- Italy’s Constitutional Court ruled today that part of a 2022 windfall tax weighing on energy companies is unlawful.
- Under the scheme, companies should have paid a 25 per cent rate of a value based on operations subject to VAT sales tax.
Italy‘s Constitutional Court ruled today that part of a 2022 windfall tax weighing on energy companies is unlawful, a decision that could have repercussions for Rome’s strained public finances.
The ruling paves the way for firms to demand partial refunds and limits the scope for similar taxes in the future.
In 2022, then-prime minister Mario Draghi introduced a one-off levy that allowed the Treasury to collect 2.8 billion euros ($2.99 billion), despite criticism and refusals to pay from numerous companies.
Under the scheme, companies should have paid a 25 per cent rate of a value based on operations subject to VAT sales tax. The tax take was used to fund relief measures for families and businesses affected by high energy costs triggered by the Russian invasion of Ukraine.
But the levy was unlawful because it included excise duties in the tax base that companies were forced to use to calculate the sums to be paid, according to the ruling.
“The exceptionality of the moment and the temporary nature of the levy cannot be considered a justification for the introduction of any form of taxation,” the Constitutional Court stated in its ruling.
One of the sources said the impact on public finance may be limited because the Treasury will be able to offset any refunds with sums collected from companies that have still not paid the levy.
Italy’s 2023 budget deficit came in at 7.4 per cent of GDP, the highest in the 27-nation European Union. The Treasury plans to bring the fiscal gap below the EU’s 3 per cent limit only in 2026.
The Court will also have to rule on the legitimacy of the energy windfall tax introduced by Prime Minister Giorgia Meloni for 2023 only, which raised almost 3.5 billion euros from 7,000 producers and sellers of electricity, gas and petrol products.
This levy had a rate equal to 50 per cent of the part of 2022 corporate income that was at least 10 per cent higher than the average income reported between 2018 and 2021.