Mediaboss Marketing

11 May 2012

The Court of Justice of the European Union (ECJ) has decided the Italian provision that private operators should have a share capital of at least EUR10m (USD13m) in order to be entitled to collect local taxes is contrary to European law on freedom of establishment and freedom to provide services.

It was noted that Italian local authorities may choose to award the tasks of assessment and collection of taxes to third party operators. In that case, those activities are awarded by means of concessions which comply with EU legislation on the tendering of the management of local public services.

Italian legislation also provides, however, that private companies seeking to carry out those activities must have a fully paid-up share capital of EUR10m, whereas companies in which a majority of the share capital is in public ownership are not subject to that condition.

In consequence, the Italian Regional Administrative Court in Lombardy has been asked to rule in several sets of proceedings between private companies and regional municipalities, as the former submitted tenders for the award of concessions but were then excluded from the procedure because they did not have the required EUR10m share capital.

The Italian court, in turn, referred questions to the ECJ concerning the compatibility of the Italian legislation with EU law and, in particular, with the rules on freedom to provide services and freedom of establishment.

In its judgment, the ECJs reply is that the Italian legislation does amount to a restriction on freedom of establishment and freedom to provide services inasmuch as it contains a condition relating to minimum share capital. Consequently, such a provision impedes or renders less attractive the freedom of establishment and the freedom to provide services.

In addition, however, the ECJ then goes on to examine whether such a restriction may be justified by overriding reasons in the public interest, with the only ground of justification raised before the court being the need to protect public authorities against possible non-performance by a concession holder, in the light of the high overall value of the contracts which have been awarded.

The ECJ notes that a restriction of fundamental freedoms may be justified only if the relevant measure is appropriate for ensuring the attainment of the legitimate objective pursued and does not go beyond what is necessary to attain that objective; but that the Italian court had given other provisions capable of providing adequate protection for public authorities, including other proof of the operators technical and financial capacity, creditworthiness and solvency, or the application of minimum thresholds for share capital that vary depending on the value of the contracts actually awarded to the concession holder.

Consequently, the ECJ finds that, as the Italian provision goes beyond the objective of protecting the public authorities against non-performance by concession holders, it also contains disproportionate, and therefore unjustified, restrictions of fundamental freedoms.

Read this article:
Restrictions On Italian Private Tax Collectors Declared Illegal