2002/581/EC: Commission Decision of 11 December 2001 on the tax measures for banks and banking foundations implemented by Italy (Text with EEA relevance) (notified under document number C(2001) 3955)

• Published date: 13 July 2002
• Official Gazette Publication: Diario Oficial de las Comunidades Europeas, L 184, 13 de julio de 2002

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32002D0581

2002/581/EC: Commission Decision of 11 December 2001 on the tax measures for banks and banking foundations implemented by Italy (Text with EEA relevance) (notified under document number C(2001) 3955)

Official Journal L 184 , 13/07/2002 P. 0027 - 0036

Commission Decision

of 11 December 2001

on the tax measures for banks and banking foundations implemented by Italy

(notified under document number C(2001) 3955)

(Only the Italian version is authentic)

(Text with EEA relevance)

(2002/581/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular the first subparagraph of Article 88(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to the provisions cited above and having regard to their comments(1),

Whereas:

I. PROCEDURE

(1) By letter dated 24 March 1999, the Commission, after receiving a Parliamentary question on the subject, requested the Italian authorities to supply information in order to assess the scope and effects of Law No 461 of 23 December 1998 ("Law 461/98"). By letters dated 24 June and 2 July 1999, the Italian authorities provided the Commission with information on the Law and on the related Legislative Decree No 153 of 17 May 1999 ("Decree 153/99"). After examining the information received, the Commission advised the Italian authorities by letter dated 23 March 2000 that the aforementioned Law and Decree were likely to contain aid elements and requested them to halt any measures implementing them. By letter dated 12 April 2000, the Italian authorities informed the Commission that they had suspended the implementation of the two instruments. Further information was supplied to the Commission by letter of 14 June 2000.

(2) By letter dated 25 October 2000, the Commission informed the Italian Government that it had decided to initiate the procedure laid down in Article 88(2) of the EC Treaty in respect of the aid.

(3) The Commission decision to initiate the procedure was published in the Official Journal of the European Communities(2). The Commission invited interested parties to submit their comments on the measure.

(4) The Commission received comments from interested parties. On 18 June 2001 it forwarded them to the Italian authorities, who were given the opportunity to react; their comments were received by letter dated 25 July 2001.

II. DETAILED DESCRIPTION OF THE AID

(5) Law 461/98 and Decree 153/99 introduce tax advantages for the consolidation of the banking sector:

1. the reduction to 12,5 % of the rate of income tax (IRPEG) for banks which merge or engage in similar restructuring, for five years after the operation, provided that the profits are placed in a special reserve which may not be distributed for a period of three years. The profits which may be placed in the special reserve may not exceed 1,2 % of the difference between the sum of credits and debits of the post-merger bank and the sum of credits and debits of the largest pre-merger bank (Article 22(1) and Article 23(1) of Decree 153/99);

2. tax neutrality for transactions in which goods and holdings in ancillary activities transferred to banks pursuant to Law No 218 of 30 July 1990 are returned to the transferring institution (Article 16(3) of Decree 153/99);

3. the imposition of a fixed amount replacing the indirect taxes normally due in connection with the operations cited above in (1) and (2) (Article 24(1) and Article 16(5) of Decree 153/99);

4. tax neutrality with respect to the local tax due on the increase in the value of property at the time of change in ownership, in connection with the operations cited above in (1) and (2) (Article 24(1) and Article 16(5) of Decree 153/99);

5. exemption from tax for the transfer to banking foundations of banks' holdings in the capital of the Banca d'Italia (Article 27(2) of Decree 153/99).

(6) Law 461/98 and Decree 153/99 also introduce tax advantages for banking foundations. The measures concerning banking foundations will not be dealt with in the present decision.

(7) Decree 153/99 grants tax benefits in relation to merger operations carried out in the years 1998-2004. Since the implementation of the measures was suspended in 2000, the tax savings should concern only operations completed in 1998, 1999 and 2000. However, should it in fact transpire that operations carried out after the suspension also benefited from the measure, these should be treated in the same way as operations carried out before the suspension, particularly when this decision is executed.

(8) On the basis of the 76 operations carried out in 1998, 1999 and 2000, the Italian authorities put at ITL 5358 billion (EUR 2767 million) the maximum theoretical amount of tax benefits that beneficiaries of the measure referred to in paragraph 5(1) above might have claimed over the specified five-year period. This estimate does not include tax benefits granted through measures indicated in paragraph 5(2) to (5).

(9) Formerly State-owned banks in Italy, which did not take the form of public limited companies, were gradually converted, and finally obliged by law to convert in 1993, into public limited companies. Their shares were either placed on the market or held by non-profit institutions referred to as "banking foundations". Law No 218 of 30 July 1990 introduced special tax rules by which the banking foundations that owned or controlled the newly created banks could transfer certain assets to those banks. The measures indicated in paragraph 5(2) and (5) refer to those same assets and define the conditions under which they might be returned to the transferring institution (i.e. the banking foundation).

(10) The Commission provisionally considered that aid granted by Law 461/98 and Decree 153/99 in connection with bank mergers was likely to be incompatible with the common market in the light of Article 87, for the following reasons:

- Law 461/98 and Decree 153/99 grant tax advantages for bank mergers that favour certain undertakings, notably those carrying out merger operations, enabling them to grow in size and benefit from economies of scale at a lower cost. Being confined to the banking sector, this constitutes a sectoral scheme which falls within the scope of Article 87(1) of the Treaty;

- The advantage is granted by forgoing tax revenues, i.e. through State resources. The aid affects trade between Member States since it makes it easier for Italian banks to expand abroad and more difficult for foreign banks to enter Italy;

- The aid to banks is not within the de minimis limit. The Italian authorities state that the tax advantages for banks are justified by the fact that they are necessary for the consolidation and modernisation of the banking sector. The Commission had doubts as to whether or not this might make it possible to consider the aid to be compatible on the basis of Article 87(3)(c). The Treaty gives the Commission sole competence for checking that aid projects meet such a compatibility criterion and this is why it requires prior notification. In addition, the aid does not satisfy the conditions laid down by the Community guidelines on State aid for rescuing and restructuring firms in difficulty(3). The measures in question are also likely to constitute operating aid in so far as they are not linked to the carrying-out of specific projects and reduce a firm's current expenditure; the Commission was unable to assess the precise volume involved when it carried out its ex ante examination.

On these grounds, the Commission initiated the procedure laid down in Article 88(2) of the EC Treaty.

III. COMMENTS FROM INTERESTED PARTIES

(11) The Commission has received a number of comments from beneficiaries of the aid, most of them being similar to those made by the Italian authorities.

(12) It was argued mainly that, even in the event that the Commission considered the measures as incompatible aid, there would be grounds for ruling out the recovery of the aid because of the legitimate expectations of the recipients.

(13) These expectations would be justified by the fact that the Commission did not call into question Law No 218 of 30 July 1990, which granted similar benefits. In fact, in its notice pursuant to Article 88(3) in the case of aid granted by Italy to Banco di Napoli(4) the Commission took the view that: "By allowing the assets to be revalued under a partial tax-exemption system and providing for the recapitalisation of certain public banks that have always been undercapitalised [...] in order to comply with the minimum capital levels laid down in the new Community Directives on banking, the 'Amato' Law made it possible to replace an unlimited State guarantee for public banks with limited capital injections. This was the first step towards treating public and private banks in the same way, thus limiting distortion of competition. [...] Consequently, it must be concluded that the capital contributions to the bank provided for under the 'Amato' Law do not constitute State aid within the meaning of Article 92(1) of the EC Treaty".

(14) The operations had also been cleared by the Banca d'Italia, which is the relevant competition authority for the credit sector.

(15) The recovery of the aid would also run counter to the proportionality principle. Merger operations were carried out on the basis of the tax incentive; recovery could produce financial instability for the beneficiaries and would alter the conditions on which they had based their merger decisions.

IV. COMMENTS FROM ITALY

(16) In its response to the initiation of the procedure, the Italian Government stated that the banking system in Italy has been subject since 1936 to strict public control and direct Government intervention in the management of a...