Italy Tries Raising the Social Stigma on Tax Evaders

New York Times
December 24, 2011

On a recent morning, Maurizio Compagnone, an employee of Italy’s internal revenue service, stood before a classroom of middle school students in a leafy neighborhood here, preaching the virtues of paying taxes.

“You may think, ‘I’m 13, why should I care about taxes?’ ” he said with earnest enthusiasm as the students looked on, slightly bored. “But you can take a step in the right direction. You can change the behavior of the people around you, your parents and friends.”

Mr. Compagnone is one soldier in a battle — often uphill — to persuade Italy’s famously tax-evading citizens to pay up. Such efforts, along with a new blitz of public service announcements trying to raise the social stigma on tax evasion, have become crucial as Italy struggles to reduce its $2.5 trillion public debt and fend off speculative attacks.

The tax authorities say Italy loses an estimated $150 billion a year in undeclared revenues, while the national statistics authority places the underground economy to be about 17.5 percent of gross domestic product — the third highest in Western Europe after Malta and Greece but before Spain. Other experts place the percentage much higher.

To tackle the issue, Prime Minister Mario Monti’s new $40 billion austerity package, which received final approval on Thursday in the Senate, includes tougher measures that will allow tax officials to peer into Italians’ bank accounts to check declared income against bank deposits — not to mention yacht, car and home ownership — under a new cross-referencing initiative.

The measures also prohibit cash transactions above $1,300 — common in Italy, where low credit-card use keeps private debt low but evasion high — and lower the threshold for which tax evasion becomes a criminal offense. The government has also set an additional 1.5 percent tax on assets repatriated under an earlier tax amnesty, raising the levy for those requesting anonymity.

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