Italy Taken To European Court Over Tax Breaks For Listed Firms

by Ulrika Lomas, Tax-News.com, Brussels

24 July 2006

The European Commission has taken the government of Italy to task over tax breaks given to newly-listed companies which, according to the EC, constitute illegal state aid.

In an announcement last week, the Commission stated that it had referred Italy to the European Court of Justice for its failure to terminate the incentives offered to firms listed for the first time on a regulated European exchange, and recover the aid from recipients.

After a formal investigation the Commission came to the conclusion that the scheme was not compatible with EC Treaty state aid rules, in that the tax relief granted constituted operating aid and was not covered by any of the derogations to the general prohibition of such aid.

Since the initial decision against the tax breaks was reached in March 2005, the Commission has found that the Italian government has taken "no concrete measures" to recover the aid except "preliminary measures of a legislative nature".

"In accordance with the rules governing the recovery of illegal aid, Italy has to take all steps available under national law to secure immediate and effective application of the Commission’s decision and so restore fair competition," the EC said in a statement.

"As no aid has been recovered to date the Commission has decided to refer the case to the Court of Justice. This approach is fully in line with the State Aid Action Plan presented by the Commission in June 2005," the Commission added.

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