Tax arrears can be used to block contracts, Euro court says

Accounting clients working for public sector organisations within the
European Union can legitimately have their contracts blocked if they are behind
in tax or social security payments, the European Court of Justice has ruled.

In an Italian case, which as usual will be a precedent across the EU, judges
ruled national or local government bans complied with the European public
services directive. However, the ECJ said this law permitted national
governments some leeway to set national rules on the deadlines for tax or social
security contribution payments, before a taxpayer could be accused of ‘not
fulfilling obligations’.

The case focused on the Italian ministry of defence’s refusal to accept
tenders for catering work, due to tax arrears of supplier Zilch, and social
contributions by La Cascina and GfM. All three companies challenged the legality
of this decision under EU law.

The court however, said that although the caterers’ action was illegal under
the directive in principle, ‘the period within which the persons concerned are
to have made payments must be established by members states’. Such flexibility
extended to settling arrears ‘immediately prior to the award of the contract’,
although such a rule should be clarified ‘with absolute certainty and made
public’.