tax litigation

Tax litigation: the importance of prevention

Giulio Tedeschi Giulio Tedeschi

On the occasion of the opening of the legal year 2018, the President of the Italian Court of Cassation couldn’t forbear to make comments on tax litigation issues.

The cue for his speech - and for our discussion - is the high number of appeals pouring in the Tax court: over 11 thousand only in 2017. This means that 37.5% of civil suits concern, in the aggregate, tax issues.

A first point to be considered is the increasing attention required for tax compliance and, most of all, for tax risk management. This activity cannot be considered as mere knowledge to implement tax regulation, but rather as an analysis of the adequacy of business processes and procedures to process and provide suitable information, and then to comply with tax fulfilments (i.e., tax risk management at all levels, starting from governance bodies).

A second issue to be pointed out is the confirmed difficulty in interpreting the complex tax regulation. The function of the Court of Cassation, i.e. guaranteeing a uniform interpretation of tax laws, thus implying for professionals and personnel dealing with tax functions a daily study and discussion of multiple judgments (over 10 thousand judgments and rulings are filed every year).

One third and last consideration is to be made on the increasing valorisation of deflationary measures provided for tax litigation, in order to benefit from reductions in penalties, and the use of voluntary disclosure of tax payments, when the taxpayers realize that they have made some mistake.