EURO-M-1 (16). 112 None 113 131 139 144 177 310 327 329 383 154 180 456 520 548 1 $375,000.00 125,000.00 2 25, 675.00 (3) 4 90, 240.00 4 76, 493. 87 Total 1 Price redetermination. 3 Although the audit report shows $71,457.26, $75,000 is being administratively withheld by the contract. ing officer. * Possible recovery on royalties paid for use of SOFAM forging method. NOTE.-In addition to audit reports noted above, there are contracts both in Italy and in Greece, which are in the process of audit by AAA that might result in claims. It is not possible at this time to furnish any factual information regarding these contracts until aforementioned reports of audit are received. Mr. MONTGOMERY. Colonel Jenkins, in order that the committee may have a proper frame of reference for the discussion of this problem, would you give us briefly the provision of the bilateral tax agreement with Italy? Colonel JENKINS. If I may, I would like to call on my price analyst to give that, Mr. Montgomery. STATEMENT OF STELLA NAFZIGER, PRICE ANALYST, OFFSHORE PROCUREMENT, ROME, ITALY Mrs. NAFZIGER. There was an exchange of notes in March 1955 between the Italian Government, Ministry of Finance, Mr. Vanoni and his Excellency, Mr. Dunn, American Ambassador. The intent was only that our prices will be exclusive of taxes and that the two Governments would determine the implementation of how to bring that about and that we would not pay taxes. Mr. FASCELL. Do you have the exact wording from something that you can read into the record ? Mrs. NAFZIGER. Here it is. Mr. FASCELL. Is that copy available to us for the record ? Mr. FASCELL. That is the idea, so we can get an understanding of what you are up against. Mrs. NAFZIGER (reading): * Recently discussions have been held between the Governments of Italy and of the United States of America on the subject of Italian taxation insofar as it may affect certain United States expenditures for the common defense. These discussions have been conducted on the basis of the agreed principle that expenditures made in Italy by the United States for the common defense should be free of Italian taxation. In the course of these discussions, certain understandings have been reached, which I am pleased to communicate to you as the undertakings of the Italian Ministry of Finance: 1. Relief will be granted by Italy from Italian taxes in the manner specified in the annex to this note. Such tax relief will be applied to all United States purchases in Italy of armament, equipment, materials, facilities, and services for the common-defense effort. The common-defense effort is understood to include existing foreign-aid programs of the United States. 2. The taxes for which relief will be provided in the manner specified in the annex are the Italian: (a) transactions tax (imposta generale sulla entrata) ; (0) taxes on production (imposta di fabbricazione), including taxes on textiles (imposta sui filati delle fibre tessili) and petroleum products (imposta sugli olii minerali); (c) registration of contracts tax (imposta di registro); (d) taxes on construction and building materials (imposta di consume: materiali per costruzioni edilzie); and (e) import duties (imposta doganali). Mr. FASCELL. This is the list of taxes to be excluded ? Mrs. NAFZIGER. Specifically. 3. The tax relief granted under this note and the annex thereto will be applied independently of possible limiting provisions contained in agreements concluded earlier and will supplement the tax benefits currently enjoyed in Italy by the United States. The relief so accorded will apply to all payments of the United States of the character described herein which are made after the date of this note. 4. With respect to any taxes not specifically referred to in this note which might be found to be applicable to expenditures of the character described herein, the two governments will consult with a view to arriving at mutually satisfactory arrangements consistent with the spirit of this note. Mr. FASCELL. That applies only to those taxes that are not specifically listed in the agreement ? Mrs. NAFZIGER. That is correct. 5. Similarly, if other special situations should arise with respect to taxes of the type covered by paragraph 2, such situations will be discussed between the two governments in the spirit and within the terms of the understandings of the present note. If necessary, the Italian Government will examine the feasibility of sponsoring appropriate legislation. 6. The laws of Italy with regard to social security and other contributions related to the employment of individuals are not affected by this agreement And so forth. Mr. FASCELL. I think we can skip the rest of that and put it in the record. Mr. MONTGOMERY. Perhaps we should get the implementing procedures. Mr. FASCELL. And annexes. Mrs. NAFZIGER. I might note that it will be possible for Italy to provide the tax relief described in the note of the Minister of Finance of March 5, 1952, within the framework of existing legislation and in the . manner prescribed below which merely tells them which ministries they will go to get these data and how they will go about doing it. That implementation is summarized in a manner which states that the Ministry of Finance will be the Ministry which helps those people to do this, and that was stipulated. However, it is not in this. Mr. MONTGOMERY. Perhaps we can develop that by interrogation. Would you tell us something about it? Mr. FASCELL. Before you get onto that, let us get this copy over to the reporter because it is going to be made a part of the record . Mrs. NAFZIGER. And a résumé developed by the proper firms. Mr. FASCELL. If you have a copy of that for the record, will you please pass it over! Mrs. NAFZIGER. Yes. Mr. FASCELL. Will you hand that to the reporter? Without objection, it will be included in the record. (The material referred to is as follows:) His Excellency MINISTER EZIO VANONI, Minister of Finance. EXCELLENCY: We have received your note (with attached annex) of March 5, 1952, which reads as follows: "Recently discussions have been held between the Governments of Italy and of the United States of America on the subject of Italian taxation insofar as it may affect certain United States expenditures for the common defense. These discussions have been conducted on the basis of the agreed principle that expenditures made in Italy by the United States for the common defense should be free of Italian taxation. In the course of these discussions, certain understandings have been reached, which I am pleased to communicate to you as the undertakings of the Italian Ministry of Finance : "1. Relief will be granted by Italy from Italian taxes in the manner specified in the annex to this note. Such tax relief will be applied to all United States purchases in Italy of armament, equipment, materials, facilities, and services for the common defense effort. The common defense effort is understood to include existing foreign-aid programs of the United States. “2. The taxes for which relief will be provided in the manner specified in the annex are the Italian (a) transactions tax (imposta generale sulla entrata); (6) taxes on production (imposte di fabbricazione), including taxes on textiles (impose sui filati delle fibre tessili) and petroleum products (imposta sugli olii minerali); (c) registration of contracts tax (imposta di registro); (d) taxes on construction and building materials (imposte di consumo: materiali per construzioni edilizie); and (c) import duties (imposte doganali). "3. The tax relief granted under this note and the annex thereto will be applied independently of possible limiting provisions contained in agreements concluded earlier and will supplement the tax benefits currently enjoyed in Italy by the United States. The relief so accorded will apply to all payments of the United States of the character described herein which are made after the date of this note. “4. With respect to any taxes not specifically referred to in this note which might be found to be applicable to expenditures of the character described herein, the two Governments will consult with a view to arriving at mutually satisfactory arrangements consistent with the spirit of this note. "5. Similarly, if other special situations should arise with respect to taxes of the type covered by paragraph 2, such situations will be discussed between the two Governments in the spirit and within the terms of the understandings of the present note. If necessary, the Italian Government will examine the feasibility of sponsoring appropriate legislation. “6. The laws of Italy with regard to social security and other contributions related to the employment of individuals are not affected by this agreement. “7. These undertakings enter immediately into effect." ANNEX "It will be possible for Italy to provide the tax relief described in note of the Minister of Finance of March 5, 1952, within the framework of existing legislation and in the manner described below: "1. With respect to procurement of goods and services: Procurement by or on behalf of the United States of the character described in the note of March 5, 1952, will have the benefit as exports of fiscal exemptions. (a) For IGE, the system applied will be: (i) Exemption for such purchases from the payment of the normal tax applicable to the last sale; (ii) reimbursement of the IGE, already included in the price of goods so procured. The Minister of Finance will determine, through ministerial decree, the amount of the IGE actually included in such categories of goods and the amount which accordingly will be reimbursed on such purchases of the United States. This amount will be reimbursed by the Ministry of Finance to the vendor to the United States. Upon prior notification of the American authorities of categories as to which procurement may be made, the Italian Administration will be able to state the amount of tax reimbursable in each such category, and will give this information to the American authorities even before publication of the decrees in the Official Gazette. The price paid by the United States to the vendor thus will be net of taxes. (iii) Exemption of the tax on the furnishing of services under contracts for processing, repair, or rebuilding of 'nonnationalized' items (that is, not formally incorporated into the Italian economy). (b) For production taxes including those on textiles and petroleum products, the allowance or the reimbursement will be conceded or maintained by the Ministry of Finance according to current procedures. (c) For the tax on registration of contracts, it is hereby made clear that no tax is applicable on contracts stipulated or concluded outside of Italy. "2. With respect to construction in Italy and the procurement of goods and services intended for the common defense in Italy: The Italian Administration will assume the burden of taxes affecting expenditures of the United States. The taxes included in this article are the IGE, the registration of contracts tax, and every other tax that can be applied to procurement or to construction or maintenance thereof, including such consumption tax on building materials as may possibly be chargeable. (a) Where procurement or construction is carried out by the Armed Forces of the United States, or by means of a contract to which the United States or an agency thereof is a party, the Italian Administration will sustain that part of the cost which can be attributed to the abovementioned Italian taxes. Appropriate agreements will be made with the interested Italian ministry concerning the procedural aspects of this paragraph. (b) Where procurement or construction is carried out by the Italian Government or by its armed forces, the United States will reimburse the Italian Government the agreed part of the total cost of the construction or procurement less an amount established by application to the United States contribution of the percentage of taxes in the total cost. "3. (a) Import duties are currently suspended with regard to the more important articles of a military nature imported into Italy. Such exemption will be extended, insofar as possible, to all articles imported by or on behalf of the United States, having the character of defense or other aid within the framework of common defense. (b) Customs duties for which exemption or allowance cannot be conceded under current regulations will be assumed as a burden by the Italian Administration. (c) For articles bought by the American Government for defense or other aid purposes, there will be applied the reimbursements of duties foreseen by existing customs law." We hereby express our agreement to the above note and annex. JAMES CLEMENT Dunn, American Ambassador. ROME, ITALY, March 5, 1952. 2-5 Italy (effective Mar. 5, 1952) (A) TAXES FOR WHICH RELIEF IS GRANTED ON U. S. GOVERNMENT EXPENDITURES FOR THE COMMON DEFENSE No. Name Rate Description Extent of exemption Other comments Transactions tax (imposta generale Normally 3 percent.-- Applies to each transaction except Relief is provided from all of the The contractor's obligation to pay the final sale in the case of ex- identifiable amounts of the tax IGE tax to the Government is not later receives relief, however, in the below). plus 0.2 percent fee. of contracts. Applies only to assume he entire burden of contracts formally concluded in this tax on contracts for the common defense in Italy. How- Italy. See below. as textiles (imposta sui filati sugar products, etc. Do. among communes and with the size and purpose of the building. Do. |
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