ECJ Upholds Fiscal Neutrality in Bingo VAT Case

Last week the European Court of Justice (ECJ) ruled that the UK violated European laws by treating certain bingo games differently for Value Added Tax purposes. The ECJ has said that VAT must be applied equally to similar goods and services. The ECJ said that the Rank Group had overpaid VAT taxes of more than more than £250 million pounds ($394,180,913.69 USD). The high court said that Her Majesty’s Revenue and Customs (HMRC) violated the EU’s fiscal neutrality rules by charging different VAT rates for similar games.

The case was referred to the ECJ after a UK court ruled that Rank Group should not have paid VAT taxes to on mechanized cash bingo between 2002 and 2005.The EU’s fiscal neutrality laws say that goods and services that are similar must be taxed the same to avoid any distortion of competition. Tax law expert Ian Hyde of Pinsent Masons said that the ECJ’s “robust defence” of fiscal neutrality is an important court decision for taxpayers who are facing discriminatory VAT tax treatment. Hyde stated “HMRC is desperately resisting fiscal neutrality arguments by throwing up any argument it can come up with. However, the most important general point is that the ECJ has rejected the UK’s argument as to whether there has to be actual competition rather than the clear line from previous cases that competition can be inferred from goods being similar.”

Rank Group had claimed that there were inconsistencies in the way HM Revenue and Customs had applied VAT taxes to different types of online bingo games and slots. Under VAT laws at the time of the complaint online bingo games were only exempt if the wagers were equal to 50p and the prizes were lower or equal to £25. ($39.4350 USD) If both these conditions were not met VAT taxes were charged. The UK government claimed that there was no breach of fiscal neutrality unless the treatment of between the games affected competition. The ECJ ruled that if the games were identical or similar from the player’s viewpoint competition considerations did not have to be proved.

The ECJ judgment stated “The principle of fiscal neutrality must be interpreted as meaning that a difference in treatment for the purposes of value added tax of two supplies of service which are identical or similar from the point of view of the consumer and meet the same needs of the consumer is sufficient to establish an infringement of that principle.” Rank group has already received a settlement from the government which boosted their third quarter figures.

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