Judgment — ECLI:EU:C:2012:186
Date: 2012-03-29
Language of the case: Italian
Court formation: Fourth Chamber
Subject matter: Taxation;Principles, objectives and tasks of the Treaties;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Italy

Summary outline of the submissions on the substance 29. The Commission considers it necessary to proceed on the basis of the referring court’s interpretation of the disputed provision in the question referred, namely that it ‘in effect provides for the VAT debt claimed to be wholly waived’ where the criteria set out in the disputed provision are met. 30. On that basis, it submits that the disputed provision is a general waiver of the kind censured by the Court in Case C‑132/06 and, for essentially the same reasons as those set out in that judgment, is precluded by EU law. Under the disputed provision, it argues, a whole category of claims by the tax authorities is simply wiped out, without any evaluation of individual circumstances. However, the Commission stated at the hearing that no infringement proceedings had been initiated against Italy in respect of the disputed provision. 31. The Italian Government submits that, unlike the amnesty in issue in Case C‑132/06, the disputed provision is a purely procedural rule relating to proceedings before the tax courts, operating downstream of the State’s exercise of its powers and performance of its obligations with regard to the verification and collection of sums due by way of VAT. While the Court is in principle bound by the national court’s interpretation of national law, the order for reference in this case is defective in that it fails to explain why the disputed provision is to be regarded as a general waiver. The Court should therefore take account of the Italian Government’s own explanation. 32. In the alternative, the Italian Government submits that, unlike the amnesty in Case C‑132/06, the disputed provision does not seriously disrupt the proper functioning of the common system of VAT or the principle of fiscal neutrality, nor does it place taxable persons who are guilty of tax evasion in a more favourable position. (15) On the contrary, it applies only in cases where the need to respect the requirement of a timely settlement of disputes laid down in the ECHR and the concern to disencumber a court system overloaded with increasingly long-pending proceedings outweigh the diminishing public interest in pursuing tax claims which have already been rejected at first and second instance. Assessment Interpretation of the disputed provision 33. While interpretation of the disputed provision is a matter for the national courts, I do not agree that this Court is rigorously bound by the description of that provision in the question referred as wholly waiving the VAT debt claimed. The effect of the provision can be ascertained from its wording. What the referring court wishes to know is whether that effect can be regarded as ‘a general and indiscriminate waiver of verification of taxable transactions’ within the meaning of the judgment in Case C‑132/06, or as sufficiently similar to such a waiver to be equally precluded by EU law. The question does not presume that the disputed provision can be so regarded. Had it done so, the referring court’s own interpretation would already have provided the answer. 34. If, however, the Court were to consider itself bound by that interpretation, it would have to answer the question in the affirmative. Comparison with the provisions in issue in Case C‑132/06 35. The effect of the disputed provision appears appreciably different from that of the provisions in issue in Case C‑132/06. 36. The latter (16) essentially granted broad immunity from assessment or investigation by the tax authorities in respect of amounts of VAT which had not been declared in good time, in exchange for a payment varying from half the amount subsequently declared as due to a purely token amount of tax. As the Court stated, (17) they had the effect that ‘taxable persons who [were] guilty of tax evasion [were] placed in a more favourable position’. The Court further considered (18) that, ‘by introducing an amnesty measure very shortly after the expiry of the deadlines by which taxable persons should have paid VAT and by requiring payment of an amount which is paltry as compared with the VAT actually due, the measure in question enables the taxable persons concerned to escape once and for all their VAT obligations, despite the fact that the national tax authorities would have been able to detect at least some of those taxable persons during the four years preceding the date after which recovery of the tax normally payable would be time-barred. In so doing, Law No 289/2002 undermines the responsibility incumbent on each Member State to ensure the correct levying and collection of the tax.’ 37. The same cannot be said of the disputed provision here. As the Italian Government and the Commission agree, it applies to the judicial phase and not to the administrative phase for which the tax authorities are responsible. Its procedural nature is underlined by the fact that it applies not simply to VAT, as was the case of the provisions in issue in Case C‑132/06, but to appeals relating to all kinds of tax before the Commissione Tributaria Centrale. There is no immunity from investigation or assessment by the tax authorities. All cases concerned had been investigated, and the amounts considered due had been claimed, before the disputed provision was enacted. That provision puts a term to the tax authority’s final appeal against an adverse judicial decision, but does not specifically benefit those who have been guilty of tax evasion. Indeed, it seems unlikely (one hopes particularly unlikely) that such persons would twice be successful before the courts in a dispute with the tax authority — not only at first instance but on appeal. Finally, the disputed provision entered into force more than 14 years after the last date on which final appeal proceedings could have been lodged, not ‘very shortly after the expiry of the deadlines by which taxable persons should have paid VAT’. (19) 38. It is therefore not possible to assert that the disputed provision ‘undermines the responsibility incumbent on each Member State to ensure the correct levying and collection of the tax’ in the same way as did the provisions at issue in Case C‑132/06. Duties of the Member States 39. The Commission stresses the Member States’ duties ‘to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on its territory’, ‘to ensure compliance with the obligations to which taxable persons are subject’, ‘to ensure effective collection of the Community’s own resources’ and ‘not to create significant differences in the manner in which taxable persons are treated’. (20) 40. Such duties cannot, however, extend to ensuring that, as a general rule, the tax authorities may continue appealing against judicial decisions until a favourable decision is obtained. Nor does any principle of EU law require more than one appeal to be available. This Court itself is an example, for certain types of proceeding, of a court of first and last instance. In certain other legal systems, there is no absolute right to appeal, and leave to appeal may rarely be granted to a party who has been unsuccessful before two successive courts. In any system, there must come a point at which no further appeal is available. In no system is there a guarantee that the final decision will be incontrovertibly correct in law. 41. The disputed provision puts a term to the tax authority’s final appeal after adverse decisions at first and second instance. It concerns, therefore, a situation in which that authority has taken what may be deemed appropriate measures for ensuring collection of VAT which it considers due, but in which a first instance and an appeal court have both ruled that the VAT claimed was not in fact due. I cannot accept that such a measure represents in itself a failure on the part of the Member State to ensure proper enforcement of the VAT system. 42. At the hearing, the Commission agreed that there was no general duty on a Member State to ensure that the tax authority may bring a second appeal in VAT disputes, but submitted that, where such an appeal is normally available, it is not permissible for an arbitrarily defined subset of appeals to be ‘decapitated’ after having been lodged but before they can be determined. 43. It seems to me that the disputed provision does not concern an arbitrarily defined subset of appeals. It concerns all appeals before the Commissione Tributaria Centrale in which the tax authority has been unsuccessful at first and second instance, in all of which proceedings have been pending for more than 10 (in practice, 14) years. The Member State’s duty under Article 22 of the Sixth Directive to ensure that VAT is correctly assessed and collected implies compliance within a much shorter period. (21) It may well be argued that, by not ensuring that disputes over assessment were determined within a reasonable time after VAT should have been definitively accounted for, despite two judicial decisions in favour of the same party, Italy was failing in that duty. It cannot, in my view, be argued that it has failed in its duty by concluding such disputes after 14 years in the only way which could not involve injustice to the party in whose favour those previous judgments were given. (I stress that these remarks concern the disputed provision itself, and not the different provision which applies to appeals before the Corte di Cassazione, or to the relationship between the two.) 44. The Commission also referred to the Court’s judgments in Lucchini (22) and, more particularly, Fallimento Olimpiclub. (23) Both cases concerned the application of the res judicata principle in Italian law. In Lucchini, the Court found that EU law precluded the application of a national provision seeking to lay down that principle if its application prevented the recovery of State aid found by the Commission, in a decision which had become final, to be incompatible with the common market. In Fallimento Olimpiclub, referring to Lucchini, it held that application of the same provision was precluded in a VAT dispute relating to a tax year in respect of which no final judicial decision had yet been delivered, where such application would prevent the national court from taking into consideration the EU rules concerning abusive practice in the field of VAT. The Commission seeks to draw a parallel between those precluded applications of the res judicata principle and the disputed provision, in so far as the latter appears to accord the authority of res judicata to the decision of the first appeal court while withdrawing any question of compatibility with EU law from (what would otherwise have been) the final appeal court. 45. I do not find that parallel valid. The situation in Lucchini was highly specific; the matters at issue were principles governing the division of powers between the Member States and the Community in the area of State aid, the Commission having exclusive competence to assess the compatibility with the common market of a national State aid measure. And Fallimento Olimpiclub, although a more closely related case in that it concerned VAT, was decided on the specific issue of whether it was compatible with the principle of effectiveness to interpret res judicata as meaning that, in VAT disputes, where a final judgment in a given case concerned a fundamental issue common to other cases, it had binding authority as regards that issue, even if its findings were made in relation to a different tax period. Neither of those situations, nor any comparable situation, prevails in the present case, which should be decided in the light of its own specific features. 46. The Commission has further emphasised that VAT forms the basis of one of the EU’s ‘own resources’, for the effective collection of which the Member States are responsible. (24) 47. That is of course true. The VAT-based own resource is set at 0.3% of a harmonised VAT assessment base for each Member State. (25) Since the theoretical harmonised base is in fact calculated back from amounts actually collected, (26) effective collection by the Member States affects EU budget revenue. 48. However, the requirement of effective collection cannot be absolute. The cost and likelihood of collection must be weighed against potential revenue. With regard to the disputed provision, there would be a cost not only, for the tax authority, in pursuing the proceedings but also, for the State, in maintaining the Commissione Tributaria Centrale in existence for, foreseeably, a very long time. The likelihood of collection is affected not only by the fact that two judicial rulings have been unfavourable to the tax authority but also simply by the passage of time, which may have rendered some amounts incapable of recovery even in the case of a subsequent favourable ruling. In addition, the duty to collect must be weighed against the duty to allow the taxable person to close his accounts within a reasonable time after the end of each VAT period. Where a dispute has been pending for a considerable period, there will inevitably come a point at which such considerations must outweigh the duty to pursue all VAT claims. The criteria set out in the disputed provision do not appear unreasonable in that context. Comparison with Article 16 of Law No 289/2002 49. The Commission refers to case-law of the Corte di Cassazione concerning Article 16 of Law No 289/2002, Articles 8 and 9 of which were the subject‑matter of the Commission’s action in Case C‑132/06 and were found by the Court to be incompatible with EU law. Article 16 allows the taxpayer to obtain closure of any pending proceedings before any tax court on payment of 10% of the amount in dispute, or of EUR 150 if the amount in dispute is less than EUR 2 000. The Corte di Cassazione has found that article to be tainted by the same incompatibility as Articles 8 and 9 of Law No 289/2002. The Commission submits that such a finding is relevant when assessing the disputed provision which, it claims, is ‘practically identical’. 50. The compatibility with EU law of Article 16 of Law No 289/2002 is not in issue in these proceedings, and it is not for the Court to express a view at this juncture. However, I note that it presents at least one significant difference in relation to the disputed provision, in that it applies to all pending proceedings before all tax courts, regardless of duration. It thus seems considerably more like a ‘general waiver’ than does the disputed provision, which applies only to third-instance proceedings when the proceedings as a whole have been pending for more than 10 (in practice, 14) years. I do not, therefore, think that any national case‑law concerning Article 16 of Law No 289/2002 can be considered relevant for present purposes. Comparison with case-by-case settlements 51. The Commission emphasises that the disputed provision entails conclusion of all disputes concerned, without regard to any likelihood of a ruling in favour of the tax authority. It contrasts that with other provisions of Italian law which allow judicial settlement of disputes between the tax authority and the taxable person on the basis of an individual assessment of the dispute by the authority, and/or of payment by the taxable person of a proportion of the amount claimed. The disputed provision embodies, in the Commission’s view, a general waiver within the meaning of the judgment in Case C‑132/06 rather than a case-by-case settlement, which it appears to consider acceptable. 52. I am unconvinced by that submission. 53. Admittedly, a party who has been unsuccessful at first instance and on a first appeal may succeed on a second appeal. Moreover, such a party will normally assess, with greater or lesser accuracy, his interests and chances of success before lodging a second appeal. A public entity such as a tax authority may also wish, on more general grounds of legal certainty, to obtain a final appeal ruling in the public interest. 54. On the one hand, the disputed provision seems in effect to replace the tax authority’s estimation of its interest in pursuing the case by a quasi-statistical approximation of the likelihood of a change of ruling on appeal. Where that likelihood is small, as seems to be contemplated by the disputed provision, the absence of a final appeal ruling, while not ideal, appears less problematic. 55. On the other hand, a negotiated case-by-case settlement, whereby the tax authority renounces its claim to the full amount which it considers due in exchange for payment of part of that sum, does not appear a more virtuous approach. It yields, necessarily, either more or less tax than should have been collected on a correct interpretation of the relevant legislation, while still relinquishing any possibility of a ruling on that interpretation by the court of final appeal. 56. Both options are less than ideal in terms of collecting all the tax that is due, but neither seems either unacceptable or comparable to a general waiver within the meaning of the judgment in Case C‑132/06. Justification on the basis of the ECHR 57. By contrast, the need to comply with the ‘reasonable time’ requirement in Article 6(1) of the ECHR (27) (and Article 47 of the Charter of Fundamental Rights of the EU, which applies to the Member States when they are implementing EU law) does appear to be a clear and especially powerful justification for a rule such as that in the disputed provision. With regard to the requirements of legal certainty, 10 years seems a particularly long time for judicial proceedings to be pending, unless justified by the specific circumstances of the case. (28) The disputed provision applies, in practice, only to proceedings which in April 2010 were at third instance and had been pending for 10 (in practice, 14) years or more, and whose overall duration has thus been appreciably longer. Whilst the mere fact of such duration is obviously a serious problem to be tackled by the Member State, (29) I do not think that the EU law obligation to ensure effective collection of VAT can require maintaining for more than 10 or 14 years a situation of legal uncertainty as regards a disputed amount of tax in relation to which the taxable person has already received two favourable judgments. 58. On the basis of all the above considerations, therefore, I take the view that the disputed provision in the present case is not comparable to those in issue in Case C‑132/06 and does not represent a failure on Italy’s part to ensure proper application of the VAT system. Requirement of fiscal neutrality 59. However, one aspect of the disputed provision appears questionable in the light of — inter alia — the Court’s judgment in Case C‑132/06, in relation to the requirement of ‘fiscal neutrality’, namely, the obligation ‘not to create significant differences in the manner in which taxable persons are treated, either within a Member State or throughout the Member States’. (30) 60. The Commission raises that aspect by asking why, if the aim of Article 3(2bis) of the converted decree-law was really to reduce the backlog of cases before the Commissione Tributaria Centrale and the Corte di Cassazione, it applied only to proceedings which had been pending for more than 10 years on a particular date, rather than all proceedings, as of such time as they reached the 10‑year limit. 61. That question does not seem to me to be appositely put in the context of the present case which, it must be recalled, concerns only cases before the Commissione Tributaria Centrale. When the disputed provision came into effect, all appeals before that court concerned proceedings which had been pending for more than 10 years, and no further appeals could be brought before it. 62. None the less, Article 3(2bis) as a whole does create a difference in treatment between final appeals in VAT proceedings, depending essentially on the date on which they were lodged rather than on the length of time for which they have been pending. (31) And, while a 10-year criterion may be regarded as an objective (though, as for any time-limit, arbitrary) distinguishing feature when viewed in the light of the ‘reasonable time’ requirement in Article 6(1) of the ECHR and Article 47 of the Charter of Fundamental Rights, it does not seem acceptable for that criterion to have differing effects depending simply on the date on which the final appeal was lodged. 63. Yet I do not consider that a sufficient ground for judging the disputed provision to be incompatible, in itself, with Italy’s duty to ensure effective collection of VAT and effective compliance by taxable persons with their obligations under the VAT system. What might be required is uniform treatment of all the situations covered by Article 3(2bis) of the converted decree-law, at least in so far as they concern VAT. If appeals pending before the Corte di Cassazione were to be treated in the same way as those before the Commissione Tributaria Centrale, whenever the duration of the proceedings reached the 10‑year limit, such a difficulty might be eliminated. The same might be true also if the treatment currently afforded to appeals before the Corte di Cassazione were to be extended to those before the Commissione Tributaria Centrale. However, I do not think that it is for the Court to express a view on either approach, or on any other, in the context of this reference for a preliminary ruling. Such considerations are not relevant to the question whether a measure such as the disputed provision is, when viewed alone, precluded by a correct interpretation of the EU legislation. Conclusion 64. I am therefore of the opinion that the Court should answer the question raised by the Commissione Tributaria Centrale to the following effect: A national provision under which, in value added tax disputes between a taxable person and the tax authority, when 10 years have elapsed since proceedings were brought at first instance, a second appeal by the tax authority following judgments against it both at first instance and on a first appeal is automatically concluded without a decision on the substance by the second appeal court, is not precluded either by Article 4(3) TEU (Article 10 EC) or by Articles 2 and 22 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment. 1 – Original language: English. 2 – Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1). 3 – Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1, amended on numerous occasions). 4 – See now Article 2(1)(a) and (d) of Directive 2006/112. 5 – Article 22 was replaced as from 1 January 1993 by Article 28h (Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of value added tax and amending Directive 77/388/EEC with a view to the abolition of fiscal frontiers, OJ 1991 L 376, p. 1), without substantive change to the provisions cited. See now Articles 252(1), 206 and 273 of Directive 2006/112. 6 – [2008] ECR I‑5457. 7 – Paragraphs 43 and 44 of the judgment. 8 – Legislative Decree No 545/1992. 9 – It appears that nearly 211 000 appeals were still pending in October 2010, but that it is hoped to bring all proceedings before the Commissione Tributaria Centrale to an end by 31 December 2012, enabling that body to be definitively wound up. 10 – Article 3(2bis) of Decree‑Law No 40/2010, converted into law by Law No 73/2010, which introduced Article 3(2bis). Article 3 is entitled ‘Reduction of litigation and rationalisation of collection’. I shall refer to Article 3(2bis), first sentence and subparagraph (a), as ‘the disputed provision’. 11 – The so-called ‘Pinto Act’, which provides a mechanism for claiming compensation in respect of the excessive length of judicial proceedings, introduced following a series of highly critical judgments by the European Court of Human Rights. 12 – Equivalent to approximately EUR 11 500. 13 – See point 11 above. 14 – Case C‑417/10 3M Italia, in which a hearing was held immediately prior to that in the present case. 15 – See paragraphs 44, 45 and 47 of the judgment in Case C‑132/06. 16 – See the summaries at paragraph 8 et seq. of the judgment, and at point 11 et seq. of my Opinion, in that case. 17 – At paragraph 47 of its judgment. 18 – At paragraph 52 of its judgment. 19 – And the present case concerns a claim for a credit which arose (or did not arise) some 30 years ago. 20 – See paragraphs 37 to 39 of the judgment in Case C‑132/06, cited in point 7 above. 21 – Article 22(4) and (5) of the Sixth Directive required taxable persons to submit a return within two months from the end of each tax period, which could not exceed a year, and to pay the net amount of VAT when submitting the return. 22 – Case C‑119/05 [2007] ECR I‑6199. 23 – Case C‑2/08 [2009] ECR I‑7501. 24 – See the 2nd and 14th recitals in the preamble to the Sixth Directive, and paragraph 39 of the judgment in Case C‑132/06. 25 – See Article 2 of Council Decision 2007/436/EC, Euratom of 7 June 2007 on the system of the European Communities’ own resources (OJ 2007 L 163, p. 17). 26 – See European Union public finance, fourth edition (EU Publications Office, 2008), p. 239. 27 – The European Court of Human Rights has repeatedly found procedural delays in Italy, of shorter duration than 10 years, to infringe Article 6(1) ECHR (see, for example, Sciortino v. Italy, no. 30127/96 (Sect. 2) (18.10.01), paragraph 19 et seq., and Scordino v. Italy (no. 1) [GC], no. 36813/97, ECHR 2006‑V, paragraph 175 et seq.). 28 – In the context of proceedings before the EU Courts, see, for example, Case C‑385/07 P Der Grüne Punkt [2009] ECR I‑6155, paragraph 181 et seq. 29 – See footnote 9 above. 30 – Paragraph 39 of the judgment. 31 – In fact, there is a threefold distinction: appeals before the Commissione Tributaria Centrale are treated differently from those before the Corte di Cassazione, and appeals before the latter are treated differently according to whether proceedings were initiated at first instance before or after 26 May 2000.