European Court Rules Against Italy’s Gambling Tax Rules

The European Court of Justice has ruled against Italian gambling tax legislation, which taxes winnings from games of chance that are obtained in other EU member states but exempts such winnings obtained in Italy.

The Court said that by exempting from income tax only winnings from games of chance obtained in Italy, Italian legislation has established different tax arrangements depending on whether the winnings are obtained in Italy or in other EU member states. Such a difference in tax treatment dissuades players from going to and playing games of chance in other member states, thereby giving rise to a discriminatory restriction on the freedom to provide services, the Court said.

The fact that gaming providers established in Italy are subject to the tax on entertainment does not rid the Italian legislation of its manifestly discriminatory character, since that tax is not analogous to income tax, the Court further said.

The Court rejected the Italian Government’s contention that the legislation was justified to prevent money laundering and compulsive gambling.

The case was heard following an appeal by two Italian taxpayers who challenged a tax assessment on winnings obtained in casinos abroad.