ITALY: An Introduction to White-Collar Crime

Legislative Reforms in Italy: Key Developments in Judicial and Tax Systems

The current year presents a promising landscape for legislative reforms in Italy, with significant discussions and newly introduced laws shaping the judicial and tax systems.

Judicial reform: separation of careers

On 16 January 2025, the Italian House of Representatives approved a constitutional reform bill aimed at separating the career paths of judges and public prosecutors. The bill is now under Senate review and requires a reinforced two-thirds majority in its final two voting sessions. If this threshold is not met, a popular referendum may be called, allowing citizens to decide directly on the matter.

This reform seeks to enhance the adversarial justice system by ensuring a clear distinction between the role of judges, who must remain impartial and autonomous, and that of public prosecutors, responsible for conducting investigations and the prosecution. Key aspects of the proposed reform include:

• Judicial Independence: The bill reaffirms the autonomy and independence of magistrates while establishing a structural separation between judges and prosecutors.
• Separate Career Paths: The principle of “separate careers” for judges and prosecutors is introduced, with implementation details to be defined through subsequent regulations. It remains unclear whether a unified entry examination will be retained or if magistrate training will be managed by a single institution.
• Restructuring the Superior Council of the Magistrates (CSM): The existing CSM, which oversees all magistrates, will be divided into two separate governing bodies: one for judges and another for prosecutors, both chaired by the President of the Republic. Members will be selected by lottery rather than internal elections. Each body will handle recruitment, assignments, transfers, evaluations, and appointments of magistrates, but not disciplinary matters.
• High Disciplinary Court: A new judicial body will be established to handle disciplinary actions, replacing the current oversight functions of the CSM and the Italian Supreme Court. This court will also review appeals against its own disciplinary rulings but with a different judicial composition.
• Limited Career Mobility: The CSM of the judges may authorise public prosecutors with at least fifteen years of experience to serve as Supreme Court judges, marking the only exception to career separation.

Implications and criticism

The reform aims to strengthen judicial impartiality and improve the efficiency of criminal proceedings. However, it has sparked considerable debate:

• Increased Autonomy v Political Influence: Some critics argue that granting public prosecutors greater independence could lead to excessive autonomy in conducting investigations, while others fear the reform may subject prosecutors to political influence through prosecution guidelines set by the government, potentially undermining the constitutional principle of mandatory prosecution (Article 112 of the Italian Constitution).
• Concerns Over the Functioning of the CSMs: The introduction of separate disciplinary bodies could create institutional tensions. Additionally, appointing members by lottery rather than elections may weaken their authority and legitimacy.

Tax reform: co-operative compliance regime

Consistent with the legislative amendments of the last few years, the Italian government has also focused on tax reforms, particularly enhancing co-operation between taxpayers and the Italian Tax Revenue Agency (Agenzia delle Entrate) and improving information-sharing mechanisms between tax authorities and law enforcement agencies, such as the Italian Tax Police (Guardia di Finanza).

The “co-operative compliance” regime, first introduced by Legislative Decree No 128/2015, aims to foster a transparent and collaborative relationship between companies and tax authorities. This regime provides legal certainty on significant tax issues through a proactive dialogue between taxpayers and the tax administration before tax returns are filed.

Eligibility and key requirements

In order to adhere to the co-operative compliance programme, taxpayers shall implement a robust tax control framework (TCF) – a structured system for identifying, assessing, managing, and controlling tax risks. Recent amendments under Legislative Decree No 108/2024 introduced the requirement that TCF models be certified by independent and qualified professionals. Moreover, participants must also adopt preventive measures to mitigate tax risks and comply with tax regulations, and disclose tax violations proactively.

Benefits for taxpayers

Taxpayers complying with the co-operative compliance framework may benefit from several advantages:

• Exemption From Administrative Penalties: Businesses that report tax violations and comply with the framework avoid fines.
• Exemption From Punishment for False Tax Returns (Article 4 of Legislative Decree No 74/2000): No criminal proceedings in relation to false tax returns will be entered against taxpayers who disclosed tax violations if certain strict requirements are met, including – most notably – the absence of fraud indicators. However, even if the exemption at issue does not apply, the general exemption under the Tax Consolidated Act remains applicable, even if it would imply the filing of criminal proceedings.

New guidelines and strengthened oversight

On 10 January 2025, the Italian Tax Agency released new guidelines for implementing and certifying TCF models, including:

• operational instructions for creating and certifying TCF models, which may support companies considering to adhere to the co-operative compliance programme; and
• the obligation for taxpayers to monitor their supply chain, including suppliers and external consultants, to prevent potential tax fraud, thereby reinforcing administrators’ liability to ensure adequate organisational, administrative, and accounting structures, as set forth under Article 2086 of the Italian Civil Code.

Enhanced co-operation between tax authorities and law enforcement

The collaboration between Italian Tax Police and the Tax Revenue Agency was further reinforced with the signing of the “Memorandum of Understanding on Collaborative Compliance” on 20 January 2025. This agreement establishes information-sharing protocols aimed at improving co-ordination in tax fraud investigations regarding potential cases of tax evasion, avoidance, or fraud.

Regulatory gaps and challenges

Despite these advancements, certain challenges remain:

• Tax Fraud Exemption Limitations: While the co-operative compliance programme offers exemptions only for the offence of false tax returns, cases involving tax fraud remain outside its scope. This raises concerns about the lack of a streamlined process for addressing fraud-related offences within the framework, especially when the investigative activities of the Italian Tax Authority are focused – as anticipated – on the detection of tax fraud.
• Balancing Oversight and Compliance: The increasing reliance on self-reporting and private compliance mechanisms shifts investigative responsibilities from public authorities to businesses.

Conclusion

The legislative developments in Italy’s judicial and tax systems mark a significant shift toward enhanced efficiency, transparency, and compliance. While the judicial reform seeks to ensure impartiality and improve prosecutorial autonomy, it raises concerns regarding potential political influence and governance effectiveness. Similarly, tax reforms promote co-operative compliance but necessitate a careful balance between self-regulation and governmental oversight.

As these reforms progress through legislative review and implementation phases, continued debate and scrutiny will shape their final impact on Italy’s legal and tax landscapes.