“I Don’t Serve the Multinationals” – But There Is the Tobacco Test

Mario Monti

Mario Monti, the new Italian Prime Minister: servant of the multinationals as some malicious people say, or the ”Saddam Hussein of Business” as the Economist has called him?

«It’s not a question of strong powers; let me reassure you totally …when I was the European Antitrust Commissioner in Brussels, I was not a devoted and disciplined server of the multinationals; I fought against big American companies, in spite of the intervention of the president of the United States … The Economist has written that the American business world considers me the Saddam Hussein of business”. These are the words of Mario Monti, the new president of the Council of Ministers of Italy, addressing the Senate.

To understand who Mario Monti is, we won’t need to observe the strong powers, the Bilderberg Group, the Trilateral Commission or Goldman Sachs; all we need to do is to watch the Italian market of processed tobacco. It is unlikely that the new Saddam Hussein will dare to stand up against the big boss Philip Morris (who put its man Marchionne at the head of Fiat) and its two cronies of the sector, all “exempted” from paying taxes in Italy.

A servant … or not a servant? Here are three issues that could reveal the weaknesses of the new Government, like the one before it.


1. Circumvention of the European Court Sentence.

Today everybody in Italy seems to love talking about Europe, but will the sentence of the European Court of Justice, dated 24 June 2010, be respected, the sentence that declared illegal the minimum price of cigarettes? How will Monti deal with the ridiculous “minimum tax”, thought up by Gianfranco Fini’s henchman Alberto Giorgetti: a tax that suddenly appeared on June 23rd to circumvent the European Court’s ruling of June 24th, the tax that is impossible to pay, the tax that benefits foreign multinationals and damages Yesmoke, an Italian company.

Monti also stated: “As E.U. Commissioner for competition, I also had the pleasure of working for the law and for the citizens, and of doing my part opposing the governments of the largest European countries when it happened that they did not respect the rules”.


2. The Price Swindle.

Will cigarette prices continue to rise “all’italiana” – the Italian way, that is, not due to tax increases but decided by the “cartel” of the three multinationals - Philip Morris, British American Tobacco and Japan Tobacco?

In 2004, with the purchase by BAT of the Ente Tabacchi Italiano, the cigarette cartel completed its “occupation” of 99% of the Italian tobacco market. Since then the prices of cigarettes have risen constantly, but this sting for buyers is not due to the State’s tax increases, but rather to these three companies who coordinate their price hikes, in a market protected by the minimum price and therefore, without free competition.

Recreating a competitive market, as the European Court of Justice intended with its June 24th sentence abolishing the minimum price, the manufacturers would be forced to reduce their profits to avoid losing their market share. In this framework, the State could increase its excise intake without necessarily increasing the cost of the goods.

The price swindle, on the other hand, with the excise on tobacco products blocked at 58.5% since 2004 (in France it is 64%) has allowed Philip Morris to build up its profits on Marlboros to 600%, while the State for years has been giving away a significant portion of its tax revenues.

3. The Multinationals Do Not Pay Taxes.

With the new government, how will Philip Morris, BAT and Japan Tobacco handle their tax
obligations? Will they finally begin to pay taxes like normal citizens, like the people of show business, like fashion designers, like sports champions … or will they continue to benefit from their “exemptions”, taking home 2 billion euro in profits every year?

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