You have to smile.
It may not be morally justifiable, it certainly isn’t fair, but Italians’ ability to avoid taxes is legendary and their audacity is at times breathtaking.
In an article last week, the Telegraph explains how the owner of a luxury goods boutique in the upmarket ski resort of Cortina d’Ampezzo could not produce a single tax receipt or document to support an estimated revenue last year of 1.6 million euros ($2 million), suggesting that most if not all of his income went undeclared for tax purposes.
The scam was revealed during what the Italian media have termed a super blitz on tax avoidance, kickstarted on Dec. 30 with a raid on the winter ski resort by 80 tax inspectors. Undoubtedly the choice of venue and timing was intended to shock not only the perpetrators (most Italians, it would seem), but also the wider European community into realizing that Mario Monti’s new Italy would not tolerate tax avoidance.
The choice of location was a good one. The article explains tax officials found evidence that hotels, restaurants, boutiques and beauty salons were also hugely under-declaring their takings. Officials traced 133 Lamborghinis, Ferraris, SUVs and other top-end cars that they found parked in the snow-lined streets of Cortina. They found that nearly a third of the owners had declared incomes of less than 22,000 euros ($27,000) a year. A further 16 claimed to be earning less than 50,000 euros ($61,000) a year. In Italy it costs well over $200 just to fill the fuel tank!
Italy has 1.9 trillion euros worth of national debt (120 percent of GDP), yet the article explains a recent government study estimated that Italy’s black economy, which includes evasion of income tax and VAT, amounts to 275 billion euros a year, or 17.5 percent of GDP. Only 72,000 Italians last year declared a gross annual income of more than 200,000 euros ($245,000) â€“ representing just 0.17 percent of all taxpayers.
Like Greece, if Italy’s authorities collected taxes as assiduously as those in the US or UK, public debt would be closer to 80 percent than 120 percent, economists calculated. But in a country where the exiting President Berlusconi famously replaced ministers’ Audi cars late last year with 19 Maserati Quattroportes, what can you expect of the general public in under-reporting? The rot is deepest at the top and maybe Mario Monti’s government is right to target the super-rich first.
The author can be reached at MetalMiner’s new Milan office, or via cell phone in his Lamborghini Aventador.