The European Court of Human Rights has released an important decision on the procedures adopted by the Italian tax authorities to conduct audit and investigations—ruling that state powers, even for tax enforcement, must have legal boundaries and procedural safeguards.

The decision may affect how tax audits are conducted in Italy, where authorities take an assertive approach, and highlights the necessity to justify access to business premises and clearly outline the scope of information requests.

The ECHR’s decision was in response to applicants who challenged Italy’s tax inspections conducted without a justified request as to the reasons and taxes to be audited. The court found a violation of Article 8 of the European Convention on Human Rights due to inadequate procedural safeguards and remedies in the Italian legal framework.

The judgment applies beyond this case, indicating that EU countries can’t depend solely on administrative discretion for investigative measures, even in regulated areas such as taxation. To comply with Article 8 of the Convention, national legislation must define the limits and conditions of inspection powers, limit document collection, and ensure effective remedies either before or shortly after an inspection.

For Italy, this suggests revising its tax enforcement framework to include judicial remedies and restrict broad or arbitrary actions.

Remedies and Controls

The applicants were businesses subject to on-site audits by the Italian tax authorities which included the seizure and copying of business records and documents. The audits were conducted under domestic legislation that allowed tax officials to authorize such access without requiring specific justification.

The applicants claimed that Italian law doesn’t provide procedures to refuse the inspections or impose significant constraints on the discretion of tax officials. They also stated that Italian law didn’t allow for timely challenges to the necessity and proportionality of the measures.

The applicants argued that this absence of judicial control beforehand and uncertain remedies afterwards didn’t comply with Article 8 and deprived them of the right to an effective remedy under Article 13 of the Convention.

The Italian government argued that the inspections were legally authorized and aimed at preventing tax fraud. The government noted the availability of judicial remedies, including tax or civil court actions, and the option to file complaints with the Taxpayer’s Guarantor (Garante del Contribuente), an independent authority that safeguards taxpayer rights by addressing complaints and recommending improvements to the tax administration, though without binding powers.

The key issue is the interpretation of Article 8, protecting the right to respect for “private and family life, home and correspondence.” Settled case law indicates that the term “home” under Article 8 includes professional offices and business premises, making tax inspections subject to this provision.

For any interference with Article 8 to be justified, it must:

Follow the law, which must be clear, accessible, and prevent arbitrariness.Have a legitimate aim, such as preventing tax evasion or protecting the country’s economy.Be necessary in a democratic society, be proportionate, and include procedural safeguards.Central Question

The central question for the court was whether Italy’s legislative and administrative framework governing tax inspections complied with the required standards, particularly the necessity of being lawful and the availability of effective judicial remedies.

The ECHR reiterated that inspections and document seizures at business premises interfere with Article 8 rights. Tax authorities may have a broader margin in regulating how to access a business activity but must ensure legal certainty and procedural fairness.

The court noted that Italian law permitted tax inspections for broad reasons such as “tax assessments” or “anti-evasion measures,” without requiring tax officers to support the access to a taxpayer’s premises with evidence for reasonable suspicion or specific justification.

Italian Supreme Court case law hasn’t provided detailed criteria on the need for justification when entering a taxpayer’s premises, resulting in a vague threshold for initiating inspections and granting tax authorities considerable discretion over how to conduct them.

Applicants raised concerns about the broad scope of the searches. Tax officials were authorized to seize or copy any document they considered “relevant” without any statutory limitations regarding the timeframe or type of records involved. This lack of specificity could lead to the seizure of documents that weren’t related to any suspected tax violations.

The court observed that Italian law didn’t require judicial authorization before conducting the inspections. The approval required was solely from an administrative official, often within the same tax department carrying out the investigation. Although the lack of prior judicial control sometimes could be offset by strong post-judicial remedies, the court determined that Italian remedies were insufficient and ineffective in practice.

The Italian government asserted that affected parties could subsequently challenge the measures in tax or civil courts. However, these remedies were subject to delay, conditional, or procedurally uncertain.

A tax court challenge was only possible following the issuance of a tax assessment, which could take years, while the jurisdiction of civil courts over these matters remained unclear. Requests to suspend ongoing inspections or recover seized materials aren’t really addressed by the provisions of law.

The ECHR determined that the interference with the applicants’ rights wasn’t “in accordance with the law” as provided by Article 8 (2) of the Convention.

Although the inspections served legitimate public objectives, the legal framework didn’t satisfy the Convention’s quality of law standard because it failed to:

Clearly define the conditions for authorizing inspections.Limit the scope of the measures to what was strictly necessary.Provide prior judicial remedies, andOffer timely and effective ex post remedies.

The court therefore found a violation of Article 8 and awarded each applicant compensation for non-pecuniary damage. Given its ruling on Article 8, the court considered it unnecessary to examine the case separately under Article 13.

Looking ahead, tax authorities in the EU will need to scrutinize how they carry out tax audits. Audits should be properly justified from the start and conducted in a fair and not excessive way. The tax authority must respect taxpayers’ fundamental rights and offer real and effective ways for taxpayers to challenge its actions.

The case is Italgomme Pneumatici S.R.L. and Others v. Italy, (no 36617/18, Feb. 6, 2025)

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Giuliana Polacco is partner with Bird & Bird Italy.

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