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Italian Tax Mores

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Herr Galen

on 25 February 2014

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Transcript of Italian Tax Mores

Italian Tax Mores
Case Study Brief
Italian companies under-report taxes by 30-70%

Italian Revenue Service issues "invitation to discuss"

Commercialista negotiates taxes

Bustarella issued to encourage fair tax bill

Taxes only go up
Ethics in play
Manager: Egoism, Kantian Duties

Bank: Relativism, Friedman

IRS: Pragmatism, Relativism, Utilitarian on Surface (sans losing year)

Commercialista: Egoism (bustarella)
Two Options
File taxes as per American standard

File taxes according to local Italian custom
Our Stand
Company should adhere to local custom

Local regulations decrease may tax burden

Paying honestly results in penalty; it should be avoided

Fire manager and hire someone who will follow company mandates and Italian advisers

Manager's Actions
Acted as if in America

Reported taxes accurately

Disobeyed company wishes, even after explicit instruction to follow Italian tax custom

Also ignored Italian tax advisers
Company pays much higher taxes

Must cope with higher "tax floor" as subsequent years taxes will always increase

Explain to shareholders why taxes are higher than required as per the books
American Way
Created for Italian Gov. (extra taxes)
Manager (follows Kantian duty)
Destroyed for firm (can't negotiate)

Taxes to be paid in full (in America)

Firm maximize stakeholder wealth
Manager follows ethics
Italian Way
Created for Italian Gov.
Created/Destroyed* for Firm
Destroyed for Manager
*losing year
Taxes on books not enforced
Negotiation is current standard

Firm maximize stakeholder wealth
Manager follows ethics
Company's Response
Understandably upset, sought to re-negotiate with IRS, but was denied

Manager was recalled to U.S. and replaced
Adam Jawitz
Brendan Howes
Jon Sadusky
Full transcript