The proposals of reform of the Italian tax justice pursuant to the report of the intra-ministerial

Prepared by Carlo Romano, Maurizio Foti and Rubina Fagioli

On June 30th, 2021 the commission for the reform of the Italian tax justice (hereinafter the “Commission”), established on April 14th 2021 with the decree of the Ministry of Justice and Ministry of the Economics and Finance (“MEF”) released the report containing the proposals for a systematic reform of the tax justice (hereinafter “Report”), which represents one of the objectives of the Italian Government within the National Recovery and Resilience Plan. 

More in detail, the Report makes an overview of the main issues of the current tax justice system and of the measures and legal instruments that might overcome these issues and ameliorate the tax justice and reduce the length of the tax proceedings. 

Precisely, the issues identified in the Relation are the following:

  • The complexity and variety of the Italian laws and regulations. According to the Commission, the numerous and often inconsistent provisions – mainly due to the technicalities of the tax matters, to the diversity of the political views and the frequent use of interpretative provisions, may undermine the certainty of the law;
  • The poor knowledge of the case law of the Tax Courts. Differently than as for the case law of the Supreme Court, taxpayers and lawyers can rely on few or incomplete, where available, databases collect the case law of the Tax Courts. This will be of impediment to the possibility to know in advance the decisions of the judges and to predict the possible outcomes of the proceedings and the probabilities of favorable judgments;
  • The excessive length of the proceedings. The average length of the proceedings before the Tax Courts is three years and the average length of the proceedings before the Supreme Court is four years because of the small number of judges available; 
  • The insufficient degree of specialization of the judges. The professionality of the tax judges is a long-term and complex issue. The lack of a corpus of judges, focused on cases exclusively related to tax matters is a peculiarity of the Italian tax justice regime that needs to be addressed;
  • The number of the pending proceedings. The excessive number of proceedings and the increase of the backlog (for instance, there are more than 55.000 pending proceedings only before the Supreme Court the majority of whom have started before the Tax Court of first instance more than 10 years ago) affects either the quality of the decisions and the whole duration of them;
  • The general feeling that tax judges are not effectively independent. One of the main indicator of this lack of independence is represented by the procedure by which the remuneration of the tax judges is determined and by the absence of specific officers and employees of the Council of Presidency of the Tax Justice, i.e. the organism that controls the independence. This kind of procedure gives the feeling that the tax judges de facto depends fr
  • om the MEF.

In order to tackle these issues, the Commission has identified the following seven lines of intervention:

  1. To prevent the tax litigation increasing the opportunities to have meetings with the Tax Administration and to apply for the tax settlement in the tax procedures. More specific, the Commission has proposed to introduce two provisions according to which respectively (i) the taxpayers have right to be heard before any deed of assessment is issued, with the consequence that the deed of assessment issued without the prior meeting with the taxpayers is invalid and (ii) the obligation of the Tax Administration to initiate a tax settlement procedure in cases where a deed of assessment is manifestly illegitimate;
  2. To prevent the tax litigation encouraging the tax settlement procedures such as the mediation and conciliation. In detail, the proposal of the Commission is to invest in hiring and training a larger number of officers in charge of the mediation and to introduce the conciliation upon request of the Tax Administration, in addition to the current conciliation upon request of the taxpayers;
  3. To fill the gap of the deficit of information about the case law of the Tax Courts, encouraging the predictive justice. Indeed, continuing the same road undertaken by the Council of the Presidency of the Tax Justice two years ago, the Commission has proposed to create a complete and accurate database in order to provide taxpayers with relevant jurisprudence that might help them to predict the potential successful outcomes of the proceedings, should they decide to enter into litigation with the Tax Administration;
  4. To increase the specialization of the tax judges. In this regard, according to the first proposal, not-specialized judges will continue to work alongside judges of the Tax Courts of first degree in possess of a degree in law, accountancy or economics or doing a MBA, when they are not part of the ordinary, administrative or accountant judicial corpus. Moreover, the judicial proceeding still will articulate in two degrees but only in the first degree there will be a specific section in charge of the controversies whose value do not exceed Euro 25.000 which are related to specific matters, such as registration in the land registry, excise and duties with full-time judges or professionals employed for most of their time. According to the second proposal (shared, inter alia, by the emeritus president of the Supreme Court, Franco Gallo), which emphasizes the principle of specialization, in the first degree there is the creation of a special judge called “Tax Court” and in the second degree “Tax Court of Appeal” and a special section in the Supreme Court, formed by ordinary judges and special tax judges in order to ensure an even consistent interpretation of the tax provisions and principles of law and to reduce the controversies. Moreover, according to this proposal, a monocratic judge will be in charge to decide the cases whose value does not exceed Euro 3.000.
  5. To consolidate the independence of the tax judges in a way that the Council of Presidency of the Tax Justice will ensure taxpayers to be independent from the MEF;           
  6. To increase the quality of the taxpayers’ rights of defense.Among the different interventions proposed by the Commission there are: to allow the appeals towards tax deeds that violate general principles of the ECHR or the Supreme Court; to allow that the centers for the tax assistance can assist taxpayers before the Tax Courts in the low-value controversies; to introduce the testimonial evidence in case of specific conditions and specific circumstances that are subject of third parties’ declarations contained in measures of investigations;
  7. To improve the judicial stage before the Supreme Court. The Commission has proposed to introduce the preliminary ruling: the first or second instance judges can release their judgment containing a general principle of law following a stage of meetings with the taxpayer, instead than waiting that the two degrees of the judicial proceedings before the Tax Courts of merit have come to an end. The same outcome can be reached when the General within the Supreme Court ask to the First President of the Court to refer the decision on a significant matter, having regards to the relevant and new issues at stake that can contribute to solve a series of other cases; to increase the workforce and staff and the time of stay within the Supreme Court.   

Having regards to the need and the urge of a wide-ranging reform of the Italian tax justice, the institutions are expected to act promptly in order to align the Italian tax justice to that of the other main European countries. To this end, the Reform elaborated by the Commission, that has drafted the proposals for the reform, represents an effective instrument to guarantee the independence of the tax justice and the taxpayers’ right of a fair trial, as well as to reduce the tax controversies. Among the proposals of the Commission, the proposal to create first and second instance degree Tax Courts is of utmost importance because it provides proper weight to the tax sector, which is renowned to create many controversies due to its complex matters.

Let’s Talk

For a deeper discussion, please contact:

Carlo Romano

PwC TLS Avvocati e Commercialisti


Maurizio Foti

PwC TLS Avvocati e Commercialisti

Senior Manager