State aid: Commission approves Italian 'cuneo fiscale' tax reduction scheme
European Commission - IP/07/1306 12/09/2007
Brussels, 12th September 2007
The European Commission has authorised, under EC Treaty state aid rules, the so-called 'cuneo fiscale', a tax measure adopted by Italy. The scheme offers deductions from the regional tax on all types of business activities (IRAP). The Commission concluded that following certain modifications adopted by the Italian Authorities, 'cuneo fiscale' became a general measure and so does not constitute state aid.
Competition Commissioner Neelie Kroes commented: “I very much welcome the positive attitude of the Italian Government, who decided to transform the 'cuneo fiscale' into a general measure to the benefit of the Italian economy as a whole”.
IRAP is a regional tax levied on the value added generated by all types of business. IRAP is computed by subtracting from revenues all intermediate costs such as salaries and raw materials.
In April 2007, Italy notified a reduction of the tax base of IRAP, consisting in the following deductions: (i) €5000 per employee with a work contract of indefinite duration; (ii) social security contributions related to pensions and sickness insurance; and (iii) contributions related to work accidents.
These deductions applied to the whole Italian economy with the exception of the banking and insurance sectors, public utilities operating under a concession and a regulated tariff, and public administrations.
Following bilateral contacts, Italy accepted to extend the scope of the measure to the banking and insurance sectors.
Therefore, the only remaining exclusions concern those public utilities that operate under both a concession and a regulated tariff and public administrations. According to the Italian authorities, the exclusion of the former was necessary to avoid overcompensation since the regulated tariff under which they were operating already took into account the cost of taxation, including IRAP. Public administrations do not usually perform economic activities and are therefore not regarded as undertakings for the purposes of the state aid rules.
On the basis of these elements the Commission considered that the exclusions were duly justified.