Italy to wage war on tax con ‘epidemic’

IF ITALIAN tax returns are to be believed, the average shoe salesman in the prosperous northern city of Bolzano earns €673 per year, while jewellers around the country earn less than primary school teachers.

Romano Prodi’s government has promised to make the battle against tax evasion a top priority and the latest data released by the economy ministry gives an idea of the task it faces.

The data, referring to the 2005 tax returns by the self-employed, among whom evasion is considered particularly rife, made front-page news in weekend newspapers. “Taxes, the big scam,” screamed La Stampa.

The data showed that on average the owners of car showrooms declare gross earnings of below €16,000 per year, less than the pay of the factory workers who make the cars.

Tax evasion is a “disease which exists in all countries, but in Italy it is an epidemic”, Economy Minister Tommaso Padoa-Schioppa said on Friday.

A glance at the tax declarations of certain self-employed labour categories shows what he means.

Tailors in the wealthy central region of Tuscany declare less than €9,000 per year, while pasta-makers in the southern region of Calabria claim to survive on less than €3,600, or €300 per month.

The government aims to garner €8 billion next year from a raft of measures to combat tax evasion, including increasing controls and toughening sanctions, but many analysts are sceptical given the failure of similar initiatives in the past.

Economist Tito Boeri wrote in La Stampa that the tax return data undermines the strategy of the 2007 budget, which cuts income tax for low-earners while raising it for the better off.

Unless the government bases its policy on more complex means testing rather than declared income, “jewellers and dentists ... risk being among the main beneficiaries of the budget’s tax reform”, he warned.