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VIRTEU
NATIONAL WORKSHOP
Italy

On the 29th of April 2021, it was held the VIRTEU National Workshop, which focused on Italy.

 

During the workshop, and through a series of questions, several experts were called upon to provide critical evaluations based on their professional experience about the relation between tax crimes and corruption. The discussion aimed at shedding light on systemic weaknesses within the context of contrasting such criminal phenomena from a legal and practical perspective.

Organization and Moderation:

Dr. Costantino Grasso 

Associate Professor in Business and Law at Manchester Law School
VIRTEU Principal Investigator

Dr. Lorenzo Pasculli

Associate Head for Research at Coventry Law School
VIRTEU Co-lnvestigator

The video recordings of the event are available below. Please note that the video recordings are in Italian with subtitles in English, the entire transcripts of the English translation is also available below. Translation by Benedetta Zanolla and Kelsey Trotta.

Suggested Citation

APA: [Speaker's surname, initial(s)] (2021, April 29). VIRTEU National Workshop - Italy, Session [1 or 2]. Video recording at [00:00]. Retrieved from https://www.corporatecrime.co.uk/virteu-national-workshop-italy

HARVARD: [Speaker's surname, initial(s)] (2021) VIRTEU National Workshop - Italy, Session [1 or 2] [Online]. Video recording at [00:00]. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy

OSCOLA: [Speaker's name and surname] ‘VIRTEU National Workshop - Italy’, Session [1 or 2] (Corporate Crime Observatory, 29 April 2021), Video recording at [00:00], <https://www.corporatecrime.co.uk/virteu-national-workshop-italy>

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National Experts:

• Dr. Samuel Bolis

Lieutenant Colonel of Guardia di Finanza
• Marco di Siena 
Partner at Chiomenti LLP
• Pietro Molino
Deputy General Prosecutor at the Italian Supreme Court 
• Fabrizio Reggiani
Partner at Severino Penalisti Associati LLP

Project Experts:

• Prof. Antonio Gullo
VIRTEU National Expert for Italy
Full Professor of Criminal Law at University LUISS Guido Carli 

• Dr. Pietro Maria Sabella 
Postdoctoral Researcher at University LUISS Guido Carli 

• Dr. Rossella Sabia
Postdoctoral Researcher at University LUISS Guido Carli 
Postdoctoral Global Fellow at NYU School of Law

• Dr. Pietro Sorbello 
Colonel of Guardia di Finanza 
Adjunct Professor in Criminal Law at University of Teramo

Dr. Donato Vozza 
Lecturer in Criminal Law at the University of Roehampton

VIRTEU NATIONAL WORKSHOP - ITALY - SESSION 1

The first session of the workshop was devoted to the exploration of the following topics:

•  The phenomenon of tax crimes;

•  The complexity of the legal system and adequacy of the legal definitions;

•  The potential deficiencies of the legal system;

•  The sectoral vulnerabilities to fraud and corruption in the area of taxation.​

transcript.png

Interactive Table of Contents
 
 

  • Welcome and Introduction: Dr. Costantino Grasso

  • Topic 1: The phenomenon of tax crime in Italy

  • Topic 2: National and Transnational tax crime practices

  • Topic 4: Complexity of the Italian taxation system

  • Topic 5: Complexity and adequacy of Italian criminal law

  • Topic 6: Actions against tax crimes

  • Topic 7: Leniency procedures, amnisties, exemptions.

  • Topic 8: Suspicious Activity Reports (SARs)

  • Topic 9: Effectiveness and deterrence of enforcement

  • Topic 10: Sectors most vulnerable to tax crimes

Select Opinions and Arguments
(click on the specific timestamp in the citation for a direct link to the relevant part of the discussion)

The Italian legal framework in relation to tax crimes is multifaceted. The main types of conduct can be ascribed to two main areas; declaratory offenses which include fraudulent declarations using either invoices for non-existent transactions and/or other tricks, and fictitious or omitted declarations. Then there are the so-called "collateral offenses", which relate to the omitted payment of taxes characterized by certain fraudulence like the omitted payment of certified deductions as well as the omitted payment of VAT or the use of undue tax credits. Finally, there are the fraudulent withholding of taxes and an offense that is in fact forgery for tax suppression, namely the destruction or concealment of accounting records (di Siena, 2021).
Suggested citation: di Siena, Marco (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 08:28. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

[In relation to the relevance of geographic profiling in tax crimes matters] in Northern Italy, especially in the area north of Milan, the proximity to Switzerland allows for the setting up of “hidden permanent (business) establishments” that operate abroad - predominantly in Switzerland but are attracted by the Italian territory for tax purposes (Bolis, 2021).
Suggested citation: Bolis, Samuel (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 11:02. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

From a judicial perspective, there is a discrepancy between the failure-to-pay-taxes offenses, which represent the vast majority of the Supreme Court's workload, and all the other tax-related offenses that, due to the challenges arising from the ascertainment of facts and their prosecution, are rarely covered by the Supreme Court's judicial decisions (Molino, 2021).
Suggested citation: Molino, Pietro (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 12:26. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

As a result of the financial crisis, in recent years we have experienced an increase in the crimes connected to the failure to pay taxes for a tax debt relating to a tax return that has already been filed (Reggiani, 2021).
Suggested citation: Reggiani, Fabrizio (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 13:35. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

Recently we have experienced a progressive increase, also emerging from media reports, in relation to the charges of the setting up of concealed permanent (business) establishments based on global models with charges that hover somehow at the border between the hidden permanent (business) establishment, which is a gray area that was explored some years ago within the Philip Morris ruling, and the transfer pricing cases that entail all the definitory issues that may let them fall outside the area of criminalization (Reggiani, 2021).
Suggested citation: Reggiani, Fabrizio (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 14:20. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

The Italian tax system is particularly complex and unstable in the sense that it is subject to significant and often very proximate changes over a period of time. These factors certainly do not help the average taxpayer to be compliant (di Siena, 2021).
Suggested citation: di Siena, Marco (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 18:50. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

If we examine the evolution over the years, there wasn’t always a clear choice as to whether or not to criminalize the failure to pay taxes. There was a time in which the legislator chose not to criminalize them and then precipitously re-thought such a decision for reasons as simple as the lack of revenue. The sign of this uncertainty also reveals itself in the amendments made to the various thresholds of criminalization that are either increased or decreased according to different
contingencies. This is another element that generates uncertainty in the area of relevant criminal law. (Molino, 2021).

Suggested citation: Molino, Pietro (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 21:39. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

The most recent changes in the field of criminal taxation are not coordinated with the rules on criminal proceedings, which have implications for investigations and for the way in which criminal proceedings are conducted. In particular, this is relevant for carousel frauds, which involve a very high number of perpetrators, including front men and de facto administrators, and which notoriously see a direction, normally hinged on professionals. In the past, the territorial jurisdiction of the investigations was linked to the place the related criminal association operated. More recently, due to the increase of statutory penalties for issuing and using false invoices, there is the risk that the territorial jurisdiction is shifted where, for example, the first issuance of a false invoice can be traced back to a carousel involving the whole Italian territory. Such a place could be different from the location where the organizational center of a criminal association is placed. In practice, this could lead to a fragmentation of allegations of criminal conduct and, as a result, thwart the investigations (Bolis, 2021).
Suggested citation: Bolis, Samuel (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 24:58. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

Paying taxes with goods (datio in solutum) for individual tax obligations isn't allowed in the italian legal system, except for a few marginal cases of direct taxation and donations where the transfer of artwork is allowed (Bolis, 2021).

Suggested citation: Bolis, Samuel (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 38:11. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

Significant risks of corrupt practices are related to the possibility of compensating tariffs and taxation in the construction sector with the execution of urban development projects to obtain tax deductions relating to taxes owed to local authorities. We are talking about extremely large sums of money that are mostly adjudged at the local level in situations that are often characterized by conflicts of interests and that may lead, on the one hand, to corrupt practices (the Italian case-law is full of examples) and, on the other, to a loss of revenue (Bolis, 2021).

Suggested citation: Bolis, Samuel (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 38:29. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

Investigators of the Italian Tax Authority (Agenzia delle Entrate) face structural challenges in investigating potential fraudulent practices in the area of taxation because, differently from the tax police (Guardia di Finanza) they are not recognized as Officials of the Judicial Police and, consequently, they're equipped with a more diminished category of investigative instruments (Bolis, 2021).

Suggested citation: Bolis, Samuel (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 40:19. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

Besides the statutory provisions, on a practical level, criminal sanctions for tax crimes appear to be problematic concerning their effectiveness, preventive effects, punitive effects, and dissuasive effects, and in relation to all other rationales, we would like to assign to criminal sanctions (Molino, 2021).
Suggested citation: Molino, Pietro (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 43:34. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

Social condemnation and moral blame felt in regard to tax frauds or failure to pay direct taxes is much more significant than the one felt in relation to all those behaviors concerning indirect taxes, which somehow seem to entail a lesser social stigma due to the fact that, from the community's overall perspective, not paying tax obligations that are directly connected to your own income is considered in a different way from the behavior of who tries to get off scot-free for failure to pay VAT tax (Molino, 2021).
Suggested citation: Molino, Pietro (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 44:27. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

In the area of tax recovery, from a comparison between criminal and administrative measures, it emerges that criminal instruments are certainly the most effective because, for example, the instruments provided for in the administrative tax procedure such as precautionary measures to protect the interests of the public treasury and tax authorities not only are not applied to any great extent but also the requirements for their adoption are much more burdensome for the public authorities (Bolis, 2021).

Suggested citation: Bolis, Samuel (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 48:21. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

Italian authorities have traditionally faced challenges in cooperating at the international level. Such difficulties derive from the different types of investigatory approaches, constraints, and institutional placements between the figure of the Italian Prosecutor compared to others who may have investigative powers
in other European countries. For instance, the dependence in some ways on inputs from the executive of investigative authorities is something that
does not happen in the Italian system. We still don’t know if the establishment of the European Public Prosecutor's Office (EPPO) will improve the situation because we still do not know how the coordination and the connection between the investigations of the European Prosecutor, of the single European Prosecutors, will be designed regarding the work that is ordinarily carried out (Molino, 2021).

Suggested citation: Molino, Pietro (2021) VIRTEU National Workshop - Italy, Session 1 [Online]. Video recording at 53:40. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

VIRTEU NATIONAL WORKSHOP - ITALY - SESSION 2


The second session of the workshop offered a special focus on the following topics:

• The role of professionals as enablers of economic crime;

• Institutional corruption and undue influence on the political decision-making process;

• Effectiveness and limits of investigative powers and anti-tax crime/corruption strategies;

• Attribution of corporate criminal liability and settlement procedures;

• The relevance of whistleblowing and whistleblowers protection.

transcript.png

Interactive Table of Contents
 
 

  • Topic 1: Enablers and facilitators of tax crimes

  • Topic 2: Revolving Door Phenomenon

  • Topic 2: Undue influence on the political process

  • Topic 3: Adequacy of investigative powers and resources

  • Topic 4: Investigating corporate actors

  • Topic 5: Liability of legal entities for tax crimes

  • Topic 6: The role of whistleblowers in fighting tax crimes
  • Topic 7: Developing solutions to fight tax crimes

Select Opinions and Arguments
(click on the specific timestamp in the citation for a direct link to the relevant part of the discussion)

The interaction between tax offenses and corruption clearly emerged in Italy in the early 1990s during the so-called Mani Pulite [Clean Hands] investigation [a nationwide judicial investigation into political corruption in Italy]: in order to guarantee the financial resources that would be used to pay off the corrupt public official, the simplest way to do that was to commit a tax crime that would allow for the accumulation of slush funds (di Siena, 2021).
Suggested citation: di Siena, Marco (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 01:50. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

As several investigative media reports have pointed out, another relevant dimension of the interconnections between tax crimes and corrupt practices in Italy is represented by the profile of judicial corruption within the tax courts [which in the Italian legal system are specialized courts that have jurisdiction over all tax disputes in the area of taxation] (Molino, 2021).
Suggested citation: Molino, Pietro (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 03:32. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

Very recent investigations have unveiled an alarming level of systemic corruption that involved officials of the Italian Tax Authority [Agenzia delle Entrate] as well as professionals, including lawyers and accountants. Such collusion between tax officials and tax professionals led to a flaw in tax verification activity and undermined the competition among professionals in the area because only the professionals who were involved in these forms of systemic corruption were able to obtain benefits [from the tax authorities] for their clients. In some cases, these corrupt practices reached the point where professionals colluding with tax officials would actually cause tax problems for their clients without their knowledge in order to trigger a tax investigation that would generate ill-gotten gains (Bolis, 2021).

Suggested citation: Bolis, Samuel (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 04:15. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

Another vulnerability is represented by the potential conflict of interests in relation to the role of the internal auditors of the companies, who may also serve the role of tax consultants. In the Italian legal system, there is an incompatibility between the audit function and the continuous provision of professional services, and the involved tax professional could be disqualified as an auditor. However, in practice, such a prohibition may be easily circumvented. For instance, in associated firms, the role of the lawyers may be interchangeable so that when a tax consultant becomes a member of the Board of Auditors his/her colleagues of the same firm may continue to provide professional advice to the client (Bolis, 2021).

Suggested citation: Bolis, Samuel (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 09:48. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

The tax professionals that are subject to disciplinary sanctions or disqualification measures by their regulatory bodies (e.g., the BAR Association) for illicit or unethical conduct related to their work in the area of taxation represent an absolutely small percentage. This is an objective and widespread problem that affects all organizations. When a member of a particular council or organization has to judge one of his peers in some way, there is a tendency to be reluctant to impose serious sanctions. As the press highlighted, such an inherent reluctance affects also the independent judiciary governing body [Consiglio Superiore della Magistratura(di Siena, 2021).
Suggested citation: di Siena, Marco (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 11:02. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

In the absence of any mandatory requirement, there is a lack of communication between the prosecutors that start a criminal case against a lawyer and the related BAR association. This is another element that may adversely affect the sanctioning role of such independent regulatory bodies (Bolis, 2021).

Suggested citation: Bolis, Samuel (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 13:23. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

The problematic aspect of the so-called "revolving door" situation in the area of taxation has emerged only recently in Italy thanks to some investigative reports made by journalists such as the report published by L'Espresso. The mechanism is related to external consulting firms that in some way collaborate with the public administration. They provide consulting services and at the same time manage the commercial and economic plans of private competitors or, in any case, private players who interact with the public administration through tenders. The point is that there are individuals who initially operate within the public administration, for example, and then move to these major consulting firms or vice versa. This phenomenon somehow encourages exchanges that are not entirely lawful, maybe in the gray area, and creates problems of incompatibility and potential conflict of interest. (Sabella, 2021).

Suggested citation: Sabella, Pietro Maria (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 16:00. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

In Italy, there is no legislation that regulates the lobbying activities and undue influences on the political decision-making and legislative process. As a result, in Italy, it would be unlikely for the prosecutors to conduct an investigation like, for example, the one that led to the arrest in 2012 of the Maltese member of the European Commission, John Dalli, who was accused of taking bribes to change the regulation on tobacco taxation to the detriment of some Member States and in favor of a multinational company (Bolis, 2021).

Suggested citation: Bolis, Samuel (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 27:12. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

Although in Italy there is no legislation that regulates the lobbying activities, influence peddling has been criminalized since 2012 and, since 2019, it also covers
supposed influences and is a predicate offense for the liability of legal entities (Gullo, 2021).

Suggested citation: Gullo, Antonio (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 30:57. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

The legislative process in Italy is porous and délabré [run-down], therefore, since the normative activity is objectively intense because we tend to have normative hypertrophy, it is obvious that the more or less articulated pressure on the legislator can be used to achieve results that are unethical (di Siena, 2021).
Suggested citation: di Siena, Marco (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 32:36. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

Intrusive investigative techniques such as wiretapping are crucial to counter complex criminal phenomena such as carousel frauds. This is because without wiretapping it is difficult to prove the subjective element of the offense. For example, without wiretapping the non-deductibility of the non-existent transaction would be subject just to an administrative penalty imposed by the tax authorities on the broker of a large company who was involved in a carousel fraud. This is because, where it is not possible to prove the intent, the broker could be merely considered as not adequately diligent, because he should have known that he was the final link in a carousel fraud (Bolis, 2021).

Suggested citation: Bolis, Samuel (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 37:44. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

In the area of corporate crime and in relation to compliance programs, it is very difficult to achieve compliance in cases where the proceedings relate to small firms. Because obviously the theme of a firm that - against the will of the natural person who has committed the predicate offense - becomes virtuous or adopts the model of conduct, is a theme that is difficult to imagine when the entity tends to coincide substantially with the individuals that perpetrated the offense. So we should differentiate the functioning of the instruments of compliance starting from a certain quantitative scale of the involved legal person (Molino, 2021).

Suggested citation: Molino, Pietro (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 55:56. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy. 

Whistleblowers are certainly essential to initiating major investigations in the field of corruption (Bolis, 2021).

Suggested citation: Bolis, Samuel (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 1:00:02. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

[Although whistleblowers play a crucial role in unveiling tax fraud and corruption,] in Italy there is no structured or institutionalized form of monitoring and analyzing the investigative outcomes of whistleblower reports. As a result, it is not possible to evaluate the real dimension of the phenomenon (di Siena, 2021).
Suggested citation: di Siena, Marco (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 1:00:47. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

[In relation to whistleblowing] unfortunately, we do not have an adequate analysis of the phenomenon. Perhaps it’s because the institute is young - if we want to use this term – so we don’t really have an adequate database to be able to imagine both the pervasiveness of the phenomenon and its effects in a positive or negative way, except for what traditionally emerges in the media (di Siena, 2021).
Suggested citation: di Siena, Marco (2021) VIRTEU National Workshop - Italy, Session 2 [Online]. Video recording at 1:03:50. Available at: https://www.corporatecrime.co.uk/virteu-national-workshop-italy.

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