The Cigarette Swindle – a Test for Monti

Since the beginning of the 1990s, the Italian politicians who have succeeded one another have always worked hand in hand with the AAMS opposing increases of tax pressure on cigarettes i.e. the rate of excise duties, opting for tariff maneuvers that have protected the profits of the giant foreign manufacturers.

Our politicians have stolen money from the collectivity to give it away to foreign companies, who in exchange said “Bravo.” But now that the Monti Government has arrived, will it all change?

A Long History of Servility – 1992-2012

In 2003, a trial involving the cartel run by the AAMS /ETI and Philip Morris was held which resulted in their conviction. At the trial, BAT stated that in the early 1990s, the AAMS had imposed its directives on cigarette manufacturers, excluding Philip Morris: “There has been a pervasive intervention of the AAMS, which, concerned about safeguarding its own interests and those of Philip Morris, has instrumentally used its numerous powers and roles to impose its directives on other manufacturers having more modest market shares, using its power to delay pricing registrations and practicing discrimination in the distribution.”

Philip Morris had signed an agreement to produce Marlboros in the AAMS plants, and the AAMS was protecting the interests of its “Client.” BAT, moreover, pointed out that sales price increases were not the only way to bring in more tax revenue: it was possible to reach the same objective by varying the excise levy. This is exactly what Yesmoke is saying to the AAMS today.

According to BAT, the concurrence between the AAMS /ETI and Philip Morris regarding the prices was evident “in their agreement on price rises that produced an increase of tax intake deriving from the sale of cigarettes, avoiding changes, provided by the law, of the excise tax, that would give the same increase. The companies agreed to go ahead with contextual and homogeneous rises of cigarette sales prices, as this method, not only satisfied the needs of the State revenue, but also allowed the producers to boost their income; their income, on the contrary, would be reduced if the excise tax was raised.”

The effects of these contract relationships between the AAMS and Philip Morris to define price increases emerged even more clearly in the hearing of the general manager of the AAMS before the Financial Commission of the Chamber of Deputies in November 1995. On this occasion, the general manager acknowledged explicitly that the “license contracts stipulated by Philip Morris and the AAMS, especially in relation to the calculation of the royalties, limited the operations of the latter, inducing it to make pricing maneuvers instead of fiscal ones.”

This conditioning finds further confirmation in the price increases that took place at the beginning of 1996; in the minutes of the meeting of the AAMS Board of Directors of 29 December 1995, the AAMS general manager and a member of the board express their perplexity on the pricing nature instead of the fiscal nature of the maneuver, aimed at “making consumers pay for the need to earn additional margins of revenue deriving from tobacco,” when adjustments could have been made […] to the taxation system, in which significant margins exist to increase tax income; these adjustments, however, had to be […] made up from the profits of the manufacturers.”

In 2004 British American Tobacco purchased the ETI Ente Tabacchi italiano, and in 2005 BAT and Japan Tobacco joined the Philip Morris and AAMS cartel. The antitrust, in fact, would have not have allowed Philip Morris to buy the ETI, and BAT, in this way, found its place in the “cartel.”

To make it work in a free market, the minimum price was introduced. This obliged the producers who were not part of the cartel to alter their sales prices in line with what the cartel established. Thanks to the minimum price, which the European Union affirmed, “safeguards the profits of the manufacturers at the expense of tax revenue,” Philip Morris today has reached earnings of 600% on a pack of Marlboro cigarettes, BAT reached a 400% profit on a pack of MSs and Japan Tobacco hit a healthy 420% intake on its Camels.

The big three naturally defended the minimum price, which was aimed at keeping the excise low and increasing their profits and this led to Italy’s controversy with the European Union. The E.U. in 2008 started up violation procedures and on June 24th 2010 imposed the abolition of the minimum price.

The continuity of the actions of the AAMS is clear: still today, it wants to make consumers pay the need for higher tax income, when it could reach the same objective by increasing the excise aliquot. But this would reduce the disproportionate profits of Big Tobacco! The AAMS is an aberration, because it is openly, almost “officially,” defending the interests of the foreign tobacco giants, who no longer manufacture in Italy and do not even pay taxes in our country, greatly damaging the Italian State and the national cigarette producers.

A Servant or not a Servant?

To understand who Monti is we do not need to examine the strong powers, the Bilderberg Group, the Trilateral Commission or Goldman Sachs. How is the professor going to handle the ridiculous minimum tax of Gianfranco Fini’s petty thief Alberto Giorgetti, the tax that is impossible to pay, the tax that suddenly appeared on June 23rd to circumvent the sentence of the European Court of Justice of June 24th?

Monti has declared: “As EU Commissioner on Competition I had the pleasure of working for the law and for the citizens, and I did my part to take action against the governments of the major European countries when they did not abide by the regulations.”

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