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Beating tax cheats key to Italy’s recovery plan
Question of the Day
The Ferrari-driving plumber hid some €2 million ($2.6 million) of his income over several years by giving his customers invoices — for jobs ranging from fixing leaks to installing new bathrooms — for the actual cost of his work, but kept a second, false registry of much lower figures for tax purposes, said Pescara tax police Col. Mauro Odorisio.
Armed with a 2008 law, authorities confiscated assets belonging to the plumber equivalent to the approximately €1 million ($1.3 million) they contend he owed in taxes, Odorisio said.
With Ferraris in red or yellow, and snazzy Porsches parked inside, Guardia di Finanza garages practically resemble luxury car dealerships.
The cars get sold to help recoup unpaid taxes and interest.
Overall, tax revenues in Italy were up by 4.1 percent, says the Economy Ministry, when comparing figures from the first eight months of 2012 with the same period in 2011, but much of that was due to new taxes, and not necessarily a revolution in citizens’ consciences about tax obligations.
Monti’s recipe relies heavily on taxes that are nearly impossible to avoid, such as sales tax. He also revived a property tax that his populist predecessor, Premier Silvio Berlusconi, had abolished in a promise to voters.
The ministry’s report last month noted that the property tax figured prominently in the “tendency toward growth” in tax revenues. But sales tax revenue dropped slightly despite higher sales tax rates, indicating that consumers were feeling the pinch of the stagnant economy.
The heavier fiscal burden seems to have driven some honest citizens to rebel against the engrained culture of tax evasion.
The number of phone calls from the public to the tax police’s hotline to report stores, restaurants and other businesses that didn’t give customers sales receipts has almost doubled in the first nine months of this year, compared with the same period in 2011.
It’s apparently dawning on Italians that shirking taxes in the end only costs them, in terms of ever-higher levies and cutbacks in public services.
Citizens now increasingly understand that “the lack of revenue over time caused by tax evaders forced the government to stiffen the tax burden on categories where you can’t evade taxes,” Campana said, referring to workers whose taxes are deducted from paychecks. Another area where evasion is close to impossible is real estate ownership.
Odorisio noted the crackdown included extending the statute of limitations on tax evasion from six to eight years and establishing prison as a penalty for big-time evasion.
Other weapons include a measure promoted by the Monti government that limits cash payments to no more than €1,000. Paying by credit card or personal check is a relatively new habit for Italians, who are used to carrying wads of cash in their pockets, even for big-ticket items like home renovations or vacations.
Past governments in Italy sometimes resorted to tax amnesties to try to boost revenues. But critics, contending some Italians counted on such a possibility, described that strategy as only perpetuating the tax cheat culture.
Spain hasn’t had much success with its own tax amnesty introduced by the conservative government in March. That measure, expiring soon, allows undeclared assets or those hidden in tax havens to be repatriated by paying a 10 percent tax without criminal penalty. The amnesty is estimated to recuperate far less than the expected €2.5 billion ($3.25 billion).
By Tom Harris and Madhav Khandekar
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