Thursday,
June 28,
The
Annotico Report
For
years, many Italians, from small-town shopkeepers to well-heeled Milanese businessmen
had a strategy for dealing with the country
Some
historians claim that tax evasion in
After
There
may be also a cultural explanation. "We
Eluding
the tax man is like an inverted
civic duty in
At
the heart of business owners
Also,
Mr.
Prodi has pledged to cut the country
Another
target is electricity bill registration, where if there are multiple
under one name, that
Thanks to Pat Gabriel
The
Wall Street Journal; By Gabriel Kahn and Luca Di
Leo ; June 28, 2007
While
many citizens and companies profited from the ruse, they nearly bankrupted the
state in the process. Now, the government is waging war on tax evasion -- a
national epidemic that has weakened the country
The
government of Prime Minister Romano Prodi estimates
that unpaid taxes, including income from the country
The
result is a smoke-screen society in which people live far better than what
their reported income would suggest. Only 0.8% of Italians claim to earn more
than 100,000, or about $134,000, a year, yet
A
weak Italian political system has long worked like a gas pedal for tax evasion,
accelerating an already chronic problem. A succession of unstable, spendthrift
governments has been unable to cut the country
The
upshot, says Giacomo Vaciago,
an economics professor at
Official
statistics offer only hints about who might be stashing funds away. Italian
restaurant owners declare an annual average income of just 13,300, or $17,900
-- less than schoolteachers, who are among the worst paid in Europe, according
to data from
To
raise more revenue, Mr. Prodi has launched a national
crackdown on tax dodging, which he said had become so pervasive in
There
One
morning in February, agents from
In
the arrest warrant, prosecutors claim that Mr. Cetti Serbelloni ran an intricate, European-wide scheme. He sold
licenses to access the database to several dozen companies in and around
The
alleged scheme -- which authorities say allowed Mr. Cetti
Serbelloni and others to evade some 200 million in
taxes -- helped provide the 51-year-old Mr. Cetti Serbelloni with a plush lifestyle, say police. He drove a
Ferrari and was building a golf resort in
"We
Though
the government claims it recouped 12 billion in unpaid taxes last year, not all
economists are convinced it can keep up that pace. The Organization for
Economic Cooperation and Development warned in May that
Even
if it misses some targets, the government hopes to chip away at a widely
accepted practice in Italian society. Eluding the tax man is like an inverted
civic duty in
"There
is solidarity among tax evaders," explains Beppe
Severgnini, a social commentator and author of
"Bella Figura," a book about Italians.
"In
Several
years ago, the tax police launched a campaign to get people to anonymously
report tax cheats via a toll-free number. The move was roundly criticized in
newspapers as something that tried to turn citizens into spies.
Many
celebrities, from tenor Luciano Pavarotti to Olympic
gold-medal skier Alberto Tomba, have been caught
evading taxes and were forced to pay fines. For more than a decade, billionaire
former Prime Minister Silvio Berlusconi, who controls
a vast media empire, has been rung up on various charges, such as bribing tax
police, false bookkeeping and tax evasion. On some of the charges he was
acquitted. On others, lower court convictions were either overturned or the statute
of limitations expired. He currently awaits another tax-evasion trial.
Some
historians claim that tax evasion in
After
"We
Mr.
Berlusconi recognized voters
Yet
in some quarters of the business community, there are signs that a long-held
tolerance for tax evasion is waning. The Confindustria,
the powerful association of
Confindustria now recognizes that rampant tax evasion is
contributing to a widening imbalance within business and society. Those hit
hardest are salaried employees of large companies -- Confindustria
This
tax disparity can put large companies at a disadvantage: Though Italian
businesses offer their workers contracts with generous welfare benefits, it
In
choosing Mr. Visco, a silver-haired economics
professor who also served in past governments, Mr. Prodi
knew he had a determined ally. "Either we fix this, or we end up like
When
Mr. Visco last year started looking for unpaid taxes,
it was difficult to even know where to begin. Since the Italian economy is
mainly made up of small, family-owned businesses, the difference between
business and individual taxpayers is hazy. So he decided to go after both.
Among
the key problems: Half of Italian companies claim either to be in the red or
just break even. Among those that declare a profit, the vast majority declare
an income of less than 50,000. "If that
One
of Mr. Visco
Owners
of small businesses are enraged by Mr. Visco
Many
small-business associations insist the government is blowing the problem out of
proportion. "Once upon a time, maybe, you could be more, let
At
the heart of business owners
"The
other day the tax police came in and wanted me to prove I had paid my garbage
tax every month between 2003 and 2006," says
Government
officials admit that the tax code itself is a large part of the problem. With
so much paper, information is scattered everywhere, making it relatively easy
for a supplier and a buyer to report only a portion of their business
officially, while doing the rest off the books. Tax officials have so many
receipts to go through that it
As a
result, some of Mr. Visco
Mr. Visco has tried to beef up the tax authority
"The
vehicle-registration database is a gold mine," smiles Ms. Orlandi.
Another
thing she looks for: Multiple electricity bills registered under one name. That
Even
amid the current crackdown, tax police complain they are outgunned. Court cases
against tax evaders take years to wind their way through
As
Luca Cordero di Montezemolo, chairman of Fiat SpA and Confindustria president,
describes it: "Italy is a like a boat in which half the people are pulling
the oars while the other half are kicking back, enjoying the ride."
Write
to Gabriel
Kahn at gabriel.
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