It would seem part of Italy’s financial problems stems from a vast and deeply entrenched cultural aversion to paying tax. Not that any of us like paying it — but most at least comply with the law.
Not so in Italy.
Last year authorities recovered around 11.5 billion euros ($15 billion), up from 3.7 billion euros ($4.9 billion) a decade ago. However, according to a Reuters article, that still represents only a fraction of what is lost overall in a phenomenon that the paper says has been deeply entrenched in Italy ever since the country was unified in 1861.
The article goes on to say a vast “submerged economy” operates out of sight of the authorities. It is estimated by national statistics agency ISTAT to be worth between 255 and 275 billion euros ($350 billion) or 16.3-17.5 percent of GDP. We wrote earlier this year about the authorities’ swoop on chic ski resort Cortina, where tax inspectors caught dozens of Ferrari owners purportedly only declaring incomes of some $34,000 a year — part of an ongoing operation that this month caught the owners of steel producer Gruppo Ragosta that makes steel reinforcing bars, gratings, welded tubes and sheets.
The millionaire owner, Fedele Ragosta, is said to have been involved in much more than tax evasion, though. Along with 47 other people, including 16 judges, Ragosta is said to be part of a wider net — including the Naples Mafia. Operation Bad Metal, launched this week, is said in an FT article to have seized assets worth over €1 billion. The fate of the steel mills is uncertain; if indeed they are proved to be a front for money laundering, they will probably be seized by the state.
Not that Italy will greatly miss the capacity if plants were idled as a result. According to SBB, crude steel output in Italy, the European Union’s second-biggest producer after Germany, will grow about 5 percent in the first quarter of this year, but with the region in such a low rate of GDP growth, you have to wonder how long that can continue.
Prosecutors said Operation Bad Metal involved authorities in Switzerland, Belgium and Luxembourg. “Tens of millions of Euros” were traced to Swiss bank accounts connected to the Ragosta case. Assets seized, the FT reported, included land, buildings, bank accounts and corporate holdings. It was the biggest financial operation aimed against the mafia since September 2010, when authorities in Sicily seized €1.5 billion of assets during an operation into the mafia’s grip on wind power contracts on the island.
According to the website, Ragosta is said to have developed the steel manufacturing company from a steel scrap transport business in the 1980s, although quite where the funds came from for expansion and modernization is unclear. In a country where even doctors and lawyers offer discounts for cash, it’s likely few questions are asked even when the source of funds appears suspect.
Such stories would be amusing if it wasn’t for the fact Italy is one of several countries placing almost irreparable stains on the European Union. Like Greece, the country could take a tangible step towards balancing its books if the tax system were simplified and people paid their tax.