On January 23rd the Guardia di Finanza (GDF), the Italian law enforcement agency dealing with financial crimes, released a statement revealing that in 2011 it launched 12 000 investigations on businesses and individuals suspected of evading their tax obligations.

According to the statement, undeclared and under reported incomes were the most common forms of tax evasion, with nearly EUR 50 billion of the neglected tax obligations being evaded by taxpayers sidestepping their individual income tax liabilities. The GDF is also conducting investigations on businesses suspected of evading payments of Value Added Tax (VAT) totaling EUR 8 billion.

In 2010 Italian tax authorities managed to recoup approximately EUR 11 billion of previously unpaid tax obligations taxes.

The cases of tax evasion currently being investigated by the Italian authorities make up less than half of the overall tax obligations evaded by tax payers annually, which, according independent estimates, could be as high as EUR 120 billion.

The Prime Minister of Italy Mario Monti has repeated that the government will increase its efforts to fight tax evasion in Italy throughout 2012, as the country struggles to control its budget deficit. In 2012 Italian tax authorities are expected to conduct a greater number of raids to catch out shop owners not recording sales, or taxpayers leading luxury lifestyles while declaring low incomes.

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The new push against tax evasion in Italy is being facilitated by a number of online projects and social media sites which are allowing Italian taxpayers to collate details of tax evaders.

One of the new sites combines individually submitted reports of tax evasion, and creates a real-time “tax evasion map”. As at January 16th the site had over 18 180 submitted reports from over 10 000 users, with a cumulative amount of evasion estimated to be EUR 2.78 million. Some similar websites are attempting to actively shame tax evaders into meeting their obligations by publishing their name, address and other personal details.

Other online tools have been launched to submit details of trusted businesses, which the users believe do not evade their obligations and issue official receipts with all purchases. The site’s creators hope that such tools will discourage business owners from hiding their incomes.

The new sites come at a time when the national media in Italy is reporting a growing sense of public anger at the country’s widespread levels of tax evasion, as low and middle income workers are asked to face more austerity measures, while some individuals continue to neglect their tax obligations.

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At a session of the Senate of Italy on December 22nd, Italian policymakers gave final approval to a proposed austerity package aimed at eliminating the country’s budget deficit by 2013 and injecting new life into the economy.
The austerity measures will include a new tax on all real estate in Italy, including residential and commercial properties.

Also, the national retirement age will be raised to 66 for men and 62 for women.

The government will also implement several new initiatives and programs aimed at curtailing the occurrence of tax evasion in Italy.
In an effort to directly stimulate the economy and raise employment levels, the government will now offer tax incentives to businesses which offer permanent employment contracts to women or people who are under 35.

According to the Prime Minister of Italy Mario Monti, the new austerity package applies new tax burdens equally across all taxpayers. He also explained that the measures are aimed at not only cutting down spending but also spurring growth in Italy, and will allow the country to “hold its head high” in the new year and throughout the ongoing economic crisis in Europe.

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On December 10th the Prime Minister of Italy Mario Monty called for the country’s newly reinstated property tax to be applied to commercial properties operated by the Church. It is estimated that the tax would apply to over 16 000 properties across the country. If the tax is instated this year it could garner an approximate EUR 700 million in extra tax revenues per annum.

Under long standing laws in Italy, the Catholic Church is exempt from paying property taxes on real estate which is not used exclusively for commercial purposes. Critics of the rule claim that the regulation can be exploited by the Church, allowing it to run large commercial operations without paying property taxes.

The Catholic Church has previously defended the tax exemption, saying that the church should not have to pay, as it already provides valuable public services and protects poorest members of the society. However, over the weekend Cardinal Tarcisio Bertone, the Vatican’s secretary of state, indicated that the Church could potentially be willing to cooperate on the tax, saying that the measure would need to be studied and that sacrifices were a necessary part of life. Cardinal Angelo Bagnasco, the head of the Italian Bishops’ Conference, also spoke to the press regarding the tax, saying that the Church would be happy to investigate any allegations of the institution not paying its rightful tax obligations, and correct the situation and pay all necessary levies.

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At a press conference given in Rome on December 4th the Italian Prime Minister Mario Monti said that the Cabinet has approved a new austerity package which will reawaken the country’s economy, and help Italy balance its budget as early as next year.

The newly passed measures aim to trim excess government spending, cut down the occurrence of tax evasion, and give a boost to the economy. Cumulatively the austerity measures are worth approximately EUR 30 billion, which will consist of at least EUR 20 billion in budget cuts and extra tax collections.

The Prime Minister said that the exact details of the austerity package will be revealed on December 5th when they are presented to both of the houses of parliament of Italy. However, Mario Monti did say that the package contains a new tax for the country’s highest earning individuals, and a 2 percent hike to the rate of the national value added tax. Also, a new tax will also be levied on taxpayers who own yachts, helicopters and other luxury assets.

In an effort to boost country’s rate of employment, the new austerity package includes a measure to grant tax breaks to employers who hire young workers. In a simultaneous move to retain employees and lower superannuation costs, the national retirement age will also be raised.

The government will also provide greater support and funding to sectors of the economy which have been lagging behind their counterparts in other countries of the EU for at least a decade.

Italy will also see new rules aimed at helping the fight against tax evasion, with all transactions above EUR 1 000 now being required to be completed electronically.

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