Advocate general Juliane Kokott said that although EU member countries have significant leeway in framing accounting regulations, they could not push the envelope like Berlusconi’s right-wing coalition government.
Kokott argued that by limiting the time for bringing false accounting charges and widening allowed margins of tolerance over false accounts, some fraudsters could escape justice.
This broke the EU rules demanding penalties against such irregularities that are ‘effective, proportionate and dissuasive’. She wrote: ‘Third parties’ need for protection is particularly great where a balance sheet has been published but it does not give a true picture of the company’s assets’.
Furthermore, by loosening rules governing accounts drawn up in the past, Italy had made remaining penalties illegal, because fraudsters should only be hit by punishments in force when they cooked the books, the advocate general added.
Her opinion will now be considered by the full ECJ, which generally confirms the views of its advocate generals. Ultimately, it will be for the Italian courts to rule on the lawfulness of Berlusconi’s accounting law changes.
The case is not the only accounting tussle involving the EU and Italy. The European Commission last week formally asked Italy to amend the VAT portion of a tax amnesty scheme in its 2003 Finance Act. It grants taxpayers immunity for previous tax periods in return for one-off payments, preventing future legal action, even if proof of serious irregularities later came to light.
Brussels is threatening Italy with another ECJ case if it refuses to change this law, branding it ‘a blanket and indiscriminate renunciation of controls on VAT’.
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