Food donations and tax on waste: a way to encourage circular economy and to prevent pollution

Di Alessandro Zuccarello -

Abstract

Law n.166 of august 19, 2016, also known as Gadda law, provides, among other things, a reduction of TARI for the donations of product that are bound to became waste. It is a provision that favours circular economy but it has to be placed properly in the frame of TARI.

Donazioni alimentari e tassa sui rifiuti: un modo per incentivare l’economia circolare e prevenire l’inquinamento – La legge Gadda, n.166 del 19 agosto 2016, prevede, tra le altre cose, una riduzione della tariffa TARI per le donazioni di beni destinati a diventare rifiuti. Si tratta di una misura che incentiva l’economia circolare ma che deve appropriatamente essere inquadrata alla luce della natura della TARI.

Table of contents: 1. The reduction of the tax on waste provided by Gadda law. – 1.1 Gadda law’s reduction in light of the frame of TARI. – 1.2 The nature of TARI. – 2. The nature of the reduction. – 2.1 The tax incentives provided by Gadda law.- 2.1 The criteria for identifying tax breaks. – 2.2 The nature of Gadda law’s incentives. – 3. Conclusions.

1. Law n. 166 of August 19, 2016, also known as Gadda law, introduced tax incentives for people who donate products that, even respecting hygiene rules, are bound to became waste due to their inability to be marketable, according to company regulations. The provisions of this law refer to different taxes: I am going to focus only on article 17 that introduced new provisions in the regulation of TARI (the Italian tax on waste regulated by law n.147, of December 27, 2013).

Article 17 of Gadda law provides a reduction of TARI (the Italian tax on waste) for taxpayers who donates, directly or indirectly, previously mentioned products to the poor. The reduction is to be proportionate to the amount of products donated. However, several issues might impact these provisions. First of all: these tax incentives are not binding for Municipalities that may decide whether or not to introduce them. Second, Gadda law’s incentives have to be linked with the regulation of TARI.

1.1. First and foremost, the nature of TARI must be clarified. Even though in the past Italian legislator introduced a special legal definition for which levy related to waste, already in force, had private law nature, doctrine and jurisprudence demonstrated again and again the public law nature of this levy, especially the tax nature.

It is a matter of fact that TARI is rooted on the possession of places that might produce waste, it has to be paid even when the collection of waste hasn’t been arranged (except for reductions) and people can benefit from the waste collection independently from the presence of taxable events. The taxable event is generally calculated on normality criteria and in light of the ability to pay principle, in fact, article 1, paragraph 652 of law 147/2013 provides that the municipal regulation must contemplate, among other things, reductions and exemptions considering even the ability to pay principle.

1.2. Moreover, the relationship between TARI and the protection of the environment must be considered. Generally, a distinction can be made between environmental taxes in a strict sense, where the taxable event is something that pollutes, and environmental taxes in a broad sense that have a normal taxable event and that do not aim solely at the protection of the environment, which, as such, is a secondary element of the levy.

So, TARI’s taxable event is the production of waste, that is a pollutant activity, TARI’s taxpayers are people who own real estate that potentially produce waste (even though not effectively), and, as a result, create a pollutant activity (that is the production of waste), moreover the taxable base is made of pollutant elements (waste). The taxation is of course based on normality standards, but the taxable base is linked (even though not effectively) to waste produced, that is the pollutant element. Therefore, there should be no doubt in qualifying TARI as an environmental tax in a strict sense. As a further confirmation, article 1, paragraph 667, law 147/2013 provides that municipalities may use precise measurement systems of waste which is considered by the same law as an implementation of principle “the polluter must pay” provided by article 14 of EU directive 98/2008.

2. On these foundations it is possible to analyse properly Gadda law’s tax incentives. Adding a final part to article 1, paragraph 652, law 147/2013, Gadda law introduced reductions of TARI for taxpayers, different from domestic users, related to productive activities for which taxpayers donated food to the poor or to feed animals. The reduction must be proportionate to the amount of food donated and, on top of that, is not binding for municipalities that have the discretion whether to introduce it or not.

There are several issues regarding these provisions.

2.1. First, should it be considered as a tax break in a strict sense? It is not easy to answer this question: the dearth of a legal definition of “a tax break” and the vagueness of the classifications made by doctrine make it hard to work as an interpreter. If anything, it is possible to move from the perspective of an Author that suggested a functioning criterion to identify tax breaks: what distinguishes tax breaks is their ability to replace public expenditures, in other words, they are expenditures through taxes.

In this way it’s possible that the distinction between tax incentives that specify the ability to pay on which the taxation is based, from tax incentives that only outwardly appear as an exception of tax regulations but actually are linked to purposes related to the field of use of public resources.

2.2. In light of the above it is possible to establish the nature of tax incentives provided by Gadda law with respect to the TARI.

On the one hand, municipalities have the discretion whether to introduce it or not and according to article 1, paragraph 652, law 147/2013 the reduction of TARI must be proportionate with the amount of food donated. Moreover, this reduction could affect just the variable part of the tax, that is part of the levy depending on amount of differentiated or undifferentiated waste or based on presumptive coefficients introduced by municipalities in the absence of a precise measurement system. In the end it comes to a specification of the ability to pay.

More specifically, the reduction of TARI as previously stated is proportionate to the amount of food donated. This food is bound to become waste, due to its inability to be commercialised. The donation avoids food becoming waste and, simultaneously, reduces the amount of waste produced by taxpayers, which is the tax base of the levy.

Anyway, the nature of TARI (has to be considered as an environmental tax in a strict sense) expresses the aim to meet the costs of the collection and the disposal of waste, so a reduction of the levy proportionate to the amount of waste produced by each taxpayer allows an adjustment of the levy with lower polluting potential.

To conclude, the reduction of TARI provided by Gadda law might be considered not as an expenditure through taxation but as an adaptation of the levy to the effective ability to pay shown by the taxpayers.

3. One last thought. The incentive provided by Gadda law matches the nature of TARI, as it is an environmental tax in a strict sense. This incentive allows, in case of a lower taxable situation (that is the amount of waste produced), the reduction of the levy proportionally to the environmental benefit, that is the reduction of waste. So, it is odd thought that the municipalities are not obligated to apply the incentives provided by Gadda law. However, in a system that should tend to encourage circular economy this kind of reductions might need to have a wider field of application.

Moreover, there is to be considered the relationship between the reduction provided by Gadda law and TARIP, that is a levy on waste, based on a punctual measurement of waste. There is the risk to overlap between these provisions, given that they both affect the variable part of the levy, so they should be considered incompatible.

In fact, where TARIP has not been provided, the reduction provided by Gadda law may adjust the levy to the effective ability of the taxpayers to pay.

Vice versa, where TARIP has been provided, the punctual measurement of waste, together with the corresponding levy, it would absorb the sheer function of the reduction provided by Gadda law, because the levy would already have been adjusted to the effective amount of waste produced. One more reduction proportionate with the amount of food donated may reduce excessively the variable part of the levy, independently with the ability to pay of the taxpayer. Here, the reduction provided by Gadda law might change in nature to become a sheer fiscal expenditure, aimed to encourage donations of food to the poor overshadowing the environmental purpose to reduce the amount of waste.

(*) Intervento svolto dall’Autore, in occasione della SUSEET Summer school in european environmental taxation, III Edition, che ha avuto luogo presso l’Università degli studi di Napoli Federico II, 12 luglio 2023.

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