Case C-132/06: Action brought on  7 March 2006  — Commission of the European Communities v Italian Republic
Date: 2006-05-06
Institutions: Court of Justice
Subjects: European Commission, Italy, VAT, action for failure to fulfil an obligation, delivery, provision of services, tax inspection

6.5.2006

EN

Official Journal of the European Union

C 108/11

Action brought on 7 March 2006 — Commission of the
European Communities v Italian Republic

(Case C-132/06)

(2006/C 108/18)

Language of the case: Italian

Parties

Applicant: Commission of the European Communities (repre-
sented by: E. Traversa and M. Afonso, acting as Agents)

Defendant: Italian Republic

Form of order sought

— A declaration that, by providing both expressly and in a
general manner in Articles 8 and 9 of Law No 289 of 27
December 2002 (Finance Law for 2003) that assessment of
taxable transactions effected in the course of a series of tax
years is to be abandoned, the Italian Republic has failed to
fulfil its obligations under Articles 2 and 22 of the Sixth
Council Directive 77/388/EEC of 17 May 1977 (1)
in
conjunction with Article 10 of the EC Treaty;

— An order that the Italian Republic should pay the costs.

Pleas in law and main arguments

legislative measures

The Commission points out that the Community legislature
imposed a twofold obligation on Member States consisting not
only in adopting all
required under
national law to implement the Sixth VAT Directive but also in
adopting all administrative measures necessary to ensure that
taxable persons liable to VAT comply with the obligations
arising under the Sixth Directive, primarily the obligation to
pay the tax due as a result of effecting taxable transactions
spanning a certain period of time. It would not have made any
sense for the Community legislature to have provided for the
harmonisation of VAT, nor would it have served any practical
purpose,
fiscal authorities were not required to
implement a system of assessment and monitoring intended to
ensure ‘the collection of taxes in a uniform manner in all
Member States’, as stated in the fourteenth recital
in the
preamble to the Sixth Directive.

if national

The rules introduced by Articles 8 and 9 of Italian Law No
289/2002 went far beyond the bounds of administrative discre-
tion conferred on the Member States by the Community legisla-
ture. In fact, instead of using that discretion to achieve more
effective fiscal monitoring, by the above-mentioned law, the
Italian State truly abandoned in a general, indiscriminate and
preventive manner all forms of VAT assessment and verifica-
tion, and is thus in direct breach of the requirements under
Article 22 of the Sixth Directive and, as a consequence, of the
general obligation under Article 2 to subject all taxable transac-
tions to VAT. The Italian legislature has given all
taxable
persons liable to VAT and subject to its fiscal competence the
possibility of bypassing entirely any form of fiscal control in
relation to a series of tax years. A taxable person may acquire
such a significant benefit by the payment of an amount calcu-
lated according to a standard method which no longer has any
connection with the amount of VAT that would have been
payable in respect of the cost of supplies of goods or services
effected by the taxable person in the relevant tax year.

this radical

A particularly striking example of
‘separation’
between the tax liability that is calculated as being payable in
accordance with normal VAT rules and the ‘quantum’ payable
to qualify for the ‘graveyard amnesty’ is to be found in the case
of a taxable person who has failed to file any tax return at all.
The taxable person can regularise his position in respect of
each tax year by a payment of Euro 1 500 in the case of a
natural person or Euro 3 000 in the case of a company. A
further example of the total absence of any link with the basis
of assessment of transactions effected (but not declared) is to be
found in the rules governing the ‘graveyard’ amnesty, which
may be procured by submitting a supplementary statement.
The amount payable by a taxpayer wishing to take advantage
of the amnesty is calculated as a percentage (2 %) to be applied
to the VAT that would have been payable in respect of the
supply of goods or services effected in each tax year (or the
VAT improperly deducted in respect of purchases in the same
tax year).

Such a general and preventive abandonment of any means of
VAT verification is likely seriously to distort the proper func-
tioning of the common VAT system. In particular,
it would
undermine the principle of fiscal neutrality, which precludes
the different VAT treatment of traders effecting the same trans-
actions. Any exception to the rule that VAT should be levied
and collected effectively would result, on the one hand,
in
inflicting serious damage to the detriment of both Italian under-
takings and those in other Member States which are subject to
in
ordinary value added tax rules and, on the other hand,
seriously undermining the principle of ‘fair competition’ within
the Community market, set out in the fourth recital to the
preamble to the Sixth Directive.

(1) OJ L 145, p. 1