Italy’s regime of offering corporate tax-exemption to its ports and harbours is a breach of EU competition rules, the European Commission announced on Friday (4 December), giving the government until 1 January 2022 to ditch the tax perks.
Today’s decision wraps up a year-long inquest by competition boss Margrethe Vestager’s services into the Italian ports scheme, which the EU executive insists offers “a selective advantage”.
Ports pay no corporate taxes and are free to spend their tax savings at their discretion, under a system that has been in place for decades. According to the results of the Commission inquiry, it must be amended over the course of the next 12 months.
“EU competition rules recognise the relevance of ports for economic growth and regional development, allowing member states to invest in them,” Vestager said in a statement.
The Danish official added: “At the same time, to preserve competition, the Commission needs to ensure that, if port authorities generate profits from economic activities, they are taxed in the same way as other companies.”
“Unjustified corporate tax exemptions for ports distort the level playing field and fair competition. They must be removed,” she concluded. Belgium and France were on the receiving end of a similar decision in 2017.
Dutch ports were told to pay tax in 2016 and last year Spain agreed to rewrite its tax laws. Spanish harbours have been subject to corporate tax since the beginning of 2020.
The silver lining for Italian harbours, which will see their financial windfall diminish, is that the Commission will class the tax exemptions as “existing aid” because the policy was in place before Italy even joined the European community back in 1958.
Vestager’s services also concluded that the regime “does not pursue a clear objective of public interest”, because the tax savings are not earmarked for initiatives that pursue sustainability goals or multi-modality.
Earlier this year, the EU executive approved €9 million in state aid to help shift freight from road to rail in and around the port of Genoa, one of Italy’s most important harbours, following the tragic collapse of the Morandi bridge in 2018. The subsidies will last until 2021.
The Commission explained in its decision today that governments are able to pursue other ways of supporting ports. In 2017, the rules governing financial aid were loosened and up to €150 million can be invested without Brussels needing to give it the green light.
Italy is still waiting for Vestager to rule on a proposed merger between shipbuilder Fincantieri and French counterpart Chantiers de l’Atlantique. The tie-up would create a ‘European champion’ in the sector but the Commission’s initial inquest identified competition concerns.
[Edited by Zoran Radosavljevic]