Italy fights tax evasion

REUTERS

Italy's new prime minister has put his country on a strict austerity regime of spending cuts, tax hikes and tighter pensions.

But Mario Monti still has one more card up his sleeve - the fight against tax evasion, another tool to cut down the debt mountain of the eurozone's third-largest economy.

“Evasione” is almost like a sport in Italy, especially for higher-income individuals who declare themselves as poor to the tax authorities.

Attilio Befera, the head of the national tax office, estimates that 120 to 130 billion euros (152 to 165 billion dollars) slip through the state's fingers annually.

Monti has pledged to fight the phenomenon and to create new instruments to that end. But can Italians be re-educated?

Some 80 tax inspectors travelled to the chic Dolomites winter sports resort of Cortina d'Ampezzo over the New Year for a series of spectacular raids.

Their audits found that 42 of the 251 owners of Ferraris and other fast cars had declared that they were barely making ends meet with a taxable annual income of 30,000 euros.

Dozens of cars with six-figure price tags were registered with firms that had allegedly lost money in the past few years or barely made a profit. In addition, many traders based in the ski resort apparently issue invoices for much less than the sales were worth.

“Too many poor people in Mercedes,” wrote the newspaper Il Giornale, while other observers decried “fantasy bills” in restaurants and luxury shops.

What was seen in the Dolomites town was only the tip of the iceberg, analysts say.

There are more than 200,000 fast cars on Italy's roads, whose owners reported an annual income of 20,000 to 50,000 euros, media reports said.

Hundreds of taxpayers who claimed they earned about 20,000 euros a year were able to afford an aeroplane or a private helicopter. Tens of thousands of yacht owners pay tax on the salary of an ordinary worker, the newspaper La Stampa reported.

“The most important thing about operations like the one in Cortina is the deterrence effect,” Befera said.

The problem facing the authorities is enormous. La Stampa described Italian tax evasion as having a “unique dimension” in Europe. The political will and instruments to fight it had been missing for too long, the liberal Turin-based newspaper said.

Inspectors are now tightening their controls. Individual finances will soon be recorded more precisely with the help of a software-supported procedure called “redditometro”, which will allow tax officials to check transactions in bank accounts.

Investigators hope the software will help them track down tax evaders.

But that will not be all, according to Befera. More “public spirit” is needed - and not only from the rich - if the fight against tax fraud is to help restore the state's finances. - Sapa-dpa