Joined Cases C‑344/13 and C‑367/13, Blanco and Fabretti

Italian legislation taxing winnings from games of chance obtained abroad but exempting such winnings obtained on its territory infringing freedom to provide services

>> In Italy, winnings from casinos were subject to income tax, while winnings from casinos situated in Italy were exempt from that tax, to the extent that the taxation of winnings paid out by those casinos was included in the tax on entertainment. In essence, for people residing in Italy, only winnings obtained in casinos situated abroad were included in the basis of assessment for income tax.

When accused by the Italian tax authorities of failing to declare various winnings obtained in casinos abroad, Mr Blanco and Mr Fabretti claimed that the tax assessments infringed the principle of non-discrimination since winnings made in Italy were exempt from tax. The Italian authorities however argued that that that national legislation was aimed at preventing money laundering abroad and at limiting the flow of capital abroad (or the arrival in Italy) of capital whose origin was uncertain.

The referring court asked whether Articles 52 and 56 TFEU must be interpreted as precluding the Italian legislation concerned and, if so, whether such infringement was justified on grounds  of of public policy, public security or public health.

The Court  reiterated that the freedom to provide services under Article 56 TFEU required not only the elimination of all discrimination on grounds of nationality against providers of services established in other Member States, but also the abolition of any restriction — even if it applied without distinction to national providers of services and to those from other Member States — which was liable to prohibit, impede  or render  less attractive the activities of a provider of services established in another Member State where he lawfully provided similar services (see, inter alia, judgment in Dirextra Alta Formazione, C‑523/12, EU:C:2013:831, para. 21).

The Court also reiterated that  the provisions of the FEU Treaty on the freedom to provide services applied to an activity which enabled people to participate in gambling in return for remuneration (judgment in Zenatti, C‑67/98, EU:C:1999:514, para. 24). Moreover, the freedom to provide services was for the benefit of both providers and recipients of services (judgment in Liga Portuguesa de Futebol Profissional and Bwin International, C‑42/07, EU:C:2009:519, para. 51).

The Court found that the Italian  legislation  gave rise to a discriminatory restriction on the freedom to provide services as guaranteed by Article 56 TFEU in relation to not only service providers but also the recipients of those services.

Moreover, according to the Court of Justice, that restriction was not justified by a need to prevent money laundering and compulsive gambling. The Court has over the years repeatedly stated that the legislation on games of chance is one of the areas in which there are significant moral, religious and cultural differences between the Member States. In the absence of harmonisation in the field at EU level, it is for each Member State to determine in those areas, in accordance with its own scale of values, what is required in order to ensure that the interests in question are protected (see, inter alia, judgments in Stanleybet International and Others, C‑186/11 and C‑209/11, EU:C:2013:33, on which I wrote this post , on which I wrote this post  and Digibet and Albers, C‑156/13, EU:C:2014:1756, paragraph 24).

However,  in the present case, the Court stressed that national legislation, such as that at issue in the main proceedings, could be justified only insofar as it pursued objectives corresponding to the grounds of public policy, public security or public health within the meaning of Article 52 TFEU. In addition, the restrictions imposed by the Member States must satisfy the conditions of proportionality. The Court reiterated that national legislation was appropriate for guaranteeing attainment of the objective pursued only if it genuinely reflected a concern to attain it in a consistent and systematic manner (see, to that effect, the judgment in Engelmann, C‑64/08, EU:C:2010:506, on which I wrote this post)

The Court found that in circumstances such as those at issue in the main proceedings, the taxation by a Member State of winnings from casinos in other Member States and the exemption of such winnings from casinos situated on its territory were not a suitable and coherent means of ensuring the attainment of the objective of combatting compulsive gambling, as such an exemption is in fact likely to encourage consumers to participate in games of chance which allowed them to benefit from such an exemption  

The Court thus found that the discrimination at issue in the main proceedings was not justified under Article 52 TFEU.

Therefore, the Court foun that Articles 52 and 56 TFEU must be interpreted as precluding legislation of a Member State which subjected winnings from games of chance obtained in casinos in other Member States to income tax and exempts similar income from that tax if it was obtained from casinos in its national territory.