Tide Turning In Italian Tax Evasion Fight

by Ulrika Lomas, Tax-News.com, Briussels

03 February 2012

During his testimony to the Chamber of Deputies’ Finance Committee, the Director of the Italian Revenue Agency, Attilio Befera, pointed to the Agency’s new ability to crosscheck taxpayers’ spending against declared incomes as the weapon that might win the government’s war on tax evasion.

Official action against tax evasion in Italy has, since the arrival of the Monti government, become ever more evident. However, while there have been high-profile raids in Rome, Milan and Cortina d'Ampezzo on suspected service sector companies that historically are believed to have significantly under-declared earned income, it is the details being collected to determine a taxpayer’s spending habits that could provide the information the government needs.

In his testimony, Befera expressed the hope that, as taxpayers become more aware of the armoury now at the Agency’s disposal, Italians would be more willing to become tax-compliant voluntarily.

In fact, the Agency has seen an increase in taxpayers arriving at its regional offices to obtain advice – from almost 8.7m in 2009 to nearly 9.6m last year – while it has also markedly increased the number of tax returns it checks automatically. In 2012, the Agency will also be active in introducing the advantages which will be accorded to those individuals whose tax affairs are “transparent”.

It is foreseen that the greatest leap forward in the Agency’s combatting of tax evasion will arrive from the Agency’s new “redditometro”, a computerized system which is presently in an experimental stage that will be finalized by the end of this month.

The new system will, after it becomes operational before the middle of this year, be able to trace individuals' expenditure in more than 100 different categories to find disparities between spending and declared incomes. It will be able to compare the data of over 22m families or around 50m individuals.

Befera reported that the Agency’s checks had resulted in the recovery of an additional amount of EUR11.5bn (USD15.15bn) in taxes in 2011, while, given the above, recoveries should increase further this year. The government will hope so, given its need for additional revenue to sustain its fiscal deficit and debt reduction policies and/or to reduce overall tax burdens for those that do pay their taxes so as to encourage economic growth.

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