Only two things are common between tax and sex: both are three-lettered and end with x. So, perhaps, it is not too common that a tax case talks about sex. And even when a tax court has such a sticky subject on hand, you can reasonably expect the erudite handling of it at more than an arm’s length.
Take, for instance, the Erotic Centre case that came up before the European Court of Justice (ECJ) not long ago. At the centre of the dispute was the eligibility for a reduced rate of 6 per cent VAT, levied on ‘certain goods and services, granting the right of admission to establishments for culture, sports or entertainment, as well as granting the right to make use thereof,’ as a research paper by Uladzislau Belavusau informs (http://papers.ssrn.com). The concession was not available to the grant of right to make use of automated recreation devices, and providing movable goods.
Private cubicles
According to the ‘procedural history’ narrated in the paper, the story begins in 2004, when ‘local authorities imposed a fine on Erotic Centre BVBA in the Flemish city of Bruges for the allegedly incorrect application of the reduced rate of VAT (i.e. 6 per cent instead of the standard 21 per cent).’ The centre, a commercial establishment, allowed its customers to watch what is often labelled as adult or X-rated films on a pay-per-minute basis, in single-user private cubicles.
EC said its services came within the category of culture, sport and entertainment and regarded its display of films as ‘cinema,’ which enjoyed the reduced tax; but the taxman saw the use of ‘automated recreation devices’ in the process.
What is cinema?
Quite instructively, the Belgian government gave three reasons why EC’s cubicles could not be classified as cinema: “They are not conceived for a group of people to watch the same film together; the films do not begin playing without intervention from the audience; and the customers do not pay for admission in advance.” The larger legal issue that had to, therefore, travel to the EU level was about what constitutes both cinema and cultural facilities within the Sixth Directive.
In what may seem anticlimactic, the court chose to go by a strict interpretation of the provisions, within the usual meaning of words. Thus, admission to a cinema includes only movies available to the public upon prior payment of an admission fee. And ‘this fee gives all those who pay it the right to collectively enjoy the cultural and entertainment services characteristic of those events and facilities. It cannot apply to customers who pay to watch one or more films individually or include films displayed in private cubicles.’
Judicial sexophobia
The comment section of the research paper begins by discussing the ‘legacy of judicial sexophobia.’ The author finds it striking for the verdict to be so rhetorical about sexually implicit services as to exclude any reference to the very word sex. How could one be sure that pornographic movies lack any artistic value without entering into the slippery slope of tax censorship, and do we keep on thinking about nudity as a set of dirty images, wonders Belavusau.
“The response of the Court is comfortable content-neutral silence rather than clear feedback. It says nothing about the correlation of the tax to the film’s content. Instead, the decision on the non-applicability of the beneficial tax is linked to the method of demonstration.”
Giggling attitude
This ‘giggling attitude’ towards pornography is unfortunate, the paper protests, ‘because currently the industry consists of a billion business producers and service-providers who do take the issue seriously.’
In contrast, the content-neutral decisions, a favourite offspring of the jurisprudence of the US Supreme Court on freedom of speech, are definitely attractive, Belavusau opines, because on the surface they permit wolves, goats and cabbages to coexist peacefully. “However, do they ultimately cross the river in the same Euro-boat?” reads the poser that the paper concludes with.
A topic that lends itself to deep exploration.
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