“For production reasons dictated by the current international economic context…” this is how British American Tobacco explained its decision to transfer production from its Italian factory in Lecce to Germany.
After the sale in 2004 of the Italian Tobacco Agency—Ente Tabacchi italiano—to BAT, the zeroing out in Italy of cigarette production is being completed with the closure of all 21 ex-E.T.I. factories.
Why is it that in the rest of Europe, cigarettes are being produced and new factories are opening while in Italy all the factories are being closed?
Up to a few years ago, 95% of the cigarettes sold on the Italian market were made in Italy. The ETI, at the time proprietor of all the Italian brands, even produced Marlboros for Philip Morris.
With the shutdown of the Lecce plant, 100% of the cigarettes sold in this country (except Yesmokes) will be produced in foreign countries. A sector worth 14 billion euro a year in tax revenue will be totally in the hands of foreign companies, distribution included.
Why is BAT Moving Out?
For the tobacco multinationals, Italy is not a country where they manufacture, but where they sell.
The tobacco sector is not feeling the economic crisis at all, particularly in Italy: here BAT produces a pack of MS cigarettes at a cost of 12 cents and sells it at 54 cents with a profit of 350%, by far the highest in Europe for a cigarette sold at the lowest cost allowed on the market.
What is more, in the past two years, the cigarettes produced in the Lecce plant increased from 9 to 13 million tons.
In the past year, the three tobacco multinationals that sell on the Italian market divided up profits amounting to 1 billion 800 million euro; but altogether they reported a total of only 120 million.
Maybe BAT is aiming to do what Japan Tobacco has done: J.T. manufactures all its cigarettes outside Italy and sells them in this country through an associated foreign company, without even sending in a tax return.
In fact, the closure of their plants and the transfer of production abroad enables these producers to get around the tax requirements showing ridiculous and absurd production costs and not even filling in a tax report.
If until 2004, when the production was 95% in Italy, the multinational tobacco companies paid taxes in this country; today with accounting tricks, they do not pay taxes in Italy on the cigarettes produced abroad. So, after the closure of the Lecce plant, BAT will be able to stop altogether being a taxpayer.
This is happening even in spite of the incomprehensible and unjustifiable tax concessions received by BAT in these past years along with the special favors of the Italian government, like the old minimum price and more recently the minimum tax—“tassa minima”—on cigarettes, that determined the end of the Italian manufacturing companies, except for Yesmoke.