Tax Penalties and Length of Proceedings: The ECtHR Rules Against Italy

Introduction

In its judgment of 8 October 2026, Grassucci and Others v. Italy, the European Court of Human Rights unanimously found against Italy on account of the excessive length of five tax proceedings and, in two cases, also on account of the lack of an effective domestic remedy. In reaching this conclusion, the Court recognised the criminal nature of the tax penalties at issue, departing from the approach followed for more than twenty years by the Italian Supreme Court, which had adopted a far more restrictive classification. That approach had, in practice, precluded taxpayers from accessing the compensation provided for by the Pinto Act, the application of which presupposes a violation of art. 6 ECHR.

The decision directly concerns the right to a hearing within a reasonable time. It remains to be seen, however, whether the recognition of the criminal nature of tax penalties is set, in the future, to affect also the applicability to tax proceedings of further safeguards specific to criminal matters.

The Criminal Nature of Tax Penalties and the Pinto Act

Art. 6, para. 1, ECHR provides for a series of safeguards forming part of the right to a fair trial, including the right to have proceedings determined within a reasonable time. In tax matters, however, this provision does not apply across the board. In particular, it applies to proceedings concerning penalties which, according to the criteria developed in the case law of the ECtHR, are criminal in substance. The applicability of art. 6 to disputes concerning solely the determination of the tax due remains, by contrast, more controversial.

On this point, the approach of the ECtHR differs significantly from that adopted by the Italian Supreme Court. According to the Supreme Court's case law, tax penalties would be criminal in nature only where they are “convertible into custodial measures” or, by reason of their particular severity, comparable to a punishment; in its more recent rulings, the Supreme Court has also emphasised the existence of a legal basis of a criminal nature.

The ECtHR, by contrast, applying the criteria developed since the Engel case, attaches decisive weight to the substantive function of the penalty. Tax surcharges, provided for by rules of general application, in fact pursue a purpose that is “both deterrent and punitive”: an element which the Court considers “in itself sufficient” to establish their criminal nature, irrespective of their amount.

Since this function characterises a very large proportion of tax penalties, the principle laid down by the Court appears capable of extending well beyond the cases specifically examined in the judgment. Measures with a purely compensatory function, such as interest due for late payment, would instead remain excluded.

The different classification has a direct bearing on the applicability of the Pinto Act, namely Law No. 89 of 2001, which grants fair compensation for the unreasonable length of proceedings where this amounts to a violation of art. 6, para. 1, ECHR.

By denying, in general terms, the criminal nature of tax penalties, domestic case law had effectively excluded taxpayers from access to that remedy. It is precisely for this reason that the ECtHR held the Pinto Act to be ineffective “as resulting from the interpretation of the Pinto Act by the domestic courts”.

The Consequences

1. The alignment of domestic courts

In accordance with the principle of subsidiarity, it is first and foremost for the national courts to ensure respect for the rights guaranteed by the Convention.

The Courts of Appeal and the Italian Supreme Court will therefore be called upon to adopt the principles laid down in Grassucci, recognising the criminal nature of tax penalties for the purposes of claims for fair compensation under the Pinto Act.

The ruling also affects the calculation of the overall length of the proceedings. According to the ECtHR, the relevant period runs from the notification of the tax assessment or adjustment notice imposing the penalties, whereas merely preparatory acts, such as the tax audit report, are not relevant for this purpose.

However, this raises an issue of coordination with art. 2, para. 2-bis, of the Pinto Act, which identifies the filing of the originating appeal as the starting point of the proceedings. It will therefore be necessary to determine whether that provision can be interpreted in a manner consistent with the Convention or whether, failing that, a question of constitutional legitimacy must be raised with reference to art. 117, para. 1, of the Constitution.

2. The applicable criminal-law safeguards

The judgment directly applies only one safeguard: the right to a hearing within a reasonable time, which, moreover, also applies in civil disputes.

The Court does not, however, rule on the applicability to tax proceedings of other safeguards typical of criminal matters, such as the presumption of innocence, the right to remain silent or the right to examine or have examined witnesses.

Recognition of the criminal nature of the penalties could provide the basis for a future extension of some of these safeguards, but it does not have an automatic effect. The ECtHR itself points out that tax penalties do not belong to the “hard core of criminal law” and that, consequently, the Convention safeguards need not necessarily apply with the same degree of stringency as is required in criminal proceedings in the strict sense. The applicability of individual safeguards will therefore have to be assessed on a case-by-case basis.

3. What taxpayers should do

In practical terms, a distinction must be drawn according to when the tax proceedings are concluded.

For proceedings concluded before the Grassucci judgment becomes final - presumably at the beginning of January 2027, unless the case is referred to the Grand Chamber - the Court does not require prior recourse to the Pinto remedy. It therefore remains possible to apply directly to Strasbourg within four months of the final domestic decision, pursuant to art. 35, para. 1, ECHR.

For proceedings that are concluded after the judgment has become final, it will instead be necessary to exhaust the domestic remedy first, by filing a claim for fair compensation with the Court of Appeal within six months of the final decision, pursuant to art. 4 of Law No. 89 of 2001.

For proceedings still pending, the Pinto claim may be brought even before they are concluded, once the reasonable time limit has been exceeded, as provided for by art. 4 of the Pinto Act following Constitutional Court judgment No. 88 of 2018.

The obligation to have prior recourse to the Pinto Act presupposes, however, that the remedy is effective in practice. Should the Italian courts fail to comply with the principles laid down by the ECtHR and continue to deny compensation in tax disputes concerning penalties of a criminal nature, the remedy would once again become ineffective.

Where there is settled domestic case law contrary to the Convention, the taxpayer could therefore apply directly to the Strasbourg Court, as two of the applicants in the Grassucci case successfully did.