Italy’s top court to decide on legality of $3.8 billion energy windfall tax

ROME (Reuters) – Italy’s constitutional court will decide whether a 2023 one-off windfall tax on energy firms is lawful, an administrative tribunal ruled on Tuesday, in a move that could have significant repercussions for Rome’s strained public finances.

Last year the Treasury raised almost 3.5 billion euros ($3.8 billion) from 7,000 producers and sellers of electricity, gas and petrol products that benefited from the surge in oil and gas prices in 2022, people familiar with the matter said.

The government, which reviewed the structure of the levy last October, expects to take in additional revenue this year.

The administrative court in the central Lazio region said in a statement it had found claims of constitutional illegitimacy raised by the affected companies to be potentially valid and it asked the constitutional court to rule on the matter.

If that court, which is the country’s highest, rules against the government, it would limit the scope to impose similar taxes in future or, in a worst-case scenario for public finances, force highly indebted Italy to reimburse the sums collected.

The levy had a rate equal to 50% of the part of 2022 corporate income which was at least 10% higher than the average income reported between 2018 and 2021.

Prime Minister Giorgia Meloni adopted the measure to replace a similar tax that, under her predecessor Mario Draghi, triggered criticism and refusals to pay by multiple firms, including state-controlled energy group Eni.

Eni and Italy’s biggest utility, Enel, in which the Treasury owns a 23.6% stake, have paid 450 million and 600 million euros for the 2023 windfall tax, respectively, amounting to around 30% of the total tax revenue collected so far, separate sources said.

In seeking a ruling from the constitutional court, the administrative judge said the tax had hit firms outside European regulations that set principles for emergency energy measures, including windfall taxes.

Moreover, the Italian companies affected could not deduct the levy from other corporate taxes and this could imply an illegitimate form of double taxation, the statement said.

The timing of a ruling by the constitutional court is not yet known.

($1 = 0.9185 euros)

(Reporting by Giuseppe Fonte and Francesca Landini; editing by Gavin Jones, Susan Fenton and Paul Simao)