Marco Melandri has been given a suspended jail term of one year and seven months for tax evasion by a court in his home town of Ravenna. Melandri was found guilty of trying to evade taxes during the period he lived in Derby, in the UK, the court finding that Melandri’s residence for tax purposes should have been in Ravenna, Italy, Melandri’s home town.
Melandri was a resident in the UK to take advantage of the British non-domiciled resident status, which allows wealthy non-UK citizens with large incomes from sources outside the UK to avoid paying tax on that income. Melandri was one of several riders who had elected to have their residence in Britain for precisely that reason.
Valentino Rossi was one such rider, nominally resident in London, but with “non-dom” status to avoid paying tax on his income. But Rossi was an earlier victim of the Italian tax authorities, the nine-times World Champion being found guilty of tax avoidance in Italy and condemned to pay a fine of 35 million euros in 2008.
The prosecution of Melandri covers the period from 2003 through 2005. Melandri’s earnings over 2003 – estimated by the courts to be 1.1 million euros – can no longer be pursued, being too far in the past, but the tax authorities are keen to pursue Melandri over his earnings in 2004 and 2005. The prosecution told the courts that the Italian earned 700,000 euros in 2004, when he was still with the Fortuna Tech 3 Yamaha team, and 1.8 million euros in 2005, when he joined the Movistar Honda team run by Fausto Gresini.
The prosecution brought several pieces of evidence to support their claims, including purchases of real estate and luxury vehicles. Melandri denies the claims, saying that his earnings were not liable to Italian tax. The courts, however, found that much of Melandri’s earnings pertained to financial activity in Italy, and were therefore subject to Italian tax.
The prosecution of Melandri, like Rossi before him, is part of a campaign by the Italian authorities to persuade wealthy Italians to pay their taxes. By going after high-profile figures such as Melandri, the tax authorities hope to discourage attempts to avoid paying tax by methods such as the UK non-domicile status.
The prosecutions are part of a larger crackdown on tax avoidance, with Italian marinas complaining during the summer of drastically reduced business, after the tax authorities sent police in to search some of the luxury yachts docked at marinas around the country. The aim is to increase tax revenue to help tackle Italy’s growing national debt, and help stabilize the Italian economy during the current financial crisis which haunts the euro area.
This article was originally published on MotoMatters, and is republished here on Asphalt & Rubber with permission by the author.