Report for the Hearing delivered in Case 252/86

I — Facts and procedure

1. Article 2 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 (Official Journal 1977 L 145, p. 1) provides that the supply of goods and services for consideration within the territory of the country by a taxable person acting as such is to be subject to VAT.

2. On 23 December 1983, the Commission brought an action against the French Republic for failure to fulfil its obligations (Case 287/83, Official Journal 1984, C 16, p. 12) on the ground that the maintenance of a general exemption from VAT for operating receipts from all automatic machines subject to entertainments tax was incompatible with Article 13 B (f) of the Sixth Directive. By Article 16 of the Loi de finances (Finance Law) for 1985 (Law No 84-1208 of 29 December 1984, Journal Officiel de la République Française (JORF), p. 4060), France imposed VAT on operating receipts from automatic machines and Case 287/83 was removed from the Register by Order of the Court of 16 January 1985.

3. In addition to VAT, which has been levied since 1 July 1985, automatic games machines are subject to two specific taxes in France, namely entertainments tax, the amount of which varies according to the size of the population of the municipality concerned, and a tax known as the State tax.

4. On 2 July 1985, the Centre des impôts (tax office) at Saint-Lô addressed to Mr Bergandi, a trader and automatic games machines operator, a claim for the payment of FF 111000 for the annual tax on automatic machines for 1985, which in this case related to machines brought into service on 1 January 1985, even though the operation of those machines became subject to VAT as from 1 July 1985.

5. The Director of Fiscal Services of La Manche, by decision of 31 December 1985, rejected an application for reduction of the tax demand by half in respect of the second half of 1985 and Mr Bergandi brought an action against him on 28 February 1986 before the Tribunal de grande instance (Regional Court), Coutances, the competent court for matters concerning taxes classified as indirect taxes and charges treated as such, seeking an order that the tax authorities should grant him an exemption in the principal sum of FF 38000 in respect of the penalties relating thereto, and should reimburse to him the sums already paid.

6. Considering that the dispute involved the interpretation of certain provisions of Community law, the Tribunal de grande instance, Coutances, decided to stay the proceedings until the Court of Justice had given a ruling under Article 177 of the EEC Treaty on the following questions:

II — Written observations submitted to the Court

1. Gabriel Bergandi, the plaintiff in the main proceedings, after explaining that the machines in question are small, purely mechanical games of skill, automatic devices in the form of small-scale vehicles in which children sit, automatic sound-reproduction devices and electric games of skill, and after describing the background to the introduction of the contested legislation, states that the questions submitted to the Court raise three legal problems: the lawfulness, in the light of the interpretation of Article 33 of the Sixth Directive, of the overlapping of VAT and other taxes, the interpretation of Article 95 of the EEC Treaty and the interpretation of Article 30 thereof.

2. The Government of the French Republic observes that in its judgment of 17 November 1985 in Case 295/84, cited above, the Court held that the prohibition of overlapping of taxes contained in Article 33 was intended to ensure that the functioning of the common VAT system was not compromised by fiscal measures applied by a Member State to the movement of goods and services which had an effect on commercial transactions comparable to that of VAT. However, that provision does not prevent the Member States from maintaining taxes based on the activities of undertakings which do not relate directly to the price of goods or services. The tax on automatic machines is unrelated to their purchase price and is not intended to represent a levy of any kind, real or flat-rate, on turnover. The tax becomes due when the annual return is made in respect of the machine regardless of whether the machine is actually in service.

3. The Government of the Federal Republic of Germany points out in the first place that it does not make any difference whether the interpretation of Article 33 is focused on the concept of turnover tax or on that of a tax which can be characterized as a turnover tax. The latter concept may be wider in scope as far as its description is concerned but not as regards its purpose or nature. Neither of those concepts has so far been defined in general terms in Community law and it is not necessary for the Court to give an exhaustive definition in the present case. It is sufficient to say that turnover taxes are characterized inter alia by their general scope, which covers more than a few categories of goods and services, whereas Community VAT, which Article 33 protects against competing taxes, is a general tax on consumption.

4. The Commission examines in turn the questions relating to Article 33 of the Sixth Directive and those relating to Articles 95 and 30 of the Treaty.

1 Language of the Case: French.