The European Court of Justice held this week that a stopover tax, levied in Sardinia on non domiciled individuals, fails both under the Freedom of Movement and State Aid rules of the EU Treaty.

In 2006 the Region of Sardinia a tax on stopovers for tourist purposes by aircraft used for the private transport of persons or by pleasure boats over a certain size. The tax was levied by reference to “tax domicile” – if you were liable to tax otherwise in Sardinia, you didn't get caught for the travel tax.

The Sardinian authorities advanced a number of arguments in their defence, among them that the travel tax went some way towards environmental management. The ECJ rather drily observed that pollution is caused regardless of the place of origin or tax domicile of travel operators and that the aircraft and boats of residents and non-residents alike contribute to the environmental damage.

The categorisation of a measure as State aid requires that four cumulative conditions be met: there must be an intervention by the State or through State resources, liable to affect trade between Member States, which confers an advantage and distorts or threatens to distort competition. The ECJ found that the travel tax conferred an advantage on Sardinian tour operators over their colleagues in other EU regions.

Further details are available at http://curia.europa.eu/jcms/jcms/Jo2_16799.