consumer's point of view, comparable, taxing them at different rates might lead to distortions of competition.

54It should be added that in an assessment of the question whether differences along these lines carry any weight — as generally when turnover is assessed under the common system of VAT — an overall view must be taken which avoids artificial distinctions and focuses primarily on the average con 19 sumer's point of view.

55Whether in a specific case the gaming machines and card games operated outside public casinos are comparable in terms of their use by the average consumer to the gaming machines and card games offered by such public casinos and meet the same needs or whether, on the other hand, they differ substantially from one another is, however, for the national court to assess.

56Given otherwise the same basic type of game of chance — card game or gaming machine — and bearing in mind that the appeal of gambling primarily lies in the possibility of winning, the potential scale of the winnings and, generally, the risk inherent in gambling are likely to have a relevant influence on the average consumer's decision to gamble.

57As regards, finally, the arguments presented by Mrs Linneweber and the German Government, according to which restricting the exemption to games of chance organised in public casinos is compatible with the principle of fiscal neutrality because those games are subject to the casino levy, which also helps to cover turnover tax, suffice it to say that the Court rejected this argument in 20 the Fischer judgment.

58In the light of the foregoing considerations the answer to the first two questions in Case C-453/02 must be that Article 13B(f) of 19 — See the judgment in Case C-349/96 Card Protection Plan 20 — Sec the judgment in Case C-283/95 (cited in footnote 3), [1999] ECR I-973. paragraph 29.

paragraphs 29 and 30.

the Sixth Directive precludes the taxation of the operation of a gaming machine if the operation of a similar gaming machine by a licensed public casino is exempt from VAT. In assessing the similarity of gaming machines, the national court must focus on whether the use of the gaming machines operated in public casinos is comparable from the average consumer's point of view to the use of gaming machines operated elsewhere, those machines therefore being in competition with each other, factors which must be taken into account in this regard being in particular the potential scale of winnings and the gambling risk.

59Similarly, the answer to the first question in Case C-462/02 must be that Article 13B(f) of the Sixth Directive precludes the taxation of the organisation of a card game if the organisation of a similar card game by a licensed public casino is exempt from VAT. In assessing the similarity of card games, the national court must focus on whether the use of the card games organised in public casinos is comparable from the average consumer's point of view to the use of card games organised elsewhere, those card games therefore being in competition with each other, factors which must be taken into account in this regard being in particular the potential scale of winnings and the gambling risk.

60As regards, finally, the argument presented by the German Government at the hearing that the duration of the effect of that judgment should possibly be curtailed, especially because it was confident that the German turnover tax rules complied with Community law, there do not appear to me to be adequate grounds for such a time-limit. As the Commission has rightly commented, 21 the Court's judgment in the Glawe case does not justify any legitimate expectation of the general consistency with Community law of the German turnover tax rules as they relate to the taxation of games of chance, since that judgment concerned only the calculation of the taxable amount. Nor — in view of the discretion which the Commission enjoys in this sphere — could such an expectation be justified by the fact that the Commission had not yet initiated proceedings against the Federal Republic of Germany for infringing the Treaty in the area of the taxation of games of chance.

Β — The direct effect of tax exemption pursuant to Article 13B(f) of the Sixth Directive (third question in Case C-453/02 and second question in Case C-462/02)

1. Main arguments of the parties

61In the view of the German Government the exemption of betting, lotteries and other forms of gambling from tax for which Article

21 — See paragraph 47 above.

13B(f) provides is, on the one hand, not unconditional and, on the other hand, too imprecise to justify unambiguous and thus directly applicable obligations. Nor does the principle of fiscal neutrality do anything to change the ambiguity of Article 13B(f) of the Sixth Directive.

62Although the Commission admits that the Member States enjoy considerable latitude in the taxation of gambling, a Member State could not dismiss the claim of a taxpayer able to prove that he was exempt under the directive by stating that appropriate national legislation had not been adopted. The Commission refers in particu 22 lar to the Kugler judgment in this context and argues on that basis that restrictions of an exemption rule of a contingent nature as in the present case cannot preclude direct effect.

63Mrs Linneweber stated at the hearing that she essentially shared the Commission s view in this respect.

2. Appraisal

64In asking the third question in Case C-453/02 and the second question in Case

22 — Judgment in Case C-141/00 (cited in footnote 7), paragraph 57.

C-462/02, the Bundesfinanzhof is seeking to establish whether in circumstances such as those in the two main actions an individual may rely before a national court on the tax exemption for which Article 13B(f) of the Sixth Directive provides.

65It is settled case-law that wherever the provisions of a directive appear to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied on by individuals against the State and the rights laid down 23 therein must be protected.

66What must first be noted here is that the fact that a provision of Community law is in need of interpretation — in the light, for example, of a principle such as that of fiscal neutrality — does not in itself preclude that provision from being sufficiently precise and definite for an individual to be able to rely on 24 it before a national court. The procedure for a preliminary ruling on the interpretation of Community law is intended rather to ensure the uniform assertion — particularly against conflicting national law — of directly

23 — See inter alia the judgments in Joined Cases C-465/00, C-138/01 and C-139/01 Österreichischer Rundfunk und Others |2003] ECR I-4989, paragraph 98, Case C-141/00 (cited in footnote 7), paragraph 51, and Case 103/88 Fratelli Costanzo [1989] ECR 1839, paragraph 29.

24 — See, for example, the recent judgment in Case C-102/02 Beuttenmidler (2004| ECR I-5405, especially paragraph 37. effective rights granted to the individual in 25 Community law.

67It is true that the Member States have some discretion in the limitation of the scope of the exemption pursuant to Article 13B 26 (f).

68However, the Court has ruled in settled case-law that, even when a directive allows the Member States a fairly wide discretion, individuals may not be denied the right to rely on provisions of the directive to the extent that, owing to their particular subject-matter, they are capable of being severed from the general body of provisions and 27 applied as such.

69Provided that, when laying down the conditions and limitations of the tax exemption under Article 13B(f), a Member State observes the discretion accorded to it by that provision, there is therefore no doubt that an individual who does not fall within the scope of the tax exemption thus defined may not rely on that provision as a means of objecting 28 to his assessment to tax.

70Conversely, however, the possibility of an individual relying on this provision in order to prevent the application of national rules cannot be precluded where those national rules go beyond or are inconsistent with the discretion accorded to the Member States.

71As I have already stated above, Article 13B(f) must be taken to mean that the Member States must observe the principle of fiscal neutrality when laying down the conditions and limitations of the exemption 29 of gambling from tax.

72If, then, a Member State has omitted to exempt gambling from tax in accordance with the principle of fiscal neutrality, it cannot, as the Commission has rightly argued, rely on its own omission in order to refuse a taxpayer entitlement to an exemption which he may claim under the 30 Sixth Directive.

25 — See, in this respect, the judgment in Case 26/62 Van Gend & Loos [1963] ECR 1, 24.

26 — See paragraphs 26 and 42 et seq. above.

28 — See the judgment in Case C-141/00 (cited in footnote 7), paragraph 55.

27 — See the judgments in Case C-346/97 Braathens [1999] ECR I- 29 — See paragraph 26 above. 3419, paragraph 30, and Case 8/81 Becker [1982] ECR 53, paragraph 30.

30 — See die judgment in Case C-141/00 (cited in footnote 7), paragraph 60.

74Thus the answer to the third question in

73. Whether this is the case in the main

Case C-453/02 and the second question in actions here in question is for the national Case C-462/02 is that an individual may rely court to determine with the aid of the before a national court on the tax exemption indications given in the answers to the first pursuant to Article 13B(f) of the Sixth two questions in Case C-453/02 and the first Directive in order to oppose national rules question in Case C-462/02.

which are incompatible with that provision.

V — Conclusion

75In view of the foregoing it is proposed that the Court should answer the questions referred to it as follows:

A —In Case C-453/02

(1) Article 13B(f) of the Sixth Directive precludes the taxation of the operation of a gaming machine if the operation of a similar gaming machine by a licensed public casino is exempt from value added tax. When assessing the similarity of gaming machines, the national court must consider whether the use of the gaming machines operated in public casinos and those operated elsewhere is comparable for the average consumer and they are therefore in competition with each other, and the factors which must be taken into account in this respect include, in particular, the potential scale of winnings and the gambling risk.

(2) An individual may rely before a national court on exemption from tax pursuant to Article 13B(f) of the Sixth Directive in order to oppose national rules which are incompatible with that provision.

Β — In Case C-462/02

(1) Article 13B(f ) of the Sixth Directive precludes the taxation of the organisation of a card game if the organisation of a similar card game by a licensed public casino is exempt from value added tax. When assessing the similarity of card games, the national court must consider whether the use of the card games organised in public casinos and those organised elsewhere is comparable for the average consumer and they are therefore in competition with each other, and the factors which must be taken into account in this respect include, in particular, the potential scale of winnings and the gambling risk.

(2) An individual may rely before a national court on exemption from tax pursuant to Article 13B(f) of the Sixth Directive in order to oppose national rules which are incompatible with that provision.