The Tax Evasion of Big Tobacco in Italy – Balances Attached

December 21 2001: based on the sentence of the Italian Supreme Court, Philip Morris's total tax evasion amounts to 120 thousand billion old lire, equal to some 60 billion euros. It would be the “World Record” for Tax evasion.

…Our Troops are Coming!

On July 9th 2004, an important agreement was signed between the European Union and Philip Morris, the leader of smuggling in Europe. The tobacco giant was to pay 1,200 million dollars, interest free and in installments over a 10-year period to bury the hatchet and forget everything that had been done in the past. Why so little?

If, after the sentence of the Supreme Court of Cassation of 21 December 2001, someone closed an eye on Philip Morris’s 120 thousand billion lire tax evasion, we have to thank, besides Romano Prodi, three sinister individuals: Massimo D’Alema, Vicenzo Visco and Oliviero Diliberto.

Foreseeing this inevitable legal ruling, the Government, with Massimo D’Alema, Vincenzo Visco and Oliviero Diliberto and signed by President Ciampi, on the 10th of March 2000, issued legislative decree no. 74. In contrast to a fundamental principle of Italian law that states that no one can invoke ignorance of the penal law, the government decreed the non-punishability of the crime of fiscal evasion for those who found it difficult to interpret the laws that obligated them to pay taxes.

Here’s how Big Tobacco Continues to Rip Off the Italians

The tobacco market of the Italian boot is the richest in Europe. Last year cigarette manufacturers divided up a turnover of 2 billion 800 million euro… But how much tax do you think they paid on it?

Today in Italy, 99% of the brands sold belong to three foreign companies that have transferred all of their production abroad and, with various accounting tricks, they no longer pay taxes in Italy.

Philip Morris Italia S.r.l.

According to the latest balance, from a turnover of 1 billion and 463 million euro, Philip Morris declared only 22 million 515 thousand euro of profits. How did they do this?

Year Sales revenue of Philip Morris – Italia Profits of Philip Morris – Italia
2010 1.463.449.460 Euro 22.515.996 Euro
2009 1.466.058.297 Euro 56.356.750 Euro

Philip Morris now has all its cigarettes manufactured in foreign countries. It inflates the purchase costs and in Italy declares a ridiculous profit that entails the payment of only a symbolic bit of change in taxes. To manufacture a pack of Marlboro cigarettes costs no more than 12 cents. Philip Morris sells it for 71 cents, taking home a real profit of close to 600%. And this does not seem to bother anyone!

Japan Tobacco International Italia S.r.l.

Camel crossing road sign«You guys don’t understand anything: Italy lost the war and if Big Tobacco doesn’t pay taxes in Italy, you shouldn’t be surprised,” – say the experts. But Japan, too, was a member of the “ROBERTO,” the Rome-Berlin-Tokyo axis, and the Italian taxpayer who buys a pack of Camels should know that the war has nothing to do with it. Japan Tobacco, paying not even a cent of taxes on the profits earned from Italian smokers’ purchases is just screwing them out of their money. The system, in fact, is simple: the Japanese produce all their Camels outside Italy and a foreign company, their associate with headquarters in Holland, sells them directly on the Italian market – without even filing an income tax report.

Japan Tobacco Italia Srl has its headquarters in Milan, the company’s declared activity in Italy is «Società di consulenza & pubbliche relazioni. Ingrosso beni durevoli vari», (consulting and public relations company wholesale various durable goods).

In spite of the 800 million packs sold in 2010, with a turnover of more than 500 million euro for the Dutch company, it reported income of a mere 49 million euro with profits amounting to a little more than 8 million euro. This, they say, does not derive directly from the sale of cigarettes, but from the commissions on the sale in Italy of Japan Tobacco International S.A.’s products.

Year Sales revenue of the Dutch Company* Sales revenue reported by JT Italia** Profits of JT Italia
* The presumed turnover of the Dutch Company, which JTI does not make public, is based on the calculation of the number of cigarettes sold in Italy.
** The profits reported by JTI in Italy do not come from its cigarette sales, but from the promotion activities performed for “third parties,” including the use of agents in tobacco shops.
2010 515.000.000 Euro 49.957.044 Euro 8.207.844 Euro
2009 495.000.000 Euro 46.870.954 Euro 8.600.875 Euro

British American Tobacco Italia S.p.A.

British American Tobacco Italia offices in Rome, Via Amsterdam 147

British American Tobacco Italia offices in Rome, Via Amsterdam 147

When it manufactured a good part of its cigarettes in Italy, BAT was not free to circumvent Italian taxes like its cronies Philip Morris and Japan Tobacco were doing. In spite of its wishes, it was obliged to be the most generous tobacco multinational contributor to the Italian fiscal system.

But a year ago the company closed down its Lecce production plant in southern Italy and took all its manufacturing out of the country. The plant in Lecce was the last of twenty-one cigarette production plants of the ex-ETI (Ente Tabacchi italiano).

So, after moving all its production abroad, what is BAT going to do now? In 2012 will it devote itself to promotional activities performed for third parties reporting negligible profits like Japan Tobacco? Or will it inflate its production costs and pay two cents of taxes at its own discretion like Philip Morris?

Year Sales revenue of BAT – Italia Profits of BAT – Italia
2010 579.860.049 Euro 69.174.324 Euro
2009 579.718.455 Euro 139.467.796 Euro

As we can see from the table, British American Tobacco’s profits in 2010 have already gone down significantly.

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