Ryanair accused of dodging taxes in Italy by claiming Italians in Bergamo work in Dublin

An Italian prosecutor has opened an investigation into Michael O'Leary, the chief executive of Ryanair, and Juliusz Komorek, the airline's legal affairs director, for alleged tax evasion.

The investigation, reported by Italy's Corriere della Sera, concerns Ryanair's hiring of 220 staff at its Bergamo hub near Milan while putting them on the books in Dublin, where tax rates are far lower.

Estimating the loss to the Italian state at €12m in taxes, the magistrate Maria Mocciaro gave the airline 90 days to settle its account, an offer Ryanair turned down, the newspaper reported.

Although the airline's Bergamo staff are required to live near the airport, Ryanair claims they work on board Ryanair aircraft and their taxes should be paid in Ireland, the home of the carrier.

A Ryanair spokesman declined to comment on the report, stating the airline would "continue to observe EU tax laws".

A representative of Italy's airline association said Ryanair was flouting Italian rules. "Given that Ryanair operates stably in Italy then I cannot understand why the rules it follows are different to those followed by other carriers including easyJet," said Aldo Bevilacqua, general secretary of Assaereo. "Ryanair's trick has been tolerated until now," he added.

But a Rome-based aviation consultant said the rules were not clear. "This is a grey area," said Nick Brough.

"Ryanair has been very careful to avoid having any fixed place of business in Italy which would make it liable to pay tax here. In France they changed the rules to make Ryanair pay taxes, but I don't see what this magistrate can achieve here unless the rules are changed."

Ryanair flew more than 22 million passengers to and from 21 Italian airports last year, second only to the flag carrier Alitalia, which flew nearly 26 million passengers. This year the Irish airline expects to reach 24 million passengers, and 37 million within four years.

Italy's own low-cost airlines have meanwhile failed to prosper, while Alitalia was saved from collapse in 2008 by a consortium of Italian businesses recruited by the then prime minister, Silvio Berlusconi.

Ryanair has previously defended its policy in Italy of accepting payments from Italian airports in return for flying to them. "The airline takes financing from airports just to land at them, a procedure which should be transparent and accessible to all," said Bevilacqua.