EC Approves Italy's IRAP Tax Deductions For Job Creation
The European Commission announced last Thursday that it has authorised, under
EC Treaty state aid rules, the fiscal incentives for companies adopted by Italy
in its Competitiveness Decree law. The scheme provides for deductions from the Italian tax on regional productive
activities (IRAP) and is designed to stimulate job creation. The measure encourages the creation of jobs particularly in the assisted area
of the Mezzogiorno where the rate of unemployment is still high compared to
other parts of Italy. In addition, the Commission stated that it considers that
the potential adverse effects on trade and competition are proportionate and
necessary to achieve the objectives of the scheme. The Commission therefore concluded that the measure meets all the conditions
laid down in Regulation 2204/02 on the application of state aid rules for employment.
Competition Commissioner Neelie Kroes commented: “By approving this measure,
we have shown once again that state aids can play an active role in supporting
job creation whilst avoiding undue distortions of competition”. However, a case is pending on IRAP before the Court of Justice, which has been
asked to give a preliminary ruling on the question of whether this tax is compatible
with the Community prohibition of national turnover taxes other than VAT. .
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