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In May 2006 a new ‘luxury tax’ regime in Sardinia in respect of pleasure vessels, private aircraft and second homes, was introduced. The widely unpopular tax, which was passed on 11 May 2005 under the reference Regione Sardegna Law No. 4, had many opponents,not least within the yachting community, and had widespread coverage both in the specialist yachting press and in various broadsheet publications. The measures were initially passed subject to strong dissenting voices within the Italian government, who subsequently appealed to the Constitutional Court of Italy to overturn the legislation.
The government’s intervention was based, in essence, on a two-pronged challenge, namely that the tax:
1. fell foul of the Italian Constitution because it conflicted with certain regulatory rules pertaining to central and regional taxation systems, and was discriminatory by targeting a certain proportion of the population (i.e. the wealthy); and
2. Contrary to the EC Treaty, as it affected freedom of establishment, the free circulation of goods and persons and was, effectively, anti-competitive. The Sardinian authorities tried to placate the government by issuing a second law (Regione Sardegna Law No. 2 of 29 May 2007), in an endeavour to remove at least some of the objections. This merely reinforced the stance of the government, who objected to the new provisions on the same grounds and went a step further by declaring the second law incompatible with certain Constitutional Rules pertaining to the retroactivity of laws in tax matters. In consequence, the Italian government has now filed an additional complaint with the Constitutional Court, challenging the new laws.
Apparently the Sardinian authorities are refusing to back down, so the matter seems to be heading for a legal showdown. The Constitutional Court is considering the issues and a ruling is expected in the first quarter of this year. We intend to circulate a further update in this Newsletter before the summer season.
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