By on May 5, 2013

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TTAC alum Justin Berkowitz, over at Car and Driver, reports that a government crackdown on tax cheats has resulted in the Italian market for Italian supercars tanking. Ferrari sales went down 50% from 2011 to 2012. Maserati’s Italian sales have dropped 80% since 2009. Lamborghini is apparently selling no more than five cars a month in all of their home country.

 

The crackdown, which included checkpoint stops and revenue police visits to gatherings of car enthusiasts, was prompted by some pretty flagrant and apparently illegal tax avoidance, but the net result has been that even some tax compliant owners of high end cars have sold off their supercars and substituted less attention drawing rides. That means lower Italian sales for the very car companies that help define Italy in the minds of car enthusiasts world wide. Ferrari president Luca di Montezemolo called his home market “a hostile environment for luxury goods”. Montezemolo pointed out that such luxury goods are an important “resource” for Italy, alluding to the foreign currency such goods bring in. Seven thousand cars is not a large figure in the car biz, but when you consider that the profit margin on a Ferrari is five, or possibly six figures, that’s a substantial ‘resource’, even before you add in Fila’s revenues on all those rosso corsa shirts and shoes. I’m no economist, just a guy who writes about cars, but if I were the Italian government, before I cracked down even harder on buyers of expensive cars I might consider what happened to the French car industry when the French government decided to lavish the tax man’s attention on luxury cars.

1938 Delahaye

1938 Delahaye

Once upon a time, not so very long ago actually, some of the very best cars in the world were French. Brands like Bugatti, Delahaye, Delage, Voisin, Facel and Talbot Lago stood for high performance but also a sense of style that stood out even in an era of magnificent automobiles that today are considered rolling sculpture. Drawing on generations of actual coach building, French automotive coachbuilders were kept busy by the, ahem, carriage trade in the period before World War Two. Today, none of those gloried French automakers exist. Yes, a division of Volkswagen owns the Bugatti brand and Ettore Bugatti’s former estate in Molsheim where Ferdinand Piech’s sttempt to show that he has the  biggest swinging dick in the automotive industry the Veyron is assembled, but nobody, even the folks who own Veyrons, think that the Veyron is a real Bugatti. Peter Mullin has real Bugattis.

Bugattis may have been at the top of le heap Francais, but the other French luxury marques were also highly regarded, so what happened? What happened was the notion of “fiscal horsepower”, cheval fiscal, abbreviated CV, as in the Citroen 2CV, a car built to be taxed as lightly as possible. Today the cheval fiscal is partly based, no surprise, on carbon dioxide emissions, but back in the postwar era, the formula involved, among other things, displacement, number of cylinders, maximum RPM of the engine, and vehicle weight. While the tax scheme promoted the development of small cars like the 2CV or Renault’s 4, it pretty much killed the French luxury car makers. The notion of taxing horsepower was popular in Europe but taxes on luxury and performance cars were particularly onerous in France.

Now right now, some of you are thinking, “Schreiber’s on a right wing anti-tax rant”, but don’t take my word for it. Almost every reference that I can find about French car makers in the postwar era mentions taxes, either as a reason for their success, as in the case of Citroen and their Deux Chevaux, or as a reason for their demise, as with the luxury brands. Looking at Wikipedia (yeah, I know, usual caveats apply), the entry for Talbot-Lago says that their cars, rated by the tax authorities at 15 CV, were taxed at “punitive” levels. When members of the Bugatti family tried to revive the company with the Type 101, its engine was rated at 17 CV, which put annual taxes at the “confiscatory” level. Starting with Sydney Allard’s Cadillac powered cars, a number of European automakers similarly installed American V8s in cars, but France’s Facel-Vega cars, which used Chrysler Hemis and Wedges, never used the biggest Mopar engines. The reason is usually attributed to French taxes. This broker’s listing for a 1949 Talbot-Lago T46 calls the French tax system “infuriating”. Whether you’re coming from the right or from the left, I think it’s fairly factual to say that high domestic taxes on luxury cars killed the French domestic luxury car industry.

The Italian government and tax authorities may think they’re doing their civic duty by cracking down on car enthusiasts who use untaxed income to buy exotic cars, without that crackdown hurting the export of expensive Italian automobiles, but they should consider the example of their neighbors in France. The present dearth of French luxury cars isn’t the only example Italians should heed. In 1990, in the United States, a Republican president and a Democratic Congress passed a special surtax on goods like yachts, private planes and very expensive cars. According to a PBS report in the mid 1990s, the 10% “luxury tax” imposed on yachts purchased in the U.S. almost destroyed American yacht makers. Rich folks didn’t stop buying expensive things, they just bought their boats in place like, ironically, Italy. As part of the general tax crackdown, by the way, Italy has also increased taxes on yachts.

Ronnie Schreiber edits Cars In Depth, a realistic perspective on cars & car culture and the original 3D car site. If you found this post worthwhile, you can dig deeper at Cars In Depth. If the 3D thing freaks you out, don’t worry, all the photo and video players in use at the site have mono options. Thanks for reading – RJS

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84 Comments on “Italy Cracks Down On Tax Cheats. Will Ferrari, Maserati & Lamborghini Go The Way Of Bugatti, Delahaye and Talbot-Lago?...”


  • avatar
    dal20402

    Totally different situations. The French imposed a tax system that made it almost impossible to buy a luxury car legitimately. The Italians’ newfound enforcement doesn’t affect someone who buys a luxury car legitimately at all. This only affects so many people because tax evasion is so universal there.

    The French (as usual) got it wrong. The Italians are getting it right. It’s stupid to impose taxes that make it impossible to buy legitimately from your own domestic producers. It’s stupid *not* to enforce your tax laws.

    • 0 avatar
      28-Cars-Later

      I have to disagree with you slightly, its equally stupid to create oppressive tax regime to the point where high producers avoid them en masse. So if you’re in Ferrari buying territory you are mostly likely in the top two brackets of 41% or 43% of income, bear in mind this is PLUS Italian Social Security (10% for employed, 17%-26.7% self employed) PLUS regional (1.2%-2.03%) and local (0.1%-0.8%) taxes PLUS a VAT tax of 20% on everything you buy. I’m not specifically familiar with deductions and what-not of Italian taxes, but it looks like as an employed executive let’s say your income tax rate is around 50%, couple this with VAT and other high duties, how do you *not* cheat on your taxes? Its easier to blame a symptom of a bigger problem than to go after the problem itself.

      Italy individual income tax rates 2013

      Tax (%) Tax Base (EUR)
      23% 0 – 15,000
      27% 15,001-28,000
      38% 28,001-55,00
      41% 55,001-75,000
      43% 75,001 and over

      http://www.worldwide-tax DOT com/italy/italy_tax.asp

      VAT tax reference:
      http://world.tax-rates DOT org/italy/sales-tax

      • 0 avatar
        Beerboy12

        Dal20 is correct. There might very well be a challenge with the tax laws (to severe?) but they are laws and enforcing them is not unreasonable. Change the laws if they don’t work, but don’t get all angry because of enforcement.

        • 0 avatar
          CelticPete

          Why shouldn’t we get angry about the kind of enforcement – especially when they use profiling.

          What if the US government decided that alot of Lexus drivers were tax cheats and started pulling them over and taking them to the station while they ran an audit?

          Don’t you think that would put Lexus in a hard spot?

          Seriously what is wrong with people nowadays that they get so envious they want everyone with more then them to have it taken by the government..

          And yes I know you didn’t say that specifically but its the only rationale I can see where one wouldn’t care about enforcement.

          You can’t go around hassling or hurting people just because SOME people in that group are bad.

          That’s whats going on here – and its not right.

      • 0 avatar
        jimbob457

        Four points:
        1. the personal income tax schedule 28 cars posted is way too progressive for today’s world. It encourages evasion.
        2. Italians have collected personal income taxes partly in accordance with your outward (conspicuous) consumption as far back as anyone can remember, if not longer.
        3. I don’t have the data in front of me, but tax evasion (overall),in Italy has been large – like on 30% of GDP as opposed to 8% in the USA.
        4. the governmental budget crisis in Italy as well as Spain, Portugal and Greece is very acute, collecting more taxes is a huge priority.

    • 0 avatar
      GoBears

      Agreed. Salaried employees in Italy can’t evade thier inocme taxes. It’s the self-employeed that do, and Berlusconi only encourages their tax evasion. Check points to stop Ferrari drivers are a good way to catch guys who have reported incomes of 40,000 euros yet can afford to own a Ferrari.

  • avatar
    OneAlpha

    Tax evasion’s not a crime, it’s a Statutory Violation.

    It’s nothing more than an attempt to keep what is rightfully yours – your money, which you earned and which the State has no legitimate claim to.

    I would no more condemn a man for evading taxes than I would condemn him for fragging the pedophile that grabbed his kid.

    We have a flawed understanding of what taxes actually are.

    Properly understood, taxes are NOT, repeat NOT, dues that citizens “owe” to the State for the privilege of being a member of a society.

    They are the fees that citizens pay for government services.

    The State has no preexisting claim to anyone’s income. I can no more “owe” taxes to the State than I can “owe” tribute to the Mafia and yes, they pretty much are the same thing.

    The concept of “owe” would only exist if the money had once belonged to the State and the person said to “owe” it had either stolen it from the State, or taken it as a loan.

    But since the money the State claims as its own was earned by the citizens and not the State, the State cannot rightly be said to be “owed” anything.

    Now, I’m all for paying taxes to fund those legitimate functions of government, such as militarily protecting the country from hostile foreigners and apprehending domestic criminals for committing acts that actually VICTIMIZE people.

    But that’s it.

    • 0 avatar
      dal20402

      Tax evasion is a crime, no matter where you are.

      26 USC (Internal Revenue Code) 7201: Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.

      There are similar statutes in every state and almost every foreign country.

      Feel free to believe your crackpot moral theories, but don’t give bad legal advice to others.

      • 0 avatar
        Lorenzo

        You’re very respectful of government. That would make the Founders sad, because they believed governments, even the one they set up, should be treated with a healthy amount of distrust.

        There is actually a body of opinion, among a minority of legal scholars, that Congress overstepped its powers by delegating what is, in essence, a legislative function to departments such as the IRS. In the case of departments like the EPA, there is some argument – from legal scholars, mind you – that Congress has delegated powers it does not have.

        You can extend your respect to people with guns, as most of us do, but others are quite willing and within their rights to contest the idea that a department rule is the same as a statute passed by a legislature.

      • 0 avatar
        OneAlpha

        You weren’t paying attention.

        I said that tax evasion was a Statutory Violation, but not a Crime. I fully recognize that the State has the Legal Power to impose taxes and to punish those who refuse to cooperate.

        My point is that while the State may have the Legal Power to do so, it does not have the Right to do it.

        But just because something’s illegal, doesn’t mean it’s a Crime. And just because something’s legal, doesn’t make it just.

        Those “crackpot moral theories” are the foundation of history’s greatest civilization.

        • 0 avatar
          dal20402

          Can you read? The statute, which was passed by Congress (it is not an IRS reg, but a real, live law) says in plain English that tax evasion is a felony. A felony is a crime, by definition (as is a misdemeanor).

          You can disagree whether it *should* be a crime, but the fact is, it *is* a crime. Telling people otherwise is just inviting them to be locked up in jail because you lied to them.

          I am a tax lawyer and sometimes it seems like half my practice is getting it through people’s heads that 1) stuff people like you tell them is wrong and 2) the consequences of taking that crap seriously are Very, Very Bad.

          Edit: You can prattle on all you want about what people in academia think, but the fact is that the Supreme Court disagrees with them, and has for almost a century, regardless of what political ideology its majority subscribed to at any given time. In plainer words: actual law consistently and universally says your theories are wrong.

          • 0 avatar
            niky

            It is unjust to force income tax upon someone who doesn’t agree to it. Unfortunately for those someones, income tax is an opportunity cost.

            Income is not earned in isolation. It is earned within the economic climate created by the services and infrastructure (physical, economic, communications, electrical, etcetera) built and maintained by the government (“we the people” notwithstanding) collecting those taxes.

            If you want to keep more of your income, you move to Monaco, as the rich in Europe do.

            Perhaps the only unfair thing is that people are drafted into government subscribership at birth and get no choice until they’re adults… but that’s about it.

          • 0 avatar
            OneAlpha

            Do you even understand the difference between a Crime and a Statutory Violation?

            Here, allow me to explain.

            A Crime is an act that VICTIMIZES someone. Murder, theft, rape, arson, things like that. An immoral act that infringes on the rights of another human being and causes them harm.

            A Statutory Violation is an act that a government has CHOSEN TO CRIMINALIZE for whatever reason – an act that, by itself, harms no one and produces no victim. Tax evasion, resisting arrest, speeding, carrying a weapon without a license, things like that.

            Yes, both Crimes and Statutory Violations carry the full weight of law, but they arise from fundamentally different assumptions.

          • 0 avatar
            dal20402

            Stop. Just stop. If you want to talk about the definition of a crime, go to law school first. The word “crime” has a very specific definition, and it’s not the one you’re trying to use.

            And, in any case, tax evasion has a victim — lots of them, actually. Every person who evades taxes causes the rest of us to either have to pay a little more in taxes, to absorb a little more in public debt, or to lose a little bit of public services. It’s not a victimless crime in the least, especially when practiced on a massive scale.

        • 0 avatar
          danio3834

          It’s pointless to argue the validity of taxes, no matter how esoteric, with a tax lawyer.

          Their business thrives on people being terrified of the tax man. The more fear, the better.

          • 0 avatar
            walleyeman57

            Ding Ding Ding

            Winner

          • 0 avatar
            OneAlpha

            So it would seem.

            Anyway, from Wikipedia:

            “MALUM IN SE is a Latin phrase meaning wrong or evil in itself. The phrase is used to refer to conduct assessed as sinful or inherently wrong by nature, independent of regulations governing the conduct.”

            “MALUM PROHIBITUM is a Latin phrase used in law to refer to conduct that constitutes an unlawful act only by virtue of statute.”

            Crime versus Statutory Violation.

    • 0 avatar
      Speed3

      I don’t think the point of this article was about different philosophical/ideological views on taxes. Whatever one’s views may be, it’s clear to most people that Europe has many economic challenges which stem from its current fiscal, monetary, tax, labor, and regulatory structures.

    • 0 avatar
      28-Cars-Later

      Friends I see it this way, all freedom loving persons ought to get familiar with other languages, international travel, and how to move money around from place to place. A government is very much like a corporation in the sense that all it takes is bad management for a prolonged period to send it into bankruptcy, or more in the case of governments, outright tyranny.

    • 0 avatar
      Beerboy12

      So, taxes are OK so long as you don’t need to pay them? The flaw with this thinking is that any government needs to tax (to survive and provide services) and on top of that they do need to enforce… Sorry but that is the only way it will work. Volunteer tax payments… Don’t be daft!

  • avatar
    henkdevries

    From the 2012 annual report:
    Ferrari total sales 7,318 units. Sales in Italy contracted 40% to 341 units. That is 4.7% of total sales. So the home market has already plumeted and is maybe on the way being now totally axed by the government. Is it of influence, probably. Is Ferrari impacted big time by this, probably not.

    But now we are still under the assumption that Ferrari is a car company.
    Revenue generated by Ferrari is 2,433 milion. That equals 332k per car. Pretax the most expensive Ferrari F12 Berlinetta HELE costs somewhere around 250k depending on where you are in the world. For that money you can buy a lot of hats and shirts. Clothing has quite a high profit margin, but I can imagine promotional stuff being even higher.
    Conclusion: Ferrari is not very dependant on its domestic car sales.

  • avatar
    Felis Concolor

    The problem with calculated horsepower taxes is their detrimental effect on the automobile industry. The British horsepower tax system effectively crippled its automobile industry for decades, resulting in a tradition of small bore, long stroke engines which provide copious quantities of torque at low engine RPM but quickly run out of breath at higher speeds. Today’s carbon taxes are no less ludicrous in their effect, when an automaker can no longer produce a truly luxurious engine option for fear of punitive taxes forcing buyers away from their product.

    And as a carbon-based life form, I consider all carbon taxes to be inherently hostile towards this planet’s life, and wish all sorts of ill will towards those who would foist the prosperity-crushing burden upon the world.

  • avatar
    E46M3_333

    It would more enjoyable to watch Europe commit economic suicide if the current Administration weren’t taking the U.S. in the same misguided direction.

    • 0 avatar
      thelaine

      Truth, E46.

    • 0 avatar
      28-Cars-Later

      +1

    • 0 avatar
      ExPatBrit

      “It would more enjoyable to watch Europe commit economic suicide if the current Administration weren’t taking the U.S. in the same misguided direction.”

      Europe is “trying” the austerity route.

      So you apparently disagree with the US sequester, which is a kind of like austerity?

      Or did we all get “the talking points” mixed up today?

      • 0 avatar
        E46M3_333

        Since when is increasing taxes on luxury goods and raising taxes on high earners “austerity?”

        • 0 avatar
          ExPatBrit

          It’s not increasing taxes, it’s increasing enforcement.

          In the more southern countries they have stepped up on tax collection , going after people who haven’t paid what they were legally due.

          Portugal, Italy, Spain, Greece were a big part of that problem. Lot’s of business off the books. I have friends in several of those countries and that is exactly what is going on. People claiming less than $50,000 income with a fancy house and a S class. These people are being tax audited, after basically being left alone for decades.

          The rates might be high , but that’s a different issue. Maybe if everyone actually paid their fair share the taxes could be lower.

    • 0 avatar
      Beerboy12

      why would anyone “enjoy” watching economic suicide? That’s just mean spirited…

    • 0 avatar
      vent-L-8

      truth +1

  • avatar
    Speed3

    I’m not sure this analogy really works that well. As pointed out, domestic sales of Italian exotic cars is pretty minimal. I would be much worried about an economic slowdown or tax crack down in China than Italy. I am pretty sure that any slack can be picked up by demand from the global wealthy (a demographic and market that didn’t exist in the early 20th Century).

    Additionally, none of these makes are small boutique companies anymore, but part of a much larger auto conglomerate (VW, Fiat-Chrysler, etc). Ford’s unsuccessful ownership of luxury makes shows how a larger auto company can prop up unprofitable luxury/exotic car makes for years. Not too worried.

    • 0 avatar

      That’s a good point about being owned by larger firms. The French luxury marques were all independents. Perhaps if they’d have been tied to Peugeot, Citroen or Renault things might have been different. Still, it’s not like those mass market companies made many luxury cars and when they did, they didn’t have the horsepower to compete with non-French automakers. The Citroen SM even has a sub 3.0 liter engine.

    • 0 avatar
      Summicron

      “the global wealthy (a demographic and market that didn’t exist in the early 20th Century)”

      This. We’re watching (albeit it through the tiniest of peepholes) a dominant species form. It is strong and mobile enough to be immune to any massed threat from below.

      • 0 avatar

        Hey Summicron!

        Disagree there. They appear immune ’cause they have a much larger say, but, definitely, they’re not immune. The pendulum of history swings. I think we’re seeing it beginning to move.

        • 0 avatar
          Summicron

          Marcelo,

          How does the mob take the aristocrats to the guillotine when the aristocrats have helicopters, private jets and the distributed resources to hire private armies wherever they may run?

          I think that in 200 years the brief episode of Western democracy will astonish all who are still permitted to study such things with the bizarrely unique confluence of events and resources necessary to give it birth against an historical norm of barbaric feudalism to which we are now slowly returning.

  • avatar
    thelaine

    Does this seem like a pretty desperate and inefficient means to collect taxes?

  • avatar
    Manic

    I’ve heard couple of times claimed that if northern Italy would be separate country it would be very rich, per capita. There is probably some truth in this. There’s quite a lot of money in Italy, old money. Also, Italy has a lot of uh…flamboyant people. So in no time when this current crisis is over, people will start buying expensive cars again, takes couple years and market is alive again. It’s not different this time. All the car co.-s in this segment are strong enough it seems, not sure about Pagani, but they probably have enough sheiks and collectors as customers to survive.

  • avatar
    JD23

    My grandfather, who was an Italian immigrant, used to say that all of the best Italians had already left Italy. Maybe he was right.

  • avatar
    gslippy

    This is a blog about cars, but I’d bet Italy’s tax crackdown is having a similar cooling effect on the sale of other luxury items like boats, planes, and high-end houses.

  • avatar
    Big Al from Oz

    I do think in France part of the problem was the socialisation of industry.

    Not to mention after WWII most of Western Europe required rebuilding, including industry that became totally reliant on the war effort, for both the Allies and Axis powers. France needed money for rebuilding, luxury wasn’t as significant. Luxury cars were placed at the bottom of neccesity list.

    What occurred is the only institutions capable of managing the rebuilding was governments. Essentially Europe was project managed into its current situation by government reliance caused by the war. Italy was war ravaged as well.

    Poor governance more so by the Mediterranian governments has produced their current economic woes, along with the reliance of government support highlighted by WWII.

    I wouldn’t like to see the famous performance marques from Italy go under. But if it means the Italian middle class can afford more vehicles, then who really cares, more jobs will be created at Fiat I suppose.

    Also, are the reduction in sales of Italian performance cars in Italy caused by an influx of cheap used ones?

  • avatar
    jpolicke

    This roadside stop technique seems like unnecessary gratuitous harassment of an unpopular set of people. Rather than simply pulling a printout of registered owners and performing a desk audit, it’s much more newsworthy to publicly pull people over and detain them; so much the better if the cameras can catch them standing by watching their toys get towed away.

    If you can’t give the peons jobs you can at least put a smile on their faces while they watch the one percenters getting “what’s coming to them”. They should probably be grateful that PETA won’t allow lions to be reintroduced to the Coliseum.

  • avatar
    drivelikejehu

    The Italians need fundamental and systematic public sector reforms, not stunts like crashing car shows.

  • avatar

    There’s an expression in Brazil that says people sometimes “need to give up their rings so as not to lose their fingers.” Independent if its wrong or right, left or right wing, that is also democracy, as in rule by the people. It’s not an oligarchy. Truth of the matter is, such actions have a highly symbolic aspects to them that shows people to get with it ’cause crunch time is here.

    This reminds me of the story of Louis Renault, or one of the many versions. One of the richest men in the world, the French government took his company. Yes there were allegations of collaboration with the Nazis, but these apparently were magnified. He was a union buster, gave money to anti Communist and Socialist party infiltrators, fought the government tooth and nail over his right not to pay taxes…Well, he lost his rings. And some of his fingers.

    • 0 avatar
      Onus

      Thanks Marcelo for putting some sanity into to this conversation.

    • 0 avatar
      carrya1911

      You’re describing mob rule…and that’s a guarantee of a society which will be violently unjust. Think French Revolution.

      Invariably mob rule creates something worse than what it purports to be upset about.

      • 0 avatar
        E46M3_333

        Yep. That’s why our founders didn’t create a democracy. They created a constitutional, representative republic. Unfortunately, over time, the constitution has died the death of a thousand cuts, and voting powers have been given to those who use their vote as nothing more than a means to appropriate the earnings of others.

        • 0 avatar

          The Founding Fathers were pretty amazing in their grasp of the situation and the remedies they devised. However, the peculiar circumstances in which they operated are no more. Things evolve. Even the Constitution must. Or we should go back and let only men of property vote. Si suggest a million bucks. That’ll guarantee that only righteous, reputable men vote.

          • 0 avatar
            Mykl

            In the United States there is an amendment process for our constitution. The legacy of the US constitution go back as far as 1100, so to say that the circumstances in which they operated are no more is a little short sighted given that the fundamental principles upon which it was devised are nearly 1000 years old.

            Demanding that our elected leaders stick to that set of rules when executing their responsibilities is the duty of every citizen, one that I wish more would take seriously.

          • 0 avatar

            Hey Mykl,

            I agree totally. The beauty of the US Constitution is that it’s so short. More a list of principles. Principles last. However, their understanding evolves. When it gets into minute details of law is when it and all other Constitutions get in trouble. Case in point, the right to bear arms. In a largely agrarian, sparsely populated republic, in a fight with one of the world’s great powers, it made sense. Nowadays?

          • 0 avatar
            Mykl

            The right to bear arms still makes absolute sense. Let me frame that statement…

            Like I said before, the US constitution falls in line with a series of documents, starting with the Charter of Liberties, that imposed restrictions upon the monarchs of Britain. Since the creation of the Charter of Liberties, several other documents from the Magna Carta up through and beyond the British Bill of Rights.

            Most of these documents were born from armed revolution in response to the monarchy abusing their power and disregarding the documents that ensured the rights of the people they led. This happened over the span of centuries, so in that light our right to bear arms is as relevant as ever. Guns are the power for the citizens to hit the reset button the moment we believe the government has gone too far and the framers of the US constitution knew that.

            Still, this is all purely academic. The constitution very clearly states that our right to keep and bear arms shall not be infringed. I’m not a lawyer, but the words “shall not” in legalese very literally means what you think it means. The only way to change this is to amend the constitution, there’s no way around it.

      • 0 avatar

        The Ancien Règime wasn’t violently unjust? That’s the nature of revolutions. When things get bad enough, people do rise and mobs do make justice. It’s rather naïve to think this has not always been the case.

    • 0 avatar
      vww12

      «Louis Renault [...] the French government took his company. Yes there were allegations of collaboration with the Nazis, but these apparently were magnified. He was a union buster, gave money to anti Communist and Socialist party infiltrators, fought the government tooth and nail over his right not to pay taxes…Well, he lost his rings. And some of his fingers.»

      Mob rule. The mob confiscated Louis’ company just like highwaymen do.

  • avatar

    During final years of Soviet Union there were similar crack downs on the streets and other public and private places. How effective it was we already know. Nevertheless, I wonder if Italians register their cars in their version of DMV. If they don’t – it is a banana republic (which is very possible given that some EU members like Cyprus and Greece are banana republics by any definition). If yes – then how Government does not know who owns luxury cars and how much they paid in taxes. You do not need to go to car shows to find it out. In Southern Europe (as well as in former USSR) people avoid paying taxes – it is a national sport. On the other hand they demand entitlements with the same vigor as many Americans (at least half of Americans avoid paying taxes too but lawfully so, but eventually they pay taxes in the form of increased prices for the goods and services provided by those who pay taxes).

    • 0 avatar
      28-Cars-Later

      Agreed, but trouble is those who do pay the taxes also pay higher prices through inflation.

      • 0 avatar

        What I can say – they elected president and congress – elections has consequences – it is not a joke. But so called “the rich” will be rich under any circumstance – they were doing well in communist Russia, during collapse of Soviet Union, during Eltsin’s Wild West era of 90s, during and after financial collapse of 1998 and so on. And the reason is that smart people willing to take risk will always find opportunities to make more bucks and some times insane amount of cash no matter who is in power and regardless of government crackdowns. Remember – Government is paid by the same people, not by clowns from Occupy Wall Street.

  • avatar
    Beerboy12

    Any business model that cannot survive because of a crack down on illegal (given the current tax laws) activity is probably not a good one. Having said that the Italian government is, in this case, squarely to blame though because they created the tax laws and then did not enforce them, allowing the luxury brands to become complacent.
    Second thought. Italy has been in the throws of an economic melt down for a while now, how come it’s a very recent tax evasion crack down that is to blame for lower sales? I don’t buy that, sorry.
    Third thought. The French did enforce draconian tax laws and that did kill of their luxury brands, I fail to see how that is the same as the Italian situation. Apples and cheeseburgers…
    Good food for thought though!

    • 0 avatar
      CJinSD

      This story is about a lazy government harassing exotic car owners because they don’t know how to enforce their confiscatory tax codes. The impact on sales goes beyond anyone buying cars with untaxed income because law abiding exotic drivers don’t want to be hassled by the police. Anytime police are seen as a revenue tool by the government, innocent people will pay the price. In some places it is paid in reduced tourism, in others by capital flight, and in others by direct persecution of the populace. It is always bad though.

      • 0 avatar

        Sorry CJ, just wrong. The whole populace is not in danger. Just that part of the 0.1% that buys Ferraris and didn’t pay taxes. Bet you don’t think it’s wrong when the police show up at places that attract illegal immigrants (shows, international soccer matches, retaurants), right? To me the same, don’t pay taxes police give you grief, illegal somewhere, police detain you.

        • 0 avatar
          CJinSD

          100% of exotic owners with Italian registration get harassed. Whatever percentage of them don’t have their taxes in order get prosecuted. We go to great lengths to make profiling illegal here to avoid this sort of thing. Police showing up at places frequented by illegal immigrants for the purposes of catching illegal immigrants isn’t something that happens in the US outside of propaganda shows. Police go further than just looking the other way here. Illegals are seen as the next structural Democratic voting block, which can only help the police unions when it comes to lowering their retirement age to 30 and raising their guaranteed benefit packages to seven figures a year. Deportation? We reserve that for material witnesses in terrorism cases and people that don’t want their kids indoctrinated by the German state.

          • 0 avatar
            thelaine

            Yeah, the illegal immigrant analogy was unfortunate. Government officials, wealthy businesspeople, libertarians and leftists have agreed on this one. Illegals are here to stay, and more are welcome. Serious criminals may be deported, but we are not raiding soccer stadiums anymore, if we ever did. We are handing out free education, food, medical care and protection from police questioning on the issue.

            As for tax collection on Ferrari drivers, I think the point is that as emotionally satisfying as it is, it will reduce revenue and employment. It sure looks like the Italian government is a joke if they cannot collect taxes through normal civil and criminal processes. It basically appears to be one crime family mugging another crime family.

        • 0 avatar
          carrya1911

          In the States we have a serious problem with police confiscating large quantities of cash. By “large” I mean anything that strikes the officer doing so as an “unusual” amount of cash, and this is directly attributable to the drug wars. The idea is that transporting large amounts of cash is something that they do in the drug trade…which is true. A number of departments have gotten themselves a tidy little windfall by pulling over somebody muling almost a million buck that, when found, the driver says they’ve never seen and had no idea how it got in the car.

          Trouble is that the tactic there is being stretched by less virtuous government agencies as a reason to snatch cash wherever they might find it. Then insist that the person they snatched it from PROVE the money isn’t from criminal activity…which is not how it’s supposed to work under our system of government. Often once the person manages to pull together enough receipts and bank statements to prove the money is rightfully theirs, then they get it back…less expenses for impounding it and court costs, you see.

          There are even dumbasses in my profession (law enforcement) giving lectures on how they set up what amounts to seizure-for-profit scams in their departments and how your department can augment their budget, too!

          As I’ve stated before, **unintended consequences**. Measures taken by government aimed at supposedly the 0.1% end up being used on far more than just that narrow sliver of the population. If you want examples, the American criminal justice system is full of them from RICO to search and seizure abuses to “towns” that were invented solely as a speed trap to generate revenue.

          In various parts of the world it’s the law to beat women who expose too much flesh, stone, behead, or beat to death women who are raped, or to commit any number of other acts that are morally repugnant. The fact that something is legal is a damnably low standard for conduct, ESPECIALLY when that conduct is from agents of the government.

          If anyone doubts me, read the testimony of someone else who has worn the uniform and found themselves in a moral quandary about enforcing the law:

          http://chrishernandezauthor.com/2013/01/15/my-life-as-a-tyrant/

          • 0 avatar
            danio3834

            @carrya1911, Thanks for sharing your perspective. We need more people in law enforcement like you.

          • 0 avatar
            CJinSD

            Wow. That’s an interesting story about Kosovo, and the other officer’s vendetta against unpermitted merchants certainly rings true. Sadly, many law enforcement agencies in this country have the latitude to act similarly here in spite of the 4th amendment.

        • 0 avatar
          danio3834

          “The whole populace is not in danger. Just that part of the 0.1% that buys Ferraris and didn’t pay taxes.”

          Oh well in that case…carry on as if nothing is wrong.

          This reminds me of that little poem “First they came”.

      • 0 avatar
        Beerboy12

        Note, I said the Italian government was wrong and… since when did enforcing laws not infringe on the innocent. I am not saying it’s wrong, just saying the enforcement is necessary while the laws are in place. Kinda logical really.

        • 0 avatar

          absolutely right Beerboy and i don’t even think the italians are wrong per se.

        • 0 avatar
          CJinSD

          Enforcement by assuming anyone driving an expensive car is a criminal is necessary? There’s no law on the books that says driving an exotic is illegal, nor would it constitute probable cause for tax fraud in the US. This tactic has ruined people that depended on selling Ferraris, Maseratis, and Lamborghinis in Italy. Were they breaking the law? Italy will see less commerce, more people fleeing to tax havens, and reduced employment. These aren’t indicators of good governance.

          • 0 avatar

            431 cars a year. Doesn’t seem like that many CJ. In the globalized world of today Ferrari can just sell them in other countries. Seems to me that whenever the rich are squeezed just a little the media goes into s full frenzy. Class warfare, envy, communist, jobs, taxes, poor rich people can’t catch a break! Not seeing it cj. Italy is in troubles needs more taxes. Rich, tax dodging ferrari owners are a great place to start

          • 0 avatar
            Hummer

            Sorry Marcelo, but an increase in taxes mirrors a proportionable loss in revenue.
            Think, every country with high taxes on the rich is doing bad. Why would a business owner stay in a place where 50%! Of what he made either goes to bogus govt programs or lazy people? You would move out to a more friendly country, in turn destroying jobs in the place you leave.

            What incentive is there to work hard only to know you will be demonized by jealous people, rich people are not the enemies regardless what your media tells you.

      • 0 avatar
        vww12

        The Italian revenuers have been going to the marinas and looking at the papers of the boat owners. Two results:

        1. The marina industries in Croatia and Montenegro are booming
        2. Yacht mechanics in Italy are having trouble finding jobs, or having to do the weekly commute to Montenegro (not cheap nor good for families)

        Someone figured that the losses to the marina industry in Italy far exceed the tax collected from a few yacht owner dodgers.

        • 0 avatar
          jimbob457

          The yacht makers and taxes story is a good one oft and truly told, but it means no more and no less than what actually happens. Boat makers just move to nearby harbors where the pleasure boaters customarily dock and taxes have not changed. They set up business there. No big deal.

          In this and other threads I see all sorts of temper tantrums by people who think they are getting screwed. Hard times bring this out. And, sometimes these folks really are getting screwed.

          So what? What to do about it? After all, if you even own a four wheeled motor vehicle, you are doing better than most people in the world. Take care of yourself.

          • 0 avatar
            carrya1911

            The luxury tax story doesn’t end there. Patrick Kennedy (of legendarily Democratic clan Kennedy) campaigned hard to get rid of the luxury tax because…let’s all pay attention here…**it was hurting the tradesmen and craftsmen that built yachts.**

            Attempts to soak the rich to come up with new revenue didn’t hurt the rich, it just hurt people who made things the rich bought. Jimbob seems unaware that this was a federal tax, and as such there was no refuge or respite from it by moving to another state. Everybody from yacht makers to people who made jets and upper-end motor homes was damaged by the tax and it didn’t really pull in revenue. The rich aren’t typically rich because they’re stupid. Penalize an action and they do less of it. That means lots of middle class people who made luxury goods got hammered. Often these were people who were genuine craftsmen, who spent many years honing their skill…not exactly easy to just pick up and do something else.

            The article here was about the dangers of unintended consequences. Frequently policy makers attempt to accomplish a goal, but often the end result of their action is a situation worse than the problem they were trying to solve.

            I have no doubt the Italian government thinks that enforcement actions like this will get them more money. What it is likely to is simply change the behavior of some of the people they want more money from while damaging the prospects of others they may not have intended to hit…like the guy stitching leather seats in a Ferrari factory. He’s not part of the 1%, I’d imagine.

          • 0 avatar

            I am well aware of some of the consequences of actions like these. However, irrespective of its history or ineptitude of the particular government in question I think we can all agree that times are tough. Putting a bit of a squeeze on some rich folk at such times is not unheard of and can have be a pedagogic measure for the rest of the population. The middle class in Italy is hurting. You cannot go after them to hard in times like these or there’ll will be consequences.

            We live in an age were the rich are celebrated and the poor are denigrated. Not always are the rich rich because of many splendored talents nor are the poor poor because of laziness. The rich have always had to cover their asses when times get tough (specially in Europe). The rich have mouthpieces thought all the media and can convince many people of the benefits to all of the status quo (by hurtling crumb).

            I’ll just point to the example of Oliver Twist who surprised everyone by daring to ask for more.

          • 0 avatar
            Hummer

            Marcello, brazil must be different then the much of the world, as America, and obviously Italy among others are denigrating the rich, Italy has an almost nonexistent middle class. Because there are few rich to provide jobs to help create a middle class. And I’m sorry but the majority of the rich are extreme left, and they do put their ideology into the media they own, they are the same people who fund billions to terrorist organizations such as occupy Wall Street.
            You can’t put 100% of the burden on the rich and expect them to deal with it.
            In America the top 10% pay 75% of the taxes, that’s ridiculous.

  • avatar
    mklrivpwner

    Maybe I’m nitpicking, but, US customers buying Italian goods to avoid domestic taxes being an example for Italians to consider for their own domestic tax system is not ironic. In fact, it’s pretty straight forward. Humorous, yes. Sad, yes. Unexpected, potentially. But not ironic.

    Otherwise, a very well put together and informative article.

  • avatar
    walleyeman57

    I think this is a message being sent by the Italian government that tax cheats are being rounded up and punished. The way they are doing it – at car shows and traffic stops-is to show in a most purposeful way that the government is watching and prosecuting cheats. If the watchdogs just comb the registrations and audit from there, only those caught will be held up for condemnation. By doing it in the most visible way, others who may be cheating but not driving high end cars will take note and perhaps change their ways also.

    With the sequestration here, we see something similar. Rather than cutting 3% of the fat from government, our leaders instead choose to make the cuts as visible as possible and thus, raise the ire of the populace.

  • avatar
    NMGOM

    What impresses me about this discussion is two things:
    1) How knowledgeable and articulate everyone as been;
    2) The politeness offered, even (or especially) in disagreements. Perhaps the TTAC family of commentators can be a shining light for other Internet interactions, much of which has been coarse or abusive.

    ———————


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