In a striking blow to the Italian government, Fiat Industrial is moving it's tax residency from Italy to Britain. Fiat Industrial is one of the world's largest bus manufacturers, who also makes tractors and heavy duty engines. The company was formed when the Fiat group split it's equipment division (Industrial) from it's car division (SpA).
Fiat is one of Italy's largest companies and it's biggest private employer. Unemployment in Italy is already at a 20 year high as the country is in the midst of the second year of a recession.
The information came to light in an SEC regulatory filing in the US as it prepares for the total acquisition of CNH (Case New Holland), which it already owns 81% of. In it, the company said that it "intends to operate in a manner to be treated as resident of the United Kingdom for tax purposes."
Also distressing to the Italian government are rumours that Fiat SpA, who controls US automaker Chrysler, is considering relocating their headquarters from Turin to Detroit. While the rumours are unlikely, they're enough to cause the Italian government some discomfort. Fiat chief Sergio Marchionne has been coy about the rumours, fuelling them further. The company has not issued a denial, merely saying that a headquarters move is not currently on the agenda. In April, Marchionne was quoted saying that once the company completes it's expected merger with Chrysler, that the company would be headquartered in a geographical region that has "the adequacy of capital markets (necessary to) support our operations going forward." He also said that "Europe is becoming a less and less relevant fact in the scheme of things" as its share of the global auto market diminishes.
The government is leaning on Marchionne to commit to Italy, and Italy's Industry Minister Flavio Zanonato is meeting with him to ask about Italy's future role with the company. There have been signs that Marchionne is cooling on Italy and it's high taxes, shrinking markets and high labour costs.
Italy's current recession is the second worst in Europe, after Greece's. As Fiat moves to take advantage of Britain's more favourable tax conditions, the desertion of such a large taxpayer will hurt Italy. Last year the company paid taxes of more than 500 million euros in that country. The posted corporate tax rate in Britain is only 23.25%, compared to 31.4% in Italy. Since the UK reduced it's corporate tax rate in 2007, the country has become a European tax haven. Both the UK and Ireland are using low corporate taxes to hold companies solvent, and to create jobs, considering them essential to their country's economic recovery. Several multinational companies, including Apple, have structures in place to allow them to pay a large percentage of their tax obligations to Ireland, where rates are exceptionally low.
By Linda Aylesworth - autoExpert.ca