Conclusion of excessively long tax proceedings legal, says court
By Eric van Puyvelde | Thursday 29 March 2012
A legislative provision in Italy under which tax proceedings brought more than ten years previously may be concluded, automatically if need be, is compatible with Union law, held the EU Court of Justice in a judgement handed down on 29 March (Cases C-417/10 and C-500/10). Its judgement came in response to requests for preliminary rulings from Italian courts. The EU court noted that this exceptional measure is meant to enforce the principle that judgement must be given within a reasonable time.
With a view to reducing the length of tax proceedings and thus respecting the principle of reasonable length of proceedings, within the meaning of the European Convention for the Protection of Human Rights and Fundamental Freedoms, Italy adopted a legislative provision, in 2010, under which proceedings that had been pending for more than ten years at the date of its entry into force, in which the state tax authorities had been unsuccessful at first and second instance, were concluded without an examination of the appeal.
In particular, proceedings pending before the Commissione Tributaria Centrale (Central Tax Court) are automatically concluded, and those pending before the Corte Suprema di Cassazione (Court of Cassation, Italy) can be concluded on payment of an amount equivalent to 5% of the value of the claim and the abandonment of any claim to compensation.
As to whether EU law precludes the application of such a provision on direct taxation, the court pointed out that while direct taxation falls within the competence of the member states, they must nonetheless exercise that competence consistently with European Union law. It added that Union law does not in this case preclude a provision of national law such as that at issue which, in order to limit the length of tax proceedings, authorises their conclusion under certain conditions.
In particular, in the first case, in its examination of the compatibility of the national provisions with state aid rules, the court considered that the measures in question are not selective and do not therefore constitute state aid.
On the conformity of automatic conclusion of proceedings with EU rules on VAT, in the second case, the court held that each member state is obliged to take all legislative and administrative measures appropriate for ensuring collection of all VAT due on its territory. But they must guarantee effective levying of the Union’s own resources (VAT) subject to compliance with the principle that judgement should be given within a reasonable time. The court noted that this is an exceptional provision, of a specific and limited nature, whose aim is to ensure observance of the principle that judgement must be given within a reasonable time and which does not create any significant differences in the way in which taxable persons are treated as a whole. It therefore does not infringe the principle of fiscal neutrality.