Brussels, 16/12/2002 (Agence Europe) - The Trieste Financial Services and Insurance Centre does not meet the requirements of EU State aid rules any more, considers the European Commission at the end of an in-depth investigation. Approved in 1995, under certain conditions the special tax scheme granted banking and insurance undertakings opening up in Central and Eastern European countries benefit from a reduction in the tax on legal persons (IRPEG) as well as certain indirect taxes. At the time, the Commission had approved the scheme as it was supposed to play in favour of the development of financial markets in countries of Eastern Europe and the former USSR in the middle of the economic transition period. The issue was the subject of a review in July 2001, in the light of the communication on fiscal aid, adopted in 1998, given developments in these countries and the fact that the scheme as approved had not yet taken effect. Doubting the need for such a scheme, the Commission had asked Italy to abolish it, but faced with the country's refusal, formal proceedings were launched on 27 February of this year.
At the end of the proceedings, the Commission confirmed its decision. On the one hand, the scheme under examination constitutes operating aid, incompatible with European rules. As it is not linked to the realisation of a specific project, this aid reduces a firm's current expenditure, and therefore distorts competition. Although the Commission authorises the granting of this type of aid, for the least developed regions, according to strict rules, Trieste is not part of that. On the other hand, the Commission considers that, currently, implementation of the scheme would lead to significant distortions of competition on the financial services market which, at the time, was limited. Since then, following the entry into force of several European agreements with countries of Eastern Europe, these countries' financial markets have developed and legal obstacles have been removed, with, as consequence, the lifting of large number of barriers that previously impeded the emergence of financial markets in that region. Finally, the new financial instruments in force in candidate countries have been created to facilitate the accession process, which encourage investors and help support economic transition. Consequently, the Commission considers that the Trieste Centre no longer has any reason for being and calls for its abolition within six months.