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A Ferrari Is Still a Ferrari

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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Drive through the Italian countryside in your rented Fiat, and you'll eventually notice that almost every vehicle you pass is also a Fiat, or an Alfa Romeo or a Lancia. While foreign brands congest the nation's cities, rural Italy pays loyal homage to its domestic auto industry.

So, yesterday's announcement that Ferrari may abandon Italy as its official residence in order to pursue lower taxes elsewhere is a potential blow to national pride. It shouldn't be. It's only a reminder that Prime Minister Matteo Renzi's efforts to reform the nation's economy still have far to go.

In a globalized world, it makes no economic sense to defend national champions just because they're national champions. As a British car enthusiast, I've watched the likes of Jaguar, Aston Martin and Range Rover all pass into foreign stewardship over the years; overseas ownership hasn't diminished their charisma. A Ferrari will still be a Ferrari no matter where the company pays its taxes.

Shifting Tax Bases

Ferrari's plan, though, to be executed next year after Fiat Chrysler Automobiles makes the supercar maker independent, highlights Italy's uncompetitive tax regime. Fiat itself already has its tax base in the U.K., where corporate taxes are levied at 21 percent and will decline to 20 percent next year. Italy charges more than 31 percent. As Bloomberg's Tommaso Ebhardt and Ruth David reported yesterday, Italy ranks 56th on the World Bank's rankings of the easiest countries to do business, while the U.K. is 8th.

As the ongoing scandal about Luxembourg's tax havens for global companies shows, tax arbitrage within the European Union risks running a beggar-thy-neighbor race to the bottom. Fiscal divisions hurt the countries least able to afford them. As Giorgio Airaudo, an Italian politician who is also the former head of a car workers' union, said yesterday: "This uncompleted Europe is showing its weakness, it’s weak with the strong and too strong with the weak.''

The solution probably isn't tax harmonization imposed from Brussels. But in the absence of a fiscal union, more companies are likely to shop around for lower taxes. In a global market, heritage provides a theme for the marketing department to exploit, but it's not an obligation the chief executive has to respect.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor on this story:
Mary Duenwald at mduenwald@bloomberg.net