Case FCA Italy, that’s why the company has not paid IRAP for ten years. And why it is necessary to make country by country reports public

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The first yes to the 6.6 billion euro loan requested by FCA to Intesa San Paolo, with a Sace guarantee arrived yesterday: the initial step of a highly debated economic initiative, because the company that controls the country’s main car manufacturer and the publishing group Gedi will have a substantial guarantee on the next expenses, although at the beginning of 2021 it has already put the merger with Peugeot on the agenda, with a dividend already fixed and the passage of control in Paris on automotive investments. While the national political controversy seems to have shifted its focus elsewhere, the debate does not stop especially where the company has greater interests.

On May 25 the regional councilor of Leu and Verdi in Piedmont, Marco Grimaldi, at the regional question time, put the theme of IRAP, the regional tax that all large and small businesses pay and which is used to pay the national health system, managed by the Regions. According to what the regional budget commissioner Andrea Tronzano replied, FCA does not pay the IRAP in Piedmont and does not pay it in any region in which it has its headquarters: it has not paid Irap on the whole national territory as it results in credit of around 12 million euros “, explained the councilor.

Open was able to view the tax returns and it is indeed so. Checking the tax heading, it doesn’t take long to understand that FCA has not paid the tax on production activities since the time of the merger between Fiat and Chrysler. It has a tax credit which accrued before the corporate reorganization of 2010 to which the negative production values ​​for 2011, 2012 and 2013 were added. The situation has remained unchanged in subsequent years. From the checks on the documents, at the moment the tax credit was 12,867,473 euros, but ten years ago it was 38,900,385 euros.

“Anyone who defends the FCA’s right to ask for credit guarantees, at least has the courage to pretend like us that the group makes its consolidated financial statements public and accessible”, comments Grimaldi after the question time: “I say more. It is time to review the structure of a tax that only children are likely to pay. It should make us think that FCA confirms to be a giant of profits, but if you look at the item Irap looks like a poor man ».

What is profit shifting

In itself, at least from a tax point of view, the non-payment of IRAP may not be a scandal: all companies that are at a loss or have a tax credit can discharge it on the heavy regional tax and not pay it. As we informally explained by FCA, the company has closed the Italian balance sheet at a loss, without profits, for years. It happened to FCA but it would have happened to any other passive company, large or small, they reiterate.

ANSA / ALESSANDRO DI MARCO | The Mirafiori plant on the day of reopening, April 27, 2020

According to some international economists, however, it is also possible that the company has followed a practice – absolutely legal – particularly widespread in multinationals, the profit shifting. As economist Francesco Saraceno, senior economist at the Sciences Po in Paris, explains to Open: “The profit shifting it is common practice for all multinationals and is not illegal. The only topic on which we can intervene, and I speak in general, not particularly of FCA, is to ask companies that receive public funding to publish their country by country reports. Public opinion would know if they are contributing to a company that is on the whole active “.

Tommaso Faccio, member of the Icrict independent commission for the tax reform of multinationals, who on the board of economists of the caliber of Joseph Stiglitz and Thomas Piketty, explained to Internazionale how it works: «I profit shifting are the transfers of intra-group funds, “says Faccio. “For example, the Luxembourg financial branch of a company can make a loan to the Brazilian one, and in this way, when the loan is repaid with interest, the profits emerge in Luxembourg, where they are not taxed: at that point if the the parent company is in London, there is a dry taxation of 5 percent, a very favorable regime compared to other countries, including Italy ».

Contacted by Open, Faccio adds that from the financial statements that FCA deposits publicly and also makes available on its website, it is not easy to understand if there have been capital shifts between one location and another: «From the consolidated financial statements it is amount of profit shifting and it is not always possible to identify if there is a risk of profit shifting, precisely, since the intra-group transactions are canceled in the consolidated position ».

Informally, FCA explains that there has been no practice of profit shifting between the Italian branch and the parent company. And he reiterates that the only explanation is the losses.

Everything solved? According to Faccio and Saraceno, the problem could be solved with the obligation to publish country by country reports. Carlo Calenda, but also Corrado Augias and even Francesco Giavazzi on the Corriere della Sera speak of greater public control, Giavazzi went so far as to cite the entry of the state into capital as a shareholder, as a tool to control not only how profits move but where investment strategies are directed. In short, the debate is far from over.

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