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Italy's 'Redditometro' Comes Into Operation

by Ulrika Lomas, Tax-News.com, Brussels

09 January 2013


The Ministry of the Economy and Finance has finally issued a decree that marks the operational introduction in Italy, on January 4, 2013, of the Revenue Agency’s new, revamped and long-delayed ‘redditometro’ – the computer data system which compares taxpayers’ income declarations with their spending habits.

The Italian Revenue Agency is hoping that its new ability to crosscheck taxpayers’ spending against declared incomes is the weapon that might win the government’s war on tax evasion, since it may convince taxpayers, as they become more aware of the armoury now at the government’s disposal, to become tax-compliant voluntarily.

It has been said that, while the "redditometro" has been long in its experimental stage, the Agency has taken its time in sorting out all of its teething problems, so as to make sure it worked well and there would be no problem when it finally went into operation.

It will look at whether an individual taxpayer’s declaration of taxable income is consistent with his or her overall spending capacity, as against the previous "redditometro" which was based upon the possession of certain assets, such as yachts or large cars. The new system will be able to trace individuals' expenditure in more than 100 different categories to find disparities between spending and declared incomes.

The categories of spending are divided into seven areas. For example, under the category of housing are included first and second residences, mortgages, restructuring work undertaken, and furniture purchased; while information on a taxpayer’s social security contributions and insurance policies are also collected, as are recreational pursuits and a family’s education spending.

Spending capacity is based upon actual, not estimated, expenditure, and it is reported that the system will be able to compare the data for over 22m families or around 50m individuals. The system’s methodology is also able to differentiate between eleven different categories of family unit including couples or singles and families with children, together with the region of Italy in which the taxpayer resides.

It is emphasized that the new system would be used in only the most striking of cases of differences between income and spending, and, in particular, would be restricted to those cases where declared and imputed incomes diverge by at least 20%.

In addition, it was also explained that the taxpayer would be given the opportunity to explain those differences, which will not immediately be assumed to be due to tax evasion, but could due to other factors, such as the use of savings made in the past or the receipt of interest or dividend income on which tax has already been paid. Instead, the computer simulation of such differences will mean that there will, subsequently, be an obligatory dialogue between the taxpayer and the Revenue Agency.

The "redditometro" will begin by verifying incomes in the 2009 tax year, which were declared in tax returns completed in 2010.

Finally, it has been suggested in the past that the "redditometro" could also be extended to cover the taxable incomes of artisans and other individuals in business. In that case, the Revenue Agency could be able to discover, not only unpaid amounts of individual income tax, but also value-added tax, the regional tax on production, and social security and welfare payments.

TAGS: individuals | artisans | compliance | Finance | tax | value added tax (VAT) | tax compliance | ministry of finance | tax authority | social security | Italy | individual income tax

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