Several recent rulings by several territorial tax courts have affirmed that confiscation, in addition to a fine of 2 to 10 times the evaded VAT, is entirely disproportionate to the infringement committed
by Federico Santini*
In the paper published in the August 2023 issue, we analysed the penalty regime provided for in Italy for smuggling in violation of customs regulations on temporary importation (so-called non-inspective smuggling) for which the owner of a non-EU pleasure yacht who fails to comply with the 18-month deadline given for clearing the yacht in EU waters is liable.
THE COURT AFFIRMED THAT A PENALTY IN THE OBLIGATION TO PAY A SUM EQUAL TO 480% OF THE DUTY EXCEEDS THE LIMITS NECESSARY TO ENSURE COMPLIANCE WITH CUSTOMS LEGISLATION AND IS NOT PROPORTIONATE TO THE EVADED DUTY.
We explained at the time that, in addition to the fine ranging from a minimum of 2 to a maximum of 10 times the evaded VAT (in addition to the possible penalty of imprisonment of up to 3 years when the evaded VAT exceeds € 100,000), the yacht’s mandatory confiscation is provided for as an additional penalty, whereby the shipowner loses ownership of the yacht, which is then acquired by the State and subsequently resold at auction. The previous article pointed out that, as an additional penalty over and above the above-mentioned harsh fine and, in the most serious cases, imprisonment, confiscation of the yacht is excessive and does not, on the whole, comply with the principle of proportionality of penalties, which is expressly established at both national and EU level.
Several recent rulings by several territorial tax courts have finally affirmed this thesis, namely that the penalty of confiscation, in addition to the fine of 2 to 10 times the evaded VAT, is entirely disproportionate to the violation committed. Of particular note is ruling No. 94 of 4 July 2023 issued by the first-degree Tax Court of Imperia, with which – in a case of smuggling (the offence had been committed under the previous legislation which had decriminalised smuggling if the evaded VAT was less than € 50,000) – the seizure order was annulled on the grounds of an alleged breach of the principle of proportionality between the fine and the legal offence, under Article 42 of EU Regulation. No. 952/2013. The court held that a penalty amounting to 480% of the tax exceeds the limits necessary to guarantee compliance with customs legislation and is not proportionate to the evaded tax.
A RULING BY THE IMPERIA TAX COURT ANNULLED THE SEIZURE ORDER FOR ALLEGED VIOLATION OF THE PRINCIPLE OF PROPORTIONALITY BETWEEN THE PENALTY AND THE INFRINGEMENT.
We also mention, although it refers to cases of smuggling of a sports car, ruling No. 42 of 27 February 2023 of the second-degree Tax Court of Friuli V. Giulia Gorizia, in which – again in the case of smuggling (the offence had been committed under the previous legislation which had decriminalized smuggling if the evaded VAT was less than € 50,000) – the seizure order was annulled because it was unquestionably excessive and disproportionate to that strictly necessary to implement the interests of the tax authorities, where the offender had already paid the tax and the mandatory fine.
The most interesting ruling, albeit interlocutory, is Order No. 21917 of 21 July 2023 issued by the Tax Section of the Supreme Court of Cassation, through which the Court remitted the proceedings to the First Presiding Judge for a possible ruling by the United Sections – the highest judicial body in Italy – on the issue of whether criminal and administrative customs confiscation is mandatory or not depending on the severity of the offence in terms of damage to the Treasury and the proportionality of the penalties based on European principles.
We must now await the outcome of the ongoing proceedings to know whether the United Sections of the Supreme Court of Cassation will take up the matter and, if so, which principles of law they will adopt on this issue of particular importance due to its significant practical implications in the specific sector of non-EU yachts in Italian waters.
Opening photo ©2019 C. Clark – Yachtpics
(Customs confiscation – Barchemagazine.com – December 2023)
