On 8 September, the Court of Justice of the EU ruled that by preventing, in cases of serious fraud in relation to VAT, the imposition of effective and dissuasive penalties because …
On 8 September, the Court of Justice of the EU ruled that by preventing, in cases of serious fraud in relation to VAT, the imposition of effective and dissuasive penalties because the overall statute of limitations period is too short, Italian law is liable to affect the financial interests of the EU.
Criminal proceedings were brought in Italy against Mr Ivo Taricco and other individuals charged with having formed and organised, between 2005 and 2009, a criminal conspiracy in which they put in place fraudulent ‘VAT carousel’ legal arrangements. Through the use of shell companies and false documents, they are alleged to have acquired bottles of champagne VAT free. This allowed the company ‘Planet’ to procure those bottles at costs below the market price, thereby distorting the market.
Some of the charges against Mr Taricco and other individuals are time-barred, whereas the other charges will be time-barred by 8 February 2018 at the latest, before a final judgment can be delivered, due to the complexity of the investigation and the duration of the procedure.
The case has come before the Tribunale di Cuneo (District Court, Cuneo, Italy), which wonders whether Italian law, by effectively granting impunity to persons and undertakings which commit criminal offences, has created a new VAT exemption which is not provided for by EU law. It seeks clarification in that regard from the Court of Justice.
By its judgment, the Court points out, first of all, that under Article 325 of the Treaty on the Functioning of the EU (TFEU), the Member States must counter illegal activities affecting the financial interests of the EU through effective deterrent measures and, in particular, take the same measures to counter fraud affecting the financial interests of the EU as they take to counter fraud affecting their own financial interests. The Court also notes that the European Union’s budget is financed, inter alia, by revenue from the application of a uniform rate to the harmonised VAT assessment bases, with the result that there is a direct link between the collection of that revenue and the financial interests of the EU.
In view of the foregoing, the Italian court must determine whether the Italian law at issue allows the effective and dissuasive penalisation of cases of serious fraud affecting the financial interests of the EU. Thus, the Italian law would be contrary to Article 325 TFEU if the Italian court were to conclude that, in a considerable number of cases, the commission of serious fraud would escape criminal punishment because the rules on limitation periods generally prevent the imposition of final judicial decisions. Likewise, the Italian law would be contrary to Article 325 TFEU if it provided for longer limitation periods in respect of cases of fraud affecting Italy’s financial interests than in respect of those affecting the financial interests of the EU. That seems to be the case, since Italian law does not lay down any absolute limitation period in respect of the offence of conspiracy to commit crimes in relation to import duties on tobacco products.