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Of tax cheats and public figures

Elisabetta Provoledo (Issues) / 14 March 2012

When five officials from Italyís internal revenue service entered the Dal Duca restaurant in the Trastevere neighbourhood here one night two weeks ago, they did not intend to eat.

Instead, during three hours, the tax collectors interviewed the employees, took a look at the books and then checked out the cash register receipts at the end of a busy night of dinner service. “We’ve always had controls of various kinds, health and social insurance officials,” said Anna Leo, the restaurant’s owner. “But this was a first.”

The unexpected intrusion was part of a stepped-up war against tax evaders that Italian officials have opened aggressively on several fronts, hoping to close Italy’s 1.9 trillion euros, or $2.5 trillion, public debt and revive a frail economy that has been buffeted by the euro crisis.

In addition to banning cash transactions, the effort has included an ad campaign comparing tax evaders to parasites. There have been headline-grabbing controls focusing on stores, hotels and restaurants in affluent Italian cities. For good measure, tax officials have also been stopping luxury cars and asking drivers to show their licenses, along with their most recent tax returns.

These boutique blitzkriegs have been splashed across the news media, leaving a wake of sulky entrepreneurs and petulant car owners. Critics lament that Italy will gradually be transformed into a tax police state.

But there has also been a growing appreciation among many Italians that the government is deadly serious in countering what is considered one of the chief scourges of Italian society: a failure to declare taxes.

Italian officials say that an estimated 115 billion euros are lost each year in undeclared income. The national statistics agency estimates that the underground economy amounts to about 17.5 per cent of gross domestic product. The national debt is 120 per cent of GDP.

Since Prime Minister Mario Monti’s three-month-old government has made clamping down on tax evasion a priority, officials have taken to the task with gusto, emboldened by the clout of new legislation and the blessing of public opinion. There is greater sense “that tax evaders are no longer an example to follow but an intolerable burden and a threat to collectivity,” Nino Di Paolo, the commander in chief of Italy’s financial police, told lawmakers at a parliamentary commission hearing last week.

Last week, Monti announced that 12 billion euros had been recovered from tax evaders in 2011. The prime minister has also suggested that future recovered funds could be used to lower the tax rates of honest citizens.

There are, however, concerns about some of the means to that end. For some, the media hype surrounding the new measures smacks of witch-hunts and retaliations, and more than a little envy.

Italy’s financial police also have set up a call center where citizens can complain when receipts have not been issued, though in this case the calls cannot be anonymous.

Despite the seeming public support, Equitalia, the collection branch of the national revenue agency, has faced what officials described as some 250 attacks in the past year, including makeshift mail bombs.

Employees are growing fearful and inhibited, Attilio Befera, the director of the Agenzia delle Entrate, told lawmakers during a parliamentary committee meeting in late January.

It is too soon to tell whether the blitzes will be a long-term deterrent to tax cheats but according to a recent survey by the research institute Demopolis, more than 80 per cent of Italians consider combating tax evasion as key to getting Italy back on track.


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