Diana Elisabeth Lindman.

• Jurisdiction: European Union
• Court: Court of Justice (European Union)
• Writing for the Court: Edward
• ECLI: ECLI:EU:C:2003:234
• Date: 10 April 2003
• Docket Number: C-42/02
• Procedure Type: Reference for a preliminary ruling

OPINION OF ADVOCATE GENERAL
STIX-HACKL
delivered on 10 April 2003 (1)


Case C-42/02

Diana Elisabeth Lindman
v
Skatterättelsenämnde


(Reference for a preliminary ruling from the Ålands Förvaltningsdomstol (Finland))

((Article 46 EC – Article 49 EC – Lottery winnings – Taxation – Cohesion of the taxation system – Proportionality))

I ─ Introduction 1. In this case, the Court is again asked to examine, following its judgments in Schindler , (2) Läärä (3) and Zenatti , (4) the issue of the compatibility of national legislation on games of chance with the Treaty provisions on the freedom to provide services. The Förvaltningsdomstol in Åland is seeking a preliminary ruling to establish whether Article 49 EC prohibits a Member State from treating winnings from lotteries held in another Member State as the winner's taxable income, whereas winnings from lotteries held in the Member State concerned are exempt from income tax. II ─ The relevant legislation

A ─

The lottery tax law (552/1992) 2. Pursuant to Paragraph 1 of the lottery tax law, lottery tax is to be paid to the State on lotteries held in Finland. 3. Under Paragraph 2(1) of that law, goods lotteries, money lotteries, bingo, betting on horse races ... among others are to be regarded as lotteries. 4. Paragraph 3 of the lottery tax law provides inter alia: The organiser of a lottery shall be liable to tax.

B ─

The income tax law (1535/1992)Income and recipients of tax. Tax on earned income shall be paid to the State, the municipality and the parish. Tax on capital income shall be paid to the State. The right of the municipalities to a portion of receipts from capital income shall be taken into account on distribution of tax receipts in accordance with this law and the law on collection of taxes (611/78).Lottery winnings. Winnings from lotteries listed in Paragraph 2 of the lottery tax law shall not be deemed taxable income. However, winnings which can be regarded as fair remuneration for services rendered or which can be viewed as pay under the law on advance collection of taxes shall be taxable income. 5. Paragraph 1(1) and (2) of the income tax law provides: 6. Paragraph 9(1) and (2) of the income tax law determines who is liable for tax and on what income. According to that paragraph, persons who have been resident in Finland during the tax year are liable in respect of income earned in Finland and elsewhere. Taxable income is the income of persons liable for tax in money or value. The income of natural persons and estates is to be divided into two types of income, namely capital income and earned income. 7. In regard to lottery winnings, Paragraph 85 of the income tax law provides:

C ─

The municipal tax law for the Province of Åland 8. The following is an extract from Paragraph 1(1):Scope of the law. Tax shall be paid to the municipality on earned income; losses may be set off on assessment to municipal tax in accordance with the provisions of the income tax law (FFS 1535/92) and the regulation on tax on income (FFS 1551/92) with the exceptions allowed under that law and other specific provisions. III ─ Facts, main proceedings and question referred 9. Ms Lindman, the appellant in the main proceedings, is a Finnish citizen residing in the municipality of Saltvik in Åland. On a visit to Sweden, she bought a ticket for one of the lotteries run by AB Svenska Spel. In the draw in Stockholm on 7 January 1998 she won SEK 1 000 000. Her lottery winnings ─ equivalent to FIM 672 100 ─ were included in her taxable income for the 1998 tax year. 10. Since the lottery winnings were viewed as taxable income, they were subject to national income tax payable to the Finnish State, municipal tax payable to the municipality of Saltvik, Church tax payable to the parish and sickness insurance premiums, levied pursuant to the sickness insurance law which is linked to the insured person's local tax liability. 11. The winnings were not considered to be exempt from tax under Paragraph 85 of the income tax law, as that exemption applies only to the lotteries listed in Paragraph 2 of the lottery tax law, which includes only lotteries held in Finland. Nor were the winnings deemed to constitute capital income since capital income is interpreted as income which can be regarded as having been acquired from property, which was not the case in this instance. 12. Ms Lindman challenged the decision on tax liability before the tax appeals authority. Her application to have the tax on her lottery winnings from Sweden cancelled or reduced was, however, dismissed by decision of 22 May 2000, after the tax appeals authority had obtained an opinion from the Directorate for Taxation (skattestyrelsen). 13. Ms Lindman appealed that decision before the Förvaltningsdomstol, Åland, the court in the main proceedings. 14. She claimed that the tax levied on her lottery winnings from Sweden should be cancelled. In the alternative, the winnings should be taxed as capital income, that is to say at a lower rate of tax. 15. In the main proceedings, the Finnish authorities take the view that the tax exemption provided for in the income tax law applies exclusively to lotteries held in Finland and that this does not pose an obstacle to the freedom of a Swedish lottery company to provide services in Finland, within the meaning of Article 49 EC. 16. According to the information supplied by the Förvaltningsdomstol, Åland, on the basis of the law on lotteries, the exemption under the income tax law applies only to lotteries held in Finland. The national court therefore considers that the levying of income tax on winnings from lotteries held outside Finland (as earned income or capital income) may constitute discrimination based on where the service is provided. 17. Consequently, by decision of 5 February 2000, the Förvaltningsdomstol, Åland, referred the following question to the Court for a preliminary ruling pursuant to Article 234 EC:Does Article 49 of the Treaty establishing the European Communities preclude a Member State from applying rules under which lottery winnings from lotteries held in other Member States are included in the taxable income of the winner on assessment to income tax, whereas lottery winnings from lotteries held in the Member State in question are exempt from tax? IV ─ Submissions of the parties 18. Ms Lindman, the Finnish, Belgian and Danish Governments, the Commission, the EFTA Surveillance Authority and the Norwegian Government have submitted observations in this case. 19. Ms Lindman merely contends that she considers the taxing of her lottery winnings to be discriminatory. In her view, her winnings would not have been taxed had she been resident in Sweden or won a Finnish lottery. 20. The Finnish, Belgian, Danish and Norwegian Governments consider a taxation regime, like the Finnish regime, under which winnings from lotteries held in other Member States are taxed, whereas winnings from lotteries held in the national territory are not, to be compatible with the freedom to provide services under Article 49 EC. In that context, those governments rely principally on the Court's decisions in Schindler , (5) Läärä (6) and Zenatti . (7) Although fundamentally conceding that treating lottery winnings in this way may restrict the freedom to provide services, they do not consider this legislation to be necessarily discriminatory. All of the governments claim that the Finnish legislation is in any event justified for overriding public interest considerations and contend that, according to the abovementioned case-law, the Member States enjoy a large margin of discretion in regulating games of chance. 21. Taking the argument further, the Finnish Government explains that the organisation of games of chance in Finland is subject to rules designed to secure legal certainty for players, prevent crime and limit damage to society as a result of gambling. In Schindler , those objectives were acknowledged to provide justification for restricting the freedom to provide services and they also justify the rules on taxation at issue, as they constitute part of the national regulation of lotteries. 22. The Finnish Government concedes that the revenue from games of chance organised by the three companies permitted to engage in gambling in Finland, is substantial. It points out that that this revenue goes to the national budget to ensure that it is used, as far as possible, for society's benefit. The Finnish State has therefore refrained from levying too heavy a tax on gambling in order to avoid jeopardising the use of the proceeds for public interest purposes. 23. The Finnish Government further maintains that this is why lottery activities in Finland are subject to a very low rate of taxation and, in that regard, the lottery tax is the only tax provided for. Currently, the rate of that tax is not the same as the rate of tax a winner would have to pay were his winnings treated as taxable income. 24. The Finnish Government claims that since it is unable to tax foreign lottery organisers, it has no option but to tax the winners of lotteries held abroad. If it did not, Finnish winners of foreign lotteries would, like the foreign lottery organisers themselves, have a tax advantage, regardless whether in the country of origin of the lottery the gaming revenue was used in the public interest or the same protective objectives were taken into account as in the Finnish legislation. 25. In the oral proceedings, the Finnish Government further maintained that the use of lottery revenue for benevolent purposes was merely an additional argument as regards compatibility with Community law. Above all, in Finland...