Press Room.
European Court Ruling Has Wide Implications For The Gambling
Industry
Today's European Court of Justice ruling on the case of
Leo-Libera* confirms that EU member states have the discretion to
decide on whether VAT applies to certain games of chance, according
to leading financial and business advisers Grant Thornton UK
LLP.
Gaming arcade operator Leo-Libera was
unsuccessful in challenging the German Government's imposition of
VAT on gaming machines. The business argued that arcades fell
within the definition of 'other forms of gaming' referred to in the
VAT Directive and, as such, should be exempt from the tax.
The Court's ruling allows countries in the EU
the flexibility to decide which forms of gambling fall outside the
'catch all' definition and are consequently subject to VAT. A
different tax treatment cannot be applied to similar types of
gambling that are in competition with each other, member states do
not have a completely free hand and must be consistent when
imposing limitations on any exemptions. However, in
this case, the Court has ruled that arcade gambling is not in
competition with the other forms of gambling relieved from VAT and,
as such, the German tax authority is free to treat it
differently.
Lorraine Parkin, Head of VAT at Grant Thornton
UK LLP say: "The VAT ruling today highlights the complexity of the
EU VAT system and the difficulties faced by taxpayers. It will
maintain the anomalies about what forms of gambling should and
should not be taxed. For example, a bookmaker taking bets on a the
World Cup match does not pay VAT, whereas the operator of a gaming
machine arcade will have to.
"Businesses that are running 'VATable'
gambling operations will feel that they are at a commercial
disadvantage when compared to competitors whose gambling service is
exempt. They will either have to increase the cost of the service
that they provide, or pay their VAT liability out of their profits.
Businesses finding themselves in that position could argue that
what is essentially the same activity should not be taxed
differently."
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ENDS-
Notes to editors:
*Leo-Libera GmbH v Finanzamt Buchholz in der
Nordheide (Case C-58/09)
For further queries, please contact Nicola
Daley (0207 728 2244) or via email on nicola.daley@gtuk.com