Taxes in Italy: Pay as much as you want! – Business

Taxes in Italy: Pay as much as you want!  – Business

The deal sounds bold. ‘Tell us how much tax you want to pay and the tax office will spare you from inspections.’ This is the ultimate offer that the government in Rome is making to the hard core of tax evaders Italy aimed at: 4.5 million self-employed people, freelancers and small entrepreneurs with an annual turnover of less than five million euros. It is valid for two years and is renewable. Behind it is a fervent request: ‘The main thing is that you contact the nearest tax office. Then we’ll leave you alone.’

Since the cabinet of Giorgia Meloni After the generous offer was approved at the end of January, the country was heatedly discussing the move. The debate, as so often, divides Italy into two irreconcilable halves. What some see as a “preventive mass amnesty”, others praise as a clever trick to finally put a curb on stubborn tax refusers.

One thing is certain: the new “preventive agreement between the tax authority and the taxpayer” is not a surprise coup. For weeks, the campaign for the European and Italian regional elections at the beginning of June has dominated politics south of the Alps. The rival coalition parties in particular are in full election campaign mode. As always, the focus is on the topic of taxes. “With its latest offer, the government is looking deeply into the eyes of its electorate,” writes the Milan business newspaper Il Sole 24 Ore“Obviously she expects a lot from it: the extraordinarily large number of self-employed people in Italy have long been considered the true backbone of the right-wing populist government in Rome.

Meloni’s deputy finance minister has launched a dozen tax amnesties for rule breakers

Meloni’s man for tax issues is her party colleague, Deputy Finance Minister Maurizio Leo. In 16 months in office, he has already initiated a dozen tax amnesties for rule breakers. Leo made himself particularly popular with the voter base by lowering the flat rate tax rate for self-employed people with an annual income of up to 85,000 euros. The rate is now only 15 percent, regardless of how high your income is. Mind you: the principle of progressive taxation is enshrined in the Italian constitution. The mini-rate also raises a problem of tax fairness. For comparison: The income of employees who earn more than 50,000 euros is taxed at 43 percent.

Not only is Italy the EU leader in tax evasion, it also struggles with a completely opaque and inefficient tax system. “The income tax is like a giant Swiss cheese full of holes,” says Alessandro Santoro, a finance professor at Milan’s Bicocca University. For every income tax payer who transfers at least one euro to the tax office, there are two contributors who pay nothing at all. 42 percent of taxpayers cover 91 percent of the total revenue.

And now Leo comes with his latest idea. The government has outdone itself in its generosity. It is giving millions of contributors the opportunity to agree in advance – by October 15th – with the tax office about what income they want to tax. Now a lot depends on which specific deals the tax authorities agree to. How low can the reported income be in order to disappear from the radar of tax investigators for two years? This will only become clear in the fall, but the operation aims to provide maximum accommodation. “We want to gradually raise the threshold for tax loyalty,” says Leo. He defends his controversial regulation by saying that it “represents the only way for the tax authorities to generate income”. Because the tax offices could only check one percent of the self-employed.

“This law is the capitulation of the state,” says Carlo Cottarelli, a Milan economist and former head of financial policy at the International Monetary Fund in Washington. The government is thus further weakening the credibility of the Italian authorities in the fight against tax evasion. The opposition benches accuse the right-wing government of legalizing mass fraud. The CGIL union castigates “the gigantic amnesty for a category that hides almost 70 percent of its income from the tax office.”

The Meloni government is not deterred by the criticism. When she took office in October 2022, she announced a new strategy in the fight against tax evaders. Her name is: fisco amico, the friendly tax office. The only question is whose friend the tax office in Italy should be.

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