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Italian Finance Ministry Reviews Actions Against Tax Evasion

by Ulrika Lomas,, Brussels

29 October 2015

The Ministry of Finance has issued a memorandum pointing out the measures the Government has taken to reduce tax evasion in Italy.

The October 26 memorandum notes that the Government has introduced a series of changes in the past 20 months to improve the collection of tax revenue by encouraging voluntary compliance by taxpayers and restricting the room for evasion.

First, in carrying out last year's special tax reform law (delega fiscale), the Italian administrative tax code was made "clearer and unambiguous" to promote voluntary compliance. A definition of "abuse of law" replaced the previous general anti-avoidance rule, and Italian tax assessment methods are becoming less invasive and tax officials have been allowed greater flexibility to offer taxpayers payment options.

The system of penal and administrative penalties is also being revised to take account of those taxpayer transgressions that, while illegal, are without fraudulent elements and are therefore considered less serious. On the other hand, criminal sanctions will be more severe if the taxpayer is found to have behaved fraudulently, such as when using false documentation.

Following provisions contained in the 2015 Budget Law, the Italian Revenue Agency has been empowered to more diligently cross-check bank account information against the sales invoice information it receives on a regular basis. The object is for the Agency to signal compliance problems to taxpayers before activating administrative processes, so that they have the opportunity to regularize their positions rapidly and with much reduced penalties.

The Agency said that it has sent 500,000 letters to taxpayers in the last few months, identifying errors and omissions in their returns.

The Ministry of Finance said that the pre-filled individual income tax returns, introduced this year for the first time, will boost compliance rates among taxpayers who have typically failed to declare employment income or pension income. The Agency has written recently to 220,000 persons about such declarations.

The obligation on all public bodies to invoice electronically from March this year has helped to make their transactions transparent to the Agency. The split payment value-added tax mechanism, which is applicable to contracts with public sector entities, and the (separate) extension of the reverse charge, from January 1, 2015, has also produced around EUR1bn (USD1.1bn) in additional tax revenue so far this year.

The voluntary disclosure program, which has been extended to November 30, 2015; and the recent ratification of eight, and the signing of nine more double taxation agreements are said to also be contributing to Italy's anti-tax evasion efforts.

TAGS: compliance | tax | double tax agreement (DTA) | value added tax (VAT) | tax compliance | public sector | law | ministry of finance | agreements | legislation | Italy | penalties | individual income tax | Tax | Tax Evasion

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