Case Diana Elisabeth Lindman v Skatterättelsenämnden (Reference for a preliminary ruling from the Ålands Förvaltningsdomstol (Finland)) Case C-42/02 Lindman Diana Elisabeth Lindman v Skatterättelsenämnden (Reference for a preliminary ruling from the Ålands Förvaltningsdomstol (Finland)) Heidi Pietilä Laura Rajala Elina Rantanen

Agenda Background of the case National (and Åland province) legislation Question referred The Finnish Government The Commission and the EFTA Surveillance Authority The Court’s Conclusion Impact on Finnish Legislation

Background of the case The Facts: Ms Lindman, Finnish citizen and resident of Finland living in autonomous province of Åland Islands. In 1998 she won Swedish crowns in a lottery arranged by Swedesh company in Sweden. This amount was considered as taxable earned income of Ms Lindman. The Board of Adjustment rejected Ms Lindman’s appeal of adjustment for lowering the tax imposed. Further she complained to Administrative court of Åland (Finland).

National legislation According to the national Lottery Tax Law (552/1992) the lottery organizer is accountable for paying the tax for lotteries organized in Finland. Finnish lottery winnings for the beneficiary are not taxable income in Finland. – No double taxation. The Åland Islands, residence of Ms Lindman, has autonomy as enacted in a legislation. o Some taxation issues are under legislative authority of Åland e.g. In this case, however, Åland does not have autonomy power.

The question referred The administrative court of Åland (Finland) asked preliminary ruling of EC court: Does Article 56 of the EC Treaty prevent a MS from applying rules that enables MS to include lottery winnings from other MS in the taxable income while lottery winnings from lotteries held in MS in question are exempt from tax.

The Finnish Government The Finnish legislation is compatible with Article 56 Taxation of games of chance is only a specific aspect of the general regime governing games of chance, a field in which the Member States have a wide discretion Any restrictions are justified by overriding reasons in the public interest relating to combating the pernicious consequences of games of chance, since if winnings from foreign lotteries were exempt, the public would be encouraged to participate in them

The Commission and the EFTA Surveillance Authority The taxation in a Member State of winnings from lotteries solely where they are organized in other Member States is contrary to Article 56  In accordance with the principle of fiscal neutrality, a Member State may not treat a winner of a game of chance lawfully organized in another Member State less favorably than a winner who participated in a game organized in the first State  Cannot be justified with public interests Ms Lindman: the Finnish legislation is discriminatory, since, if she had resided in Sweden or if the amount at issue in the main proceedings had been won in a Finnish lottery, she would not have been charged income tax

The Court’s Conclusion Although direct taxation is within the competence of the MS, MS must none the less exercise that competence consistently with Community Law. Court’s statement: The case should be examined from the viewpoint of freedom to provide services.  The case falls within the scope of Article 56. Foreign lotteries are treated differently for tax purposes from, and are in a disadvantageous position compared to Finnish lotteries.  Therefore Finnish legislation was discriminatory Article 56 prohibits a MS’s legislation under which winnings from games of chance organized in other MS are treated as income of the winner chargeable to income tax, whereas winnings from games of chance conducted in the MS in question are not taxable.

Impact on Finnish Legislation The preliminary ruling given by the Court forced Finland (among other Nordic Countries) to change its legislation regarding taxation of games of chance. In Finland this was implemented by changing the Income Tax Law (1535/1992) § 85, regarding the taxation of lottery winnings: o “Income arising from winnings in a lottery may be exempt from income tax if income arises from winnings in a lottery in an EEA country, operated according to the rules of the national legislation of that country, or from a Finnish lottery conforming to the provisions of § 2 of the Act on Tax on Lottery Prizes.” o The Income Tax Law § 85 was applied for the first time in income taxation of the fiscal year 2004.

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