Drive to curb Italian tax on luxury cars

Date: 15/05/1997

ITALY is being threatened with legal action by the European Commission over tax rules which discriminate against luxury car ownership.

The Commission has sent Rome a warning letter demanding an explanation for its refusal to give tax deductions to professionals and businesses with luxury cars. Under Italian law, vehicles with cylinders over 2000cc (2500 cc for diesel models) are excluded from any tax relief.

EU officials suspect the rules could amount to disguised protection of local manufacturers, which are mostly absent from the luxury end of the market.

Although Italy is home to some of the most famous makers of luxury models - Ferrari, Alfa Romeo and Lancia - more than nine out of ten large-cylinder luxury cars sold in Italy are imported, with 80&percent; of imports coming from other EU countries.

Italian officials justify the heavier burden on luxury cars as an example of progressive taxation and add that the virtual absence of Turin-based car giant Fiat from the top-of-the-range market is not significant. Fiat is indirectly present in the luxury trade through its ownership of Ferrari and Maserati.

Rome might also consider using environmental arguments against the Commission, added an Italian official.

European Commissioners for transport and the environment have both floated the idea of heavier tax penalties on bigger cars to encourage motorists to buy less polluting models.

UK manufacturer Jaguar, now part of US car giant Ford, started the campaign against a raft of discriminatory Italian rules in the early 1990s.

One of its complaints, against an extra tax on the purchase of luxury cars, resulted in a victory for the company in 1994 when the levy was abolished.

The mix of measures introduced by the Rome government has shrunk the market for luxury cars to far below what it should be for a country with Italy's purchasing power and population, claims John Lewis, managing director of Jaguar Italia.

“We have been vociferous in asking for changes and pushing the Commission to force Italy to make them. The market size in Italy is only between 13,000 and 14,000 cars a year. That is peanuts compared with other countries such as the UK, which stands at around 100,000 a year,” he said.

German carmakers BMW, Mercedes and Audi are the other main players fighting for a share of the small Italian trade. But Lewis says some firms selling models over 2000cc, such as Peugeot and Rover, do not even try to enter the Italian market because of the present rules.