Brussels, 07/09/2005 (Agence Europe) - The European Commission has decided that an Italian tax scheme for certain investment vehicles violates EU Treaty State aid rules (Article 87). The scheme reduces the nominal tax rate on the earnings accruing to certain collective investment vehicles specialised in holding stocks of small and medium capitalised companies (small caps, with capitalisation of less than EUR 800 mil) listed on regulated EU stock exchanges from 12.5 to 5%. With its 2004 budget law, Italy enacted a tax scheme reducing the substitute tax on capital earnings accruing to open-ended collective investment vehicles specialised in holding stocks of small and medium capitalised companies listed on EU regulated stock exchanges The Commission's decision follows an in-depth investigation opened in May 2004, which found that the scheme constituted state aid in favour of certain financial intermediaries which received indirect benefits from a tax discount granted to the investors, explains a Commission press release. The tax breaks were given without prior Commission approval and must be recovered from the intermediaries by the Italian authorities.