The Italian corporation is typically represented in such negotiations by its

The italian corporation is typically represented in

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The Italian corporation is typically represented in such negotiations by its commercialista , a function which exists in Italian society for the primary purpose of negotiating corporate (and individual) tax payments with the Italian tax authorities; thus, the management of an Italian corporation seldom, if ever, has to meet directly with the Italian revenue service and probably has a minimum awareness of the details of the negotiation other than the final settlement. Both the final settlement and the negotiation are extremely important to the corporation, the tax authorities, and the commercialista . Since the tax authorities assume that a corporation always earned more money this year than last year and never has a loss, the amount of the final settlement, i.e., corporate
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taxes which will actually be paid, becomes, for all practical purposes, the floor for the start of next year's negotiations. The final settlement also represents the amount of revenue the Italian government will collect in taxes to help finance the cost of running the country. However, since large amounts of money are involved and two individuals having vested personal interests are conducting the negotiations, the amount of bustarella -- typically a substantial cash payment "requested" by the Italian revenue agent from the commercialista --usually determines whether the final settlement is closer to the corporation's original tax return or to the fiscal authority's original negotiating position. Whatever bustarella is paid during the negotiation is usually included by the commercialista in his lump-sum fee "for services rendered" to his corporate client. If the final settlement is favorable to the corporation, and it is the commercialista's job to see that it is, then the corporation is not likely to complain about the amount of its commercialista's fee, nor will it ever know how much of that fee was represented by bustarella and how much remained for the commercialista as payment for his negotiating services. In any case, the tax authorities will recognize the full amount of the fee as a tax deductible expense on the corporation's tax return for the following year. About ten years ago, a leading American bank opened a banking subsidiary in a major Italian city. At the end of its first year of operation, the bank was advised by its local lawyers and tax accountants, both from branches of U.S. companies, to file its tax return "Italian-style," i.e., to understate its actual profits by a significant amount. The American general manager of the bank, who was on his first overseas assignment, refused to do so both because he considered it dishonest and because it was inconsistent with the practices of his parent company in the United States. About six months after its "American-style" tax return, the bank received an "invitation to discuss" notice for the Italian tax authorities. The bank general manager consulted with his lawyers and tax accountants who suggested he hire a commercialista . He rejected this advice and instead wrote a letter
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