THE EU REJECTS REVERSE CHARGE, RENZI: “NO TO SAFEGUARD CLAUSE” New problems on the horizon for public finances, an overdraft worth 700 million Euros . The government will not increase excise taxes on petrol

  • Italiano

“The safeguard clause will under no circumstances be triggered off”. Matteo Renzi gave his assurance in a speech at Bersaglio Mobile on TV channel La7. Hence, no increase on excise taxes on petrol to cover the 728 million worth hole in the public budget, following the EU’s rejection to extend the reverse charge on the big retailers. It practically concerns an accounting ‘shift’ whereby the buyer of goods of services, as long as he is taxable within the state, will end up paying for the VAT and not the seller. The latter hence will receive from the client the total amount of the goods or servece sold and so be exemppt from the payment of the VAT arising from the financial transaction. The rejection was supposed to have triggered off the Stability Law, but the government in disagreement with Bruxelles, will endeavour to find other means of covering up for the overdraft in the budget. Confindustria (Italian Industrial Confederation) is said to be satisfied and that it has filed an appeal to the EU against the measure.

What remains to be esamine instead is the mechanism of the split payment – which should ensure over 900 million Euros revenue – the possibilities of getting the go-ahead on this are good. In conclusion to the analysis, which began on12th February, date when Italy had presented its request to shift the reverse charge onto the retailers, the Commission had concluded “it is not in line with article 395 regarding VAT matters”. According to Bruxelles, “there is not sufficient proof to know whether the measure can contribute in the fight against fraud. Furthermore, it iso f the opinion that such a measure would lead to higher risks of shifting the frauds to the commercial sector and to other states as well,” said Vanessa Mock, spokesman to Tax-Commissioner Pierre Moscovici.

The Commission has fully expressed its views in a communiqué sent to the government where it recommends rejecting the Italian request. It is up to the government now to answer, but it is assumed that the opinion of Brussels Commission will immediately follow. Brussels, reads the communiqué, “has always had a cautious approach, in order to ensure that the exemptions would not undermine the general working of the VAT system as a whole, be they limited, necessary or proportional. Any exemption on the fractional payment system, cannot be considered an emergency measure or a last resort in proven cases of fraud, and should therefore ensure the necessity or exceptional nature of the exemption, the duration of the measure and the nature of the products. The reverse charge cannot be used systematically to mask the shortfalls in surveillance by the state’s tax-authorities.”. Bruxelles instead believes “th Italian authorities have not demonstrated that for the typology of the goods in question, it is imposssible to check using conventional methods circumstance that would justify the necessity for a similar measure. Furthermore, the government had thought of it as an anti-tax evasion measure, but the Commission “has serious doubts that it would have positive impact which the Italian authorities expect, because it may be suitable to prevent a ‘Carousel’ fraud but not all the other that would bring to avoid paying VAT.

The measure had been prescribed for the last law of Stability perfected by Renzi’s government. But it represents yet another set back, this time from Brussels, which, following the Constitutional Court’s rejection over the ”Robin Tax” wanted by Tremonti on public utilities and further to the blockage applied on pension-indexations of Monti’s government, hence the supertax on electronic cigarettes. This may not yet be over: next week 26 May, i twill have to decide on 8% premium asked by Equitalia on the sums collected (in other words 2-3 billion) ad then 23 June on the blockage on public civil servants’ pay which has been lasting for years. On the public Treasury, this is going to mean an ultimate drain on its coffers worth about 12 billion Euros.

Translation provided by Marina Stronati

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