Italy Taken To Task Over Investment Tax Break

by Ulrika Lomas, for LawAndTax-News.com, Brussels

09 September 2005

The European Commission announced on Wednesday that in its view, an Italian tax scheme for certain investment vehicles violates EU Treaty State Aid rules.

The scheme reduces the nominal tax rate from 12.5% to 5% on earnings accruing to certain collective investment vehicles specialised in holding stocks of small and medium capitalised companies (small caps) listed on regulated EU stock exchanges.

According to the EC, the scheme distorts competition because it provides additional liquidity to listed small caps by altering the market value of their stocks and favouring certain undertakings managing the specialised investment vehicles.

The aid has been enacted without prior Commission approval and, the Commission stated, must now be recovered from the intermediaries having applied the tax break.

“This Commission is firmly committed to tackle competition distortions deriving from state aid when it does not contribute to achieve any Community objectives or to promote growth, and this is the case when the aid takes the form of tax breaks which merely favour select financial products” explained Competition Commissioner Neelie Kroes.

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