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Country Rankings - Italy

  • May 01, 2018   Italy: real time

    Either way, like it or not, automation is here to stay, including in the area of tax administration, and it's only going to become more prevalent the way things are going. In another recent example, Italy was authorized by the European Union to undertake real-time VAT reporting, which entails mandatory electronic reporting obligations on all taxable persons except for certain small businesses. And last year, it emerged that the Chinese Government plans to use blockchain technology to collect tax and issue electronic invoices. We often dwell on the potential dangers posed by a world driven by algorithms. After all, code is ultimately created by humans, with all their individual flaws and foibles. But in terms of tax administration and compliance, there are surely benefits to automation. For taxpayers in a country like Italy, for example, which has garnered something of a reputation for lacking the culture of compliance that exists elsewhere in Europe, there would be fewer opportunities for taxpayers to, shall we say, take liberties with their tax obligations. This could allow the Government to narrow the tax gap and address its acute fiscal problems. But it would be not only the Government that benefits. Tax compliance and administration in a digital environment should be less cumbersome, and less prone to error. Taxpayers should, therefore, save thousands of hours attempting to comply with complex tax regimes like Italy's, as well as face a much-reduced risk of being fined for mistakes, unintentionally committed or otherwise.  And it's not just taxpayers that buckle under the strain of complex tax codes. Tax authorities often struggle too. The US Internal Revenue Service is a classic example, as Congress throws the agency an ever-increasing number of balls to juggle, seemingly while tying one arm behind its back with budget cuts. If HMRC's experience, computerizing certain high-volume administrative processes could free up substantial resources to be used in areas where the IRS is seen to be failing, particularly in its taxpayer-facing functions. Potentially therefore, automation is a win-win-win scenario. Until, that is, Metal Mickey decides to go rogue. And there's no telling what will happen then.
    Source: https://www.tax-news.com/news/Italy_Receives_EU_Green_Light_For_RealTime_VAT_Reporting____76753.html

  • Mar 21, 2018   Italy: no joke

    Okay, imagine this scenario if you will: it's November 2018, and finally you've got all your tax planning ducks in a row now that Congress has fixed the broken bits of the tax reform legislation, and the Internal Revenue Service has issued most of the necessary guidance to help taxpayers comprehend the more novel parts of the Tax Cuts and Jobs Act. You've got your deductions lined up, your QBI sorted, you've avoided a BEAT, and you're sure you're not GILTI. Now you can breathe a sigh of relief. But what's this? You've been so engrossed in tax planning that you've forgotten about the elections. "Didn't we just have one of those," you think to yourself? Yes, but that was the Presidential election, and that was two years ago. This is the mid-terms, and the Democrats have won Congress back. And their first legislative move is the Repeal Unfair Corporate Taxes United States bill (or RUCUS for short), introduced by House Ways and Means Chairman Richard Neal (D – Massachusetts). And a ruckus this will surely create. Remember all that planning you just did? It's been your life's work for the past 10 months! But don't tear it up just yet. The Democrats' Senate majority is as wafer thin as the Republicans' was after 2016. Surely, they'll never get the RUCUS past a GOP filibuster? Well, the Republicans managed to push the TCJA through without the Democrats. And surely the Democrats will now try every procedural trick in the book to achieve their main goal. You wake up – this nightmare scenario was just a dream. It's March 7, 2018, and you read in the morning news about the Democrats' proposed infrastructure plan. "I wonder how they will pay for that?" you ponder. After a quick glance down the screen, you break into a cold sweat... Granted, this might sound like a rather fanciful scenario. But it's not beyond the realms of possibility, such are the vagaries of democratic systems of government. Indeed, electoral cycles can play havoc with tax planning. We're seeing this in Italy right now, where a somewhat unexpected turn of political events has left the country's tax policy in a state of uncertainty. Then again, given the recent chain of events worldwide, that a G7 economy could be led by a professional comedian isn't all that surprising. But perhaps it's also no joke.
    Source: https://www.tax-news.com/news/Italys_Tax_Policy_Direction_Uncertain_Following_Elections____76539.html

  • Aug 15, 2017   Italy: hunting

    Staying with the UK, it is interesting that while the Government continues to dismantle the "non-dom" regime, under which wealthy foreign taxpayers (for the most part) don't pay tax on their overseas earnings as long as those earnings stay offshore, Italy is creating its own non-dom regime, aimed at attracting the sort of entrepreneurial types that have been lured to London for decades, centuries even. Indeed, a number of European countries that have struggled to compete with the UK on tax now appear to be falling over themselves to lay out the red carpet for London bankers and other highly remunerated professionals who contribute substantial sums in tax. France has been banging this particular drum for a number of months now, albeit without doing much about it, and the German state of Hesse – home to Frankfurt, continental Europe's main finance center – has launched a tax helpline to assist any Brexit-disillusioned Brits thinking of making their way in Germany. It used to be the case that the UK was seen as the predator. Fittingly, "laying out the red carpet" was ex-Prime Minister David Cameron's phrase when inviting France's entrepreneurs to escape President Hollande's tax assault. Now it appears that the hunter is being hunted. Significantly, the first taxpayer to be granted non-dom status in Italy originated from the UK. Will they be the first of many? Is this an early sign of an irrecoverable slide in competitiveness for the UK as a result of Brexit? Opinion is bound to be very much divided on that, but don't be surprised to see more wolves circle the wagon in the months and years ahead. On the other hand, perhaps the higher levels of complexity and larger tax burdens generally prevalent in Western Europe will deter many UK-based non-doms and HNWIs from taking the bait. Perhaps these jurisdictions need to make taxes lower and simpler to begin with, to maximize their appeal to investors. This is not a short-term option, of course. Such things are usually done a step at a time, as Brazil can testify, as it begins to slowly creep up the "ease of paying taxes" indexes.
    Source: https://www.tax-news.com/news/Italy_Grants_NonDom_Status_To_First_HWNI_Taxpayer____74926.html

  • May 10, 2017   Italy: non-adversarial

    Sticking with the sporting world, I now turn to the often-murky world of soccer. It is the planet's most-watched sport, but it's never far from controversy, as the FIFA corruption scandal demonstrated. It also has its fair share of run-ins with the taxman too, with the recent raids of two prominent English soccer clubs the latest such development. However, this is an issue of wider significance, rather than one confined to the tax controversies at the top end of sport. And, appropriately enough, it also touches on the subject of tax competition too. Some governments are more than willing to offer tax concessions to attract highly skilled – and highly remunerated – workers and investors to their shores. But, to my knowledge, such concessions rarely seem to be extended to professional sports people, including in the soccer world. The issue of executive pay, the king's ransom that some soccer players receive every week, and taxation is highly divisive. Some people are very comfortable with the idea that those on mind-boggling salaries should pay half of their income in tax. Others argue that, in principle, rates of income tax approaching 50 percent or more are wrong, even confiscatory. The reality remains, however, that businesses and top-league soccer clubs (mostly those in Europe) can struggle to recruit top talent when high rates of tax are in place. Maybe harsh realities call for pragmatic solutions. Spain, for example, came up with the "Beckham Law," (named after the famous soccer player when he moved to Madrid) whereby individuals can choose to be taxed as a non-resident for a temporary period. Italy deals with these issues in a somewhat less adversarial way, through the agreement of an annual tax protocol between the revenue agency and professional clubs. So perhaps other professional leagues would also benefit from similar measures and codes of conduct.
    Source: http://www.tax-news.com/news/Italian_Soccer_Clubs_Renew_Tax_Protocol____70402.html

  • Feb 27, 2017   Italy: gives and takes

    It is frequently said that governments give with one hand and take back with the other with tax policy, particularly at budget time. And the greatest trick of the finance minister is to do this without anyone really noticing. They don't always pull it off though, because some clever so-and-so in the media, or whose job it is to hold governments to account, usually notices such creative budgetary accounting and broadcasts it. But still they try. Italian taxpayers must be getting used to this game of give and take. There, the Government is desperate to deliver meaningful tax cuts in line with its policy of reducing economy-strangling tax and regulation. But it's struggling to deliver. Spending must be cut, not only for the health of the Italian economy, but also under EU fiscal rules designed to prevent runaway deficits. But spending cuts are very unwise things to do for governments clinging on to power with their collective finger tips. They therefore turn to those time-honored devices, which collectively can be classified as "stealth taxes," and which are often used by finance ministers to dig themselves out of fiscal holes. These are things like sin taxes on booze and tobacco, excise taxes on fuel, etc., and various fees and charges for government services and the like. The sort of tax that most people know is there, but that can't really be seen. Eventually Italy may see meaningful tax cuts. But, all the while the country flirts with fiscal crisis, Italians will probably pay the Government back for its generosity in other ways.
    Source: http://www.tax-news.com/news/Italy_Looking_For_Avenues_To_Increase_Tax_Revenues____73542.html

  • Dec 13, 2016   Italy: tax cuts

    Also featuring on the list is Italy, led until a few days ago by Matteo Renzi (resigned). And while the erstwhile PM has been accused of hubris by staking his career on the outcome of the recent constitutional referendum (which to few people's surprise, he lost), and potentially leaving Italy in another fine economic mess, he deserves some credit for sticking around to see through the 2017 Budget, which contains some long-awaited tax cuts for large and small businesses. Still, those tax cuts, while welcome, do not address the root of the problem with Italy's tax regime. Yes, taxes are high – the tax burden is an "untenable" 49 percent, according to the association of sole traders and small businesses – but they are also fiendishly complex. Shockingly, PwC placed Italy 126th out of 189 economies in its recently released 2017 Paying Taxes Index. So there's a huge amount of ground for the country to make up on its main competitors, many of which can hardly be described as having simple tax regimes themselves.
    Source: http://www.tax-news.com/news/Italian_2017_Budget_Receives_Parliamentary_Approval____72942.html

  • Oct 25, 2016   Italy: bold

    At the bottom of the EU/EFTA league table is — not that surprisingly — Italy, with an eye-watering total tax rate of 64.8 percent. Therefore, the recent approval by the Government of a draft budget with a heavy emphasis on cutting corporate tax was probably greeted with a degree of relief by most of Italy's businesses. However, as is the case with most of the countries towards the bottom end of the ranking, the bulk of this tax burden consists of labor taxes. 43.4 percent in Italy's case. I can't knock the Government for approving what is, in the context of Italy's fiscal restraints, a fairly bold business tax improvement plan. But perhaps Prime Minister Matteo Renzi is looking in the wrong place in his attempts to improve Italy's competitiveness. Or, more to the point, perhaps he should be looking in more places. One of those places should be, metaphorically speaking, down the back of the couch. It's surprising how much money can fall out of your furniture if you give it a good shake-down. And the parallel is, as has been well-documented, that Italy, with its highly inefficient tax system, lets far too many euros vanish into the cracks between the cushions. Another place is under the mattress. Because it is also a well-known fact that Italy has had a long-standing problem with tax compliance, and Italian taxpayers, so it would appear, have become quite adept at – hmm, how do I put this diplomatically – let's just say staying a step ahead of the tax man. Still, the latest set of "tax gap" figures seem to confirm that rates of tax avoidance and evasion remain high, despite several high-profile (and often amusing, from the outside) campaigns by the tax authorities, which have resulted in tax inspectors making appearances in the most unlikely of places – think you're safe on your yacht or off-piste in the Dolomites, think again!
    Source: http://www.tax-news.com/news/Italian_Corporate_Tax_Rate_To_Fall_In_New_Budget____72491.html

  • Sep 28, 2016   Italy: transformative

    It is a measure of how profoundly the financial crisis affected the world that, only now, eight years after the collapse of Lehman Brothers, many governments are switching the focus of their fiscal policies from austerity to growth, according to the OECD. One country that is trying to do so is Italy, which has been promising its beleaguered taxpayers tax cuts and tax reform on an almost weekly basis in recent times, without having quite the means to follow through on its pledges. So it remains to be seen whether the Government will be able to bring about the transformative measures announced in the very modern-sounding new industrial growth plan, "Industria 4.0." If nothing else, the plan is a bold statement of intent from Matteo Renzi's Government, which is determined to take the Italian economy in a very different direction to the one it has been heading recently – namely from stagnation and paralysis to growth and modernization. This in itself is admirable, and taxpayers in Italy will no doubt welcome the introduction of the incentives outlined in the plan. But – and there is usually a but to be found where Italy and taxes are concerned – perhaps there are more deep-rooted problems that the Government should tackle first, before it attempts to dazzle investors with promises of big tax cuts. From an administrative point of view, Italy's tax system remains somewhat chaotic, a problem reflected in its low score in PwC's Paying Taxes Index. Italy languishes in 137th place in 2016, just ahead of the Kyrgyz Republic. This failing was recognized in an OECD report published earlier this year, which concluded that Italy would have much to gain from improving tax administration. Complexity and administrative muddle tends to give rise to low rates of compliance, which has certainly been the case in Italy for many years. However, Italy has tried to plug its colander-esque tax system by focusing on compliance rather than simplification. The result, said the OECD, are "assessments that reportedly are often uncollectable," and "no comprehensive strategy across the entities involved in tax administration to address this issue in a holistic manner." There are few indications that this situation is going to improve very much in the short- to medium-term. Which makes me wonder if the EUR37bn (USD41.5bn) price tag attached to "Industria 4.0" is really affordable, given stubborn budget deficits and a generally under-performing economy relative to other Eurozone nations.
    Source: http://www.tax-news.com/news/Tax_Incentives_Major_Part_Of_New_Italian_Industrial_Plan____72304.html

  • Jul 26, 2016   Italy: divided

    One would probably have to find an even more negative adjective for Italy, which has an even worse tax system (137th in Paying Taxes 2016). More generally though, the country cannot be accused of being a dull place. Indeed, one interesting feature of life in Italy is that since the country has been a united, single entity, it has been starkly divided between north and south. The economic divide is especially marked. According to The Economist, while the economy of Italy generally stagnated between 2001 and 2013, the north still managed to grow by 2 percent during this time, while the south shrank by 7 percent. Shockingly, of the almost 1m Italians who lost their jobs between 2007 and 2014, 70 percent were from the south. One could go on at length about the root causes for the south's problems, such as corruption, organized crime, and low investment, but this isn't the place to do it. Suffice to say it comes as no surprise to learn that northerners pay more tax than southerners, and by a quite considerable margin.  Italian Prime Minister Matteo Renzi seems to have the right ideas about how to inject some life into the Italian economy, like reducing Italy's stifling tax burden and creating incentives for investment and job creation. However, when you consider the above statistics, he has, in effect, only got half an economy to play with. Italy is by no means the only country in the world with a population divided along economic and geographic lines, but its division seems particularly wide, and won't be an easy rift to heal. One gets the feeling the nation won't perform to its potential until it is. But then Italy's elected officials have got more pressing concerns at the moment, namely shoring up an ailing banking system.
    Source: http://www.tax-news.com/news/Italians_In_Northern_Italy_Pay_Twice_As_Much_Tax____71737.html

  • Jun 06, 2016   Italy: celebration

    Ending on a slightly upbeat note, congratulations go to Italy's taxpayers for celebrating "tax freedom day" a little earlier this year. For those of you unfamiliar with the concept, let me fill you in: tax freedom day is the theoretical day in the year when you stop working to pay the government, and start keeping what you earn for yourself. And in that sense, I suppose it is a good indicator of just how much of a country's income is taxed in one form or another. Although most Americans are heard to grumble about their taxes, in the United States tax freedom day normally arrives well before summer (in the northern hemisphere), usually towards the end of April. But if you think things in Italy are bad, try living in Belgium, where, shockingly, last year you had to work into August before pocketing your own money! For Italy however, a tax freedom day of June 3 represents at least some progress in the Government's attempt to reduce the country's tax burden, coming three days earlier than in 2015. And it's encouraging to see that Prime Minister Matteo Renzi appears determined to cut income tax rates, with the Government having proposed to reduce corporate tax from 27.5 percent to 24 percent and also pushing for personal income tax reductions in 2018. That is, if Italy can keep the party pooper that is the EU at bay long enough to execute these tax cuts. It has managed to wangle some leeway in its budget plans this year, but the EU's patience over the deficit won't last forever. How appropriate it would be if Brussels, home to some of the world's highest taxes, threw a wrench in Italy's tax cut plans!
    Source: http://www.tax-news.com/news/Italian_Tax_Freedom_Day_Arrives_Three_Days_Earlier____71352.html

  • Nov 30, 2015   Italy: straightjacketed

    Talking of prolonging the agony, it's probably going to be quite some time until Italy's long-suffering taxpayers are given some relief, despite Prime Minister Matteo Renzi's repeated promises to improve the Italian tax system. In PwC's Paying Taxes Index 2016, Italy finds itself in 137th place, giving it a marginally better tax system than the Kyrgyz Republic, Ecuador, and Sudan. Just as shocking is the fact that, according to Paying Taxes, Italian companies hand over almost 65 percent of their profits in income, labor, and other taxes. So clearly, there is a long way to go before meaningful improvements are felt by taxpayers in Italy. However, that path is now strewn with obstacles, not the least of which is the EU, with its determination to have its say on Italy's fiscal affairs, much to Renzi's chagrin. As a consequence, the Government no longer has sufficient room for a corporate tax cut in 2016, which is hardly going to help Italy improve its appalling ratings in the tax and regulatory league tables. However, no matter how much Renzi curses the EU's interference in national matters – as he has on numerous occasions in recent months – there's not a lot that he can do about it. Italy's economic problems manifested themselves long ago as a result of mismanagement by successive governments. So unfortunately Italy has made its fiscal bed and must now lie in it.
    Source: http://www.tax-news.com/news/Italy_Cancels_Possible_2016_Corporate_Tax_Cut____69802.html

  • Aug 03, 2015   Italy: revolutionary

    Quote of the week probably should go to Italian Prime Minister Matteo Renzi, who has called for a "Copernican Revolution" for the Italian tax system. In case you're not up to speed with your renaissance geniuses, he was the early 16th century mathematician and astronomer who shook the very foundations of the religious orthodoxy by concluding that the earth and the other planets of the system orbited around the sun, rather than the other way around. Just how Copernican theory relates to taxation I'm not sure. But I do get Renzi's drift. Italy's tax system has become so uncompetitive and unattractive that a paradigm shift in thinking is needed to turn things around. To kick off the revolution, Renzi has proposed a fairly deep corporate tax cut, which would reduce Italy's total tax rate from the low 30s to the mid-20s, and thus closer to the world average. His claim that this would make Italy one of the most competitive nations in Europe in tax terms is stretching things a bit however. The UK, for example, has given its competitors food for thought with its recent announcement that the country will have a corporate tax rate of 18 percent by 2020. There are also a number of other EU member states with corporate tax rates well below 20 percent, including Ireland, Cyprus, Bulgaria, and Latvia. Surely the revolution shouldn't just stop at cutting corporate tax. If PwC's Paying Taxes Index is a reliable indicator of a national tax system's user-friendliness, this would have to be just the start: Italy has the 144th-best business tax system in the world; in comparison, the UK is 16th, Ireland is 6th, Cyprus is 50th, and Latvia is 24th. Copernicus helped to change humanity's thinking about the earth's place in the heavens. Renzi though might have to move heaven and earth to accomplish his goals.
    Source: www.tax-news.com/news/Italy_Eyes_24_Percent_Corporate_Tax_Rate____68741.html

  • Jul 07, 2015   Italy: overtaxed

    How much tax is too much tax? The answer to that will depend very much on your political beliefs, although I suspect it would take quite a while before you spoke to somebody who professed to be paying not enough tax, unless, that is, you happen to bump into Warren Buffett in the near future. Still, a consensus seems to have emerged that once a government starts taking the best part of a half or more of a person's income, then tax rates are punitive. Indeed, 50 percent seems to have become something of a psychological boundary in many countries in tax terms. A key battle ground in British politics of late has been whether the top rate of income tax should be 50 percent or slightly less than that. The Labour Party recently lost an election with its policy to restore taxation to 50 percent for those earning GBP150,000 (USD235,000) per year or more, while the Conservatives won after having nudged that rate down to 45 percent while in coalition with the Liberal Democrats. This of course isn't the only reason why Labour was punished by voters in May, but it says something that the party recently dropped its 50 percent tax policy. However, it is Italy I really want to write about. Although Italy's top personal tax rate is 43 percent, according to CGIA of Mestre, Italy's association of sole traders and small businesses, "tax freedom day," the notional day when individuals stop effectively working for the government and begin to pocket their income, only arrived on June 23 this year. So, in reality, the tax burden for a person earning the equivalent of USD50,000 in Italy is more than 50 percent. But businesses have it even worse. They won't see tax freedom day until August 14, says CAN, the national association of artisans and small and medium-sized enterprises. This is going to be six days earlier than last year, which I guess represents a modicum of progress. And at least the Government is trying to turn things round; earlier this year Prime Minister Matteo Renzi pledged that Italy will not raise taxes for three years. The CGIA suggests that this promise will be very difficult to keep however. The association claims that the Government faces a choice between increasing taxes by more than EUR16bn or making drastic and unpopular spending cuts to reach its fiscal targets. A politician making promises on tax (s)he can't keep? Will wonders never cease!
    Source: www.tax-news.com/news/Italians_Long_Wait_For_Tax_Freedom_Over____68474.html

  • May 18, 2015   Italy: small mercies

    Casting an eye over the recent news, it's been difficult to find a country on which to bestow an encomium. But perhaps poor old Italy deserves a bit of break after some recent savagings in this column, following the news that low-paid Italians celebrated Tax Freedom Day - the notional day when taxpayers' income stops funding state expenditure and is received entirely by taxpayers for themselves - one day earlier this year, on May 13. It isn't much, but it's something for Italy's over-taxed citizens to cling on to, especially after Prime Minister Matteo Renzi announced last month that taxes would not be raised during the next three years (although something tells me that it's going to be difficult for the Government to keep this promise). It won't be much comfort for those earning more the EUR24,000 (USD27,000) per year though. They effectively have to work for the government for just over half the year. I suppose they can count themselves lucky they are not living in Belgium. There, the government doesn't release you from your obligations until August 6.
    Source: http://www.tax-news.com/news/LowerPaid_Italians_Celebrate_Tax_Freedom_A_Day_Earlier____68073.html

  • Apr 13, 2015   Italy: overtaxed

    Does Italy really need another new tax? Seemingly, yes it does. Well, the economy doesn't, but the Government surely does. National Statistical Office figures show that Italy's tax-to-GDP ratio exceeded 50 percent in the fourth quarter of 2014, yet the budget deficit nudged back up to three percent of the economy last year. The Government could of course make a greater effort to cut expenditure, but that's not as easy as raising taxes, or creating new ones. But where do you go next as a government when you've taxed virtually everything in sight already? According to Paolo Grimoldi, a Northern League member of the Chamber of Deputies, you turn the clock back to medieval times and slap a copyright tax on heraldic designs. I had to check it wasn't April 1 when I first read this story. But, alas, it came too late for that, and Grimoldi doesn't appear to be joking. In fact, his proposal won't necessitate the invention of a time machine to bring the money back from the Middle Ages because there are well over 6,000 coats of arms currently in existence in Italy. And it could be a tax that keeps on giving (to the state) because each new generation will have to re-register their coat of arms. As a result it could raise substantial sums of revenue for the Government, says Grimoldi. Not only this, because (presumably) the tax will only affect a handful of rich people, or those with aristocratic pretensions, the vast majority of taxpayers (and voters), in all likelihood, won't be that bothered about it. It's either genius or one of the silliest things I've heard of in a while in the world of taxation. I can't quite decide yet. Still, you could imagine what they're saying in the Finance Ministry: Ministry Official Number One: "I hear this Grimoldi chap from the Northern League has come up with a new tax idea." Ministry Official Number Two: "Oh yes, what's that then? There's hardly anything left to tax, so we're running out of those!" Ministry Official Number One: "He wants us to tax heraldic shields." Ministry Official Number Two, indignantly: "Heraldic shields? What planet is he on?! This isn't the 14th century!" Ministry Official Number One: "Says it could raise a lot of money, though. Apparently, when the head of the family kicks the bucket, the kids will have to pay to keep their cherished coat of arms." Ministry Official Number Two, devious smile beginning to break out: "Really? Hmmm. Interesting. They're all rich aren't they, these people with coats of arms? And even if they're broke, they still won't vote for us anyway. I'll find the minister."
    Source: http://www.tax-news.com/news/Proposal_For_Copyright_Tax_On_Italian_Family_Crests____67769.html

  • Mar 26, 2015   Italy: stifles investment and growth

    The British Government's sense of economic security may be unfounded to a certain extent. But Italy would probably bend over backwards to swap its current predicament with the problems facing the UK. Earlier this month we saw further evidence of the high tax and administrative burden that continues to stifle business investment and growth, with a medium-sized company in Italy spending on average EUR7,500 a year to comply with Italy's bureaucratic tax code, according to the ImpresaLavoro research center. This gives Italy the dubious distinction of having the EU's most burdensome tax regime, and that's saying something. However, it's not as if this is a surprise revelation: reports about the state of taxation in Italy are a regular feature in the news. What's worrying is the Government's apparent inability to do anything about it. Italy's economy continues to be weighed down by a large and inefficient state sector, and businesses tend to be over-regulated and over-taxed. A key difference between the UK and Italy is that the former has a fairly flexible labor market, which has been credited with a fall in unemployment since the end of the recession there. Italy's labor laws by comparison mean that hiring and firing personnel can be a time-consuming, expensive, and onerous business. Prime Minister Matteo Renzi has put the transformation of Italy's economy at the heart of his program, yet there are few signs of real progress. Last November, after the Chamber of Deputies approved the Government's 2015 Budget, Economy Minister Pier Carlo Padoan professed his conviction that the Bill "will allow Italy to begin a reversal in fortune, in terms of economic growth and employment." We must wait for him to be proved right, but I'm not that convinced. I read a quite startling statistic recently, that Italy's economy has effectively grown by only 4 percent since the single European currency was created 16 years ago. It suggests that Italy's problems are much deeper than Padoan would probably like to admit, and even harder to overcome.
    Source: http://www.tax-news.com/news/Italy_Has_EUs_Highest_Tax_Compliance_Cost____67526.html

  • Feb 19, 2015   Italy: muddled

    Italian Prime Minister Matteo Renzi deserves some credit I suppose for recognizing that the Government, as he put it, scored a spectacular own goal with its Byzantine new self-employment tax regime. The basic premise of this alternative tax system is sound: sole traders, who tend to suffer disproportionately at the hands of complex tax codes, get to pay a fairly low fixed rate of tax in place of the multitude of other taxes they are supposed to account for. However, eligibility depends on convoluted criteria including turnover, profession and even your age (your age?!) I don't pretend to be an expert on rules regarding self-employment in Italy, and some quick research on the web left me none the wiser, really. However, the experience did begin to confirm my suspicions that the rules are complicated, ambiguous and, judging by one account I read, quite scary. Evidently, it's not just a case of telling the tax office that you are self-employed, and then getting on with your job. Multiple registrations and certifications are also required depending on what profession you are engaged in. And the type of work you do could also affect the amount of tax you pay. But don't get it wrong, and definitely don't start trading before you have the appropriate registrations and certifications. Because, says one guide I found, "doing so may incur stiff penalties, which may include a large fine, confiscation of machinery or tools, deportation and even a ban from entering Italy for a number of years." Alarmingly, the contributor to another advice website for expats related that staff in the relevant government offices are often unsure of the rules themselves, and are sometimes loth to give advice in case they get it wrong. So if you choose to go self-employed in Italy, God help you. And if He doesn't understand the rules either, get a good accountant or two.
    Source: www.tax-news.com/news/Italy_To_Alter_Controversial_New_SelfEmployed_Tax_System____67188.html

  • Dec 29, 2014   Italy: for sucking up to the fairies

    Well, that has been quite a diversion through territory you may not have been expecting, but it brings us back to terra firma. The first thing to do is to get rid of all the shadow people and their organizations. Send them back to the universities and institutions they came from, where they can continue to win imaginary prizes for scratching each others' backs. As for our elected leaders, the second thing is that we need to tell them to stop spending money, and in particular to stop getting into debt. If we don't do those two things, then within two to three years the fairies will have succeeded in destroying the laboriously constructed international business house which sits today protectively over the heads of cross-border traders big and small, and it will be open season for every government inside and outside the OECD to take what it fancies under any old pretext, and fight it out in court with any taxpayer who is rich enough to stand up for themselves. If you doubt me, then just look at the behaviour of the British Government over the last two weeks, which has cast off the last fig-leaf of legal propriety and is allowing and perhaps even encouraging HMRC to introduce a series of ever more Draconian anti-business laws. By now, it probably calculates, might is right, and it will get first mover advantage, while other countries, which are in an even worse fiscal state than the UK, will have to play catch-up and won't dare to be as grasping as Perfidious Albion. We can expect to see Italy and France, both of which are going to be in desperate need of assistance from the unmentionables, persist with the statist game whatever the colour of their Governments. Russia now finds itself in the same camp, unexpectedly enough, although it has had a bad year in terms of international trade rules. So, execrations for all four of them. Australia, which is by now a sort of pallid resource reflection of China, hardly has a short-term future at all. Most of South and Central America has been practising being anti-internationalist for so long now that it should be becoming almost second-nature for them. India has lately shown the world just what it thinks of international law; so no surprises in that direction.
    Source: www.tax-news.com/news/Italy_Approves_2015_Budget____66800.html

  • Dec 11, 2014   Italy: bread and circuses

    There are also some bad habits that Italy has to banish to give itself a fighting chance of avoiding a potentially cataclysmic economic crisis. For a start, a substantial swathe of the Italian population has gotten into the habit of thinking that taxation is a voluntary exercise. And the Government continues to spend money it doesn't have. The result is a sticky budget deficit which the Government is struggling to contain, and sovereign debt worth 130 percent of GDP and rising. The economy also has a nasty habit of stalling and then failing to re-start. And it is difficult to see how the Government will break the cycle. Although cultural attitudes are largely responsible for rates of tax evasion in any given country, Italy's tax system seems to provide ample scope for it to take place because a) it is so complex and b) taxes are so high. The recently updated PwC/World Bank ease of paying taxes index puts Italy 141st out of 186 countries. That's only marginally better than Zimbabwe in 143rd place, and slightly worse than Sudan in 139th. Even more damning is that Italy's total tax rate on a mid-sized company, represented by the combination of profit, labour and other taxes, is put at 65.4 percent. Who would want to invest in a country where, after finally figuring out how much tax you owe, it transpires that you must hand over two-thirds of your income to the Government? So cutting and simplifying taxes is at least part of the answer to Italy's problems, for this could help to reduce tax evasion and encourage more investment and growth in the Italian economy. But without commensurate spending cuts, Italy's fiscal troubles might just be exacerbated. Prime Minister Matteo Renzi claims to be the one with the answers. But despite his youthful vigor, he is still a politician. Italy's 2015 Budget, recently approved by the lower house, is supposed to be the tonic that saves Italy. The tax cuts contained within in it are claimed to be the largest in Italian history, but there's also a bit of clever accounting going on – EUR3bn of the EUR5bn reduction in the regional production tax known as IRAP actually went into effect in April, meaning that strictly speaking the 2015 Budget cuts the tax by EUR2bn. Not so clever is the fact that the Budget includes more borrowing to finance certain items of public expenditure. Slashing spending, if it happens, is only going to increase the chances of fracturing the fragile coalition and losing the support of voters – should Renzi ever get the chance to face them, that is. Unless he is Silvio Berlusconi, the average career of an Italian premier is fleetingly short. Canceling bread and circuses won't help to prolong it.
    Source: www.tax-news.com/news/Italian_Lower_House_Approves_2015_Budget____66581.html

  • Nov 13, 2014   Italy: Dive! Dive! Dive!

    In crisis-bound Italy, I don't know whom to believe any more. On the one hand there is Prime Minister Renzi, who has (predictably) fallen out with the fallen Cavaliere, and fallen into the arms of the country's equivalent of the British Monster Raving Loony party, being the 5-Star Movement led by a TV comedian, and it is no surprise therefore that one side of Mr Renzi's face tells the EU that the country will just about squeeze into the fiscal strait-jacket required by Brussels, while the other side of his face announces EUR25bn of tax cuts (could that have anything to do with the fact that he needs to legitimize himself with an election, now that the comedians have helped him to pass a new electoral law?) On the other hand there are the steely-faced technocrats, currently represented by Pier Carlo Padoan, the Economy Minister, who told parliament this week that the tax take will go up from 43.3 percent of GDP this year to 43.6 percent in 2016. Italy's public spending runs at 51 percent of GDP, so it doesn't take a genius to work out that the country's debt, currently at 134 percent of GDP, can only go in one direction. As to reconciling the two men's pronouncements, that would take some extremely creative footwork. As to which one to believe, I'm afraid for me it has to be Padoan. Luckily for both of them, compatriot Mario Draghi over at the European Central Bank is about to dish out a trillion euros in whatever the euro-speak will be for Quantitative Easing, and which you and I call printing money. Luckily, I say, because that will hold down interest rates: if they were to go up, it would be Madame La Guillotine for Italy. Meanwhile, the hapless tax authority is relying on technology to increase its takings, and is presumably reassuring Messrs Renzi and Padoan that it will be able to bail them out. Knitting while Rome burns might be the right description. What nobody talks about, of course, is cutting public expenditure. Well, OK, they do talk about it, they just don't do it.
    Source: www.tax-news.com/news/Italy_Approves_PreCompiled_Tax_Returns____66283.html

  • Sep 18, 2014   Italy: rudderless

    One leader who claims to have an eye on the long-term is Italy's (unelected) Prime Minister Matteo Renzi. Italy's Tony Blair (who was elected, the British one that is) came to the leadership offering an Italian version of New Labour's "third way." Put simply, this means that you can cosy up to the business sector while still maintaining a social conscience. You can be pro-enterprise without having to be a rabid Thatcherite. History tells us that the New Labour experiment got off to a bright start, but crashed and burned amid the wreckage of the credit crunch. Indeed, Gordon "Prudence" Brown's famous (or should that be infamous) "Golden Rule" went out of the window even before the financial whirlwind was unleashed, leaving the UK with a budget deficit bigger than Greece's. Anyway, moving on from the UK of the past and back to the Italy of the present, I guess the point I'm trying to make here is that Renzi, as youthful and fresh-faced as he is, needs to channel this energy into something more radical for Italy. Taxes – the Italian tax burden is one of the highest in Europe – need to come down, spending needs to be cut, entrenched, inefficient bureaucracies need sweeping aside and labor laws need to be loosened. Renzi's three-year economic and financial plan adopted by the Cabinet in April was an underwhelming start, and judging by the way that the 2015 Budget Bill is shaping up, the difficult issues will be dodged once more. Tax cuts will be in it, but at a level hardly worth talking about. A figure of EUR20bn in spending cuts initially made me sit up, but spending in certain areas will be increased. One can be too critical of Renzi I suppose. Italy's current problems have been built up by weak and ineffectual governments over decades, and there almost needs to be a complete overhaul of Italy's governmental system before anyone can realistically think of making the required economic reforms. Renzi has been hailed by some as the most skilled political operator in Europe right now. He needs to start proving it.
    Source: www.tax-news.com/news/Renzi_Promises_Tax_Cuts_In_Italys_Next_Budget____65810.html

  • Jun 26, 2014   Italy: in a bind

    Last Monday was bad news day for many Italians, with large tax bills coming due. Of itself, that would not necessarily be an issue – the problem is that the rates of tax are so high, worsened by the complication of the system. Even the IMF, which almost universally advises governments to increase taxes, thinks that rates are too high. The economy contracted by 0.1 percent in Q1, making minus 0.5 percent in the last 12 months. Like France, Italy is missing its deficit goals, and was reported to have asked the EU last week for an extra year to achieve them. Supposedly, Matteo Renzi, who by the way is unelected, is prepared to support the candidature of Jean-Claude Juncker in exchange for relief from Brussels. Apart from being a dreadful example of the sort of unprincipled "consensus" politics that have brought Europe to its knees, any slackening of the screws on Italy would be catastrophic: it is not the deficit itself, which is not so very large, less than the magic Maastricht 3 percent; the problem is the debt, which is over 130 percent of GDP and rising. It will rise even further if Italy is allowed bread and circuses; and this in a week when the Governor of the Bank of England talks of "fiscal tightening," that is to say, higher interest rates.
    Source: http://www.tax-news.com/news/Italy_Should_Look_To_Bring_Down_Tax_Rates_IMF____65019.html

  • Apr 17, 2014   Italy: dreams on

    Well that wasn't too successful, was it? All that glitters is not gold. Especially in tax. I am torn between "Italy Confirms Tax Cuts," which sounds clear enough, and "India Will Enhance Tax Administration," which is indeed much needed. But this is just another Committee: it is a rule of politics that when you can't work out what to do about a given situation, or if what you would like to do will upset too many of your supporters, then you appoint a Committee of the great and good to think about it for two years before telling you that they can't think of what to do about it either. So that leaves us with Italy. Mr Renzi looks nice, doesn't he? I would happily have dinner with him, and I might even agree with some of his ideas, especially if he feeds me enough Tuscan Red. The trouble is, he doesn't have any money. I don't mean that he couldn't afford to buy me a glass of wine, fussy as I might be. I was reading an article today in a well-known daily newspaper which used to be produced in Paris (and now you know which one) dealing with the disaster of Italian railways as an example of the long-term failure of the Italian state to improve the efficiency of public services and stimulate regional enterprise. They said that EUR550bn had been spent on trying to lift up the Mezzogiorno (south of Italy), and it now lagged even further behind the North than when they started. Don't tell me; that's where I have a cottage, and I love the fact that it's like living in the 19th century. But we know who got the money, don't we? The Sopranos. The railways are important as a particularly glaring example of how money has been spent heedlessly without the smallest attempt to improve efficiency, but with a careful focus on maintaining or even increasing employment. Last week I took a taxi from Bari to my local town, and the taxi-driver sat in wonder as a man (of course a man) emerged from his cottage to crank up the barriers on his level-crossing and allow us to pass. On average, it's about 13 minutes to wait at that level-crossing, on the main road to Taranto, from beginning to end. You learn to carry a newspaper with you. "I've never seen that before!" he said in amazement. What with the Sopranos and the Unions, Mr Renzi is between a rock and a hard place. I don't know what will cure Italy, but it's not Matteo Renzi, for all his good intentions.
    Source: www.tax-news.com/news/Italy_Confirms_Tax_Cuts____64335.html

  • Mar 06, 2014   Italy: hmmmm

    It would be good to believe that Matteo Renzi across the water in Italy has the same good sense, but his initial appearances before parliament (of which he is not a member) were unconvincing, and his proposals seem to owe more to political rather than economic necessity. He says that his tax cuts will be paid for by "spending cuts, and the remainder from reducing inefficient and unused corporate subsidies." Well you know what I think of politicians who wave spending cuts around like Dame Edna waves bunches of gladioli; and as for corporate subsidies, if they are "unused" then scrapping them won't save money, will it? And if they are used, scrapping them is a tax increase, isn't it? So you'll have to try harder, Matteo, and by the way, it's best to take your hands out of your pockets when you address the nation. Didn't anyone tell you?
    Source: www.tax-news.com/news/Renzi_Explains_DoubleDigit_Cut_To_Italian_Taxes____63863.html

  • Feb 27, 2014   Italy: dissolving

    Italy in the spotlight again this week, with (unelected) Matteo Renzi in full flood of (unelected) government-forming. It's difficult to see how he can change the Porcellum (pig-sty) for the better with the dogs' dinner of a parliament that he has inherited from his unsuccessful predecessors, Mario Monti and Enrico Letta, which is most likely to tear itself apart if any real reforms seem imminent. But let's wish him luck. As an example of Italy's political incoherence we can point this week to the splendid piece of governmental incompetence displayed by the tax agency's announcement of a 20 percent withholding tax on monies received from "abroad," which it was forced to withdraw within 48 hours after the EU pointed out that it was illegal. That seems obvious: how can mandatory "withholding" be applied to cross-border EU transfers in a way that's consistent with freedom of capital? Anyway, it's not "withholding," it's theft. Withholding applies to outgoing payments, not incoming ones. The results would quickly have been catastrophic: nobody, no bank, and no company would have made payments to Italy in the face of such a regime. On one very probable construction, cross-border business would have become immediately paralyzed, and all Italians expecting to receive monies from "abroad" would have made sure to open bank accounts somewhere else. So, very stupid, but you have to ask: "Who's in charge?" Didn't the tax agency have to get approval from the finance ministry? Didn't the finance ministry realize what the results would be? Did (silly question) the Prime Minister know about it, whether that would be Letta or Renzi? It's disconnected government, not joined up at all. So if you're Renzi, where would you start? If I was him, I'd go back to Florence. As it is, he's in the snake pit, God help him.
    Source: www.tax-news.com/news/Italy_Withdraws_WHT_On_Inbound_Payments____63780.html

  • Feb 20, 2014   Italy: killing with kindness

    I suppose it's positive that Italy has removed San Marino from its black-list of low-tax countries. Not sure though whether it's quite as positive that Italy removed its Prime Minister in the same week. They are comparing Matteo Renzi to Tony Blair, but it remains to be seen whether "New Labour" is a concept that will turn out to have wheels in Italy's moribund polity. Anyway he's Mayor of Florence, where he has done a good job of removing pigeons from the Piazza della Signoria. Let's hope it's a bit more permanent than Red Ken's attack on "flying rats" in Trafalgar Square in London. If he does succeed in removing blood-sucking political vampires from Italy's public spaces then Renzi will deserve a statue. Ci vediamo! Meanwhile, back to San Marino, which used to be a thriving Italian Monaco, but has been reduced by successive Italian non-Governments to a level of importance equivalent to that of of an Austrian mountain resort, which is indeed what it was prior to the risorgimento. Previously it could fairly be called a tax haven, and that is probably why it still has GDP per head of more than USD60,000, putting it way ahead of Italy itself, and in the top 10 of countries world-wide. It is a country, yes, sort of, but not powerful enough to have managed to retain its fiscal independence as have Andorra or Monaco. It's not quite clear why the Italian authorities decided to make an example of San Marino, especially given that a high proportion of the salotto buono probably had bank accounts there. Anyway, it has been done, and the Sammarinese will have to have to support themselves in future by selling postage stamps to collectors and VAT-free ice-creams to the tourists. As a piece of gratuitous information, I can inform you that there are lots of Russians in San Marino. You can make what you want of that, but bear in mind that it's also true of Hastings and Limassol.
    Source: www.tax-news.com/news/Italy_Takes_San_Marino_Off_Blacklist____63723.html

  • Jan 02, 2014   Italy: promises to be messsy

    Italy's budget for 2014, hopefully called a "Stability Law," also contains some futuristic douceurs for taxpayers, so far as it can be understood (not very far, and anyway it changes by the day), in addition to including a few new taxes, in case maybe one of them will survive popular riots, the constitutional court, and the EU's single market rules.
    Source: www.tax-news.com/news/Italian_2014_Budget_Tries_Out_New_Taxes_____63150.html

  • Dec 30, 2013   Italy: gives it to the grannies

    Another candidate to go on that list of tax-privileged sectors would be R&D. Most countries give some sort of beneficial treatment to investments in technology, particularly start-ups, and this week's particular case is Italy, which will favor young entrepreneurs for the next few years. I do like the fact that there is positive discrimination in favor of women entrepreneurs of any age, while for men only the young ones are rewarded. Given how many Italian men are living at home with their parents, and not just young ones, I predict a rash of granny start-ups: so when in three years' time you see a statistic showing that Italy has the most innovative oldsters in the world, you'll know why. "Cherchez l'impot" is just as true as "Cherchez la femme." More generally, it's stretching a point to give Italy a prize this week; the Government is bouncing from one crisis to another, and it has no coherent policy for dealing with the country's woes, which include disastrously high unemployment, particularly among the young, and a debt level at the outer edge of sustainability which can only get worse in the forseeable future. The feeble performance of Europe's leaders this week over the formation of a banking resolution mechanism (like they have completely failed to construct a credible regime) reduces the chances of a successful Italian bail-out to nil. Given that Angela Merkel is clearly determined not to pay to save the south, and that getting decisive behaviour out of the German coalition will be impossible for the next few years in any case, even if the lady was willing, it seems to me that this is the time for Italy to cut loose. But it won't; so the show will continue towards some sort of European Gotterdamerung, and I don't mean at Bayreuth.
    Source: http://www.tax-news.com/news/Italy_Plans_Further_Tax_Measures_To_Promote_Economic_Recovery____63058.html

  • Dec 12, 2013   Italy: on its uppers

    And our final cash-strapped administration is, of course, Italy, which has been struggling to find a way of canceling the second instalment of property tax (the first was canceled back in June when the now-ousted Silvio Berlusconi made it a condition of his support for the cross-party coalition under center-leftist Enrico Letta). With Berlusconi gone, Letta now has a freer hand, and has used it for this highly populist gesture, resourced, you guessed it, not by savings, but by increasing taxation on the finance sector, which is an unexploded bomb and may blow up in his face next year. The employers' federation, as in France, complained loudly, but no-one in Rome is listening, any more than they are in Paris. It's so drearily predictable that left-wing administrations will get the economy wrong – why can't electors see it? I suppose they do see it, but then it's the tragedy of the commons every time. Isn't there a better way?
    Source: www.tax-news.com/news/Italy_Finally_Able_To_Cancel_Second_2013_IMU_Payment____62881.html

  • Oct 17, 2013   Italy: in the last chance saloon

    Malta's nearest other EU member country is of course Italy, and the two are sharing in the awful task of dealing with the unstoppable waves of migrants and refugees arriving from North African and Middle Eastern countries. Both complain that the EU is leaving them dangling, without budgetary or other assistance. Italy's Premier Enrico Letta has responded humanely and effectively to the challenge, but his bigger preoccupation must surely be the budget he is due to present this week. The political shenanigans brought on by Silvio Berlusconi, his nominal partner in government, in recent weeks, have strengthened him and weakened Berlusconi, who is due to begin a year of community service this week. They can give him a broom to sweep the street outside his palace, but what will they do with his team of 20 bodyguards? There should be some good television footage in that. The Berlusconi circus aside, Letta's task seems insuperable. Due to Berlusconi, the property tax has had to be abandoned for this year, leaving a EUR5bn hole in the budget; yet Letta says, and rightly, that he must reduce taxes on businesses and on labour, with a budget target of another EUR5bn. He says blithely that the money will come from savings in public expenditure and privatizations; but he is left-wing, and it seems inconceivable that his own rank and file, let alone the Unions, will permit anything of the kind. Italian politicians have been talking about these remedies for a quarter of a century, and it never happens. There have been a few fake privatizations, for instance of Telecom Italia and Alitalia, but in reality both remain as loss-making state monopolies. So Letta can bluster, but the reality will be that Italy's already high debt (133 percent of GDP) will get higher. I have speculated before on how long the markets will stand for it; surely the tipping point is at hand? Meaning that Italy will have to throw up its hands and invite the Troika to take on the unholy mess. There is no imaginable political force in Italy that is capable of the job. They should call in the professionals, and the sooner the better.
    Source: www.lowtax.net/asp/story/front/Italian_Tax_Cuts_Promised_In_Upcoming_2014_Budget____62292.html

  • Aug 22, 2013   Italy: being silly

    This is the "silly season," the time of year dreaded by all journalists, when politicians are on the beach and nothing silly happens, so perhaps it should really be called the non-silly season. There was a small piece of silliness in the USA this week when a study linked the timing of childbirth to levels of taxation, but the best place for being silly at present is Italy, where the entire political class has embarked on a major exercise in silliness because of one man's legal entanglements, that man being of course Il Cavaliere, aka Silvio Berlusconi, who is going to have to choose in October between sweeping the streets and house arrest – a no-brainer, you would think, given that he has palaces dotted about all over Italy, not to mention a few islands here and there. The Government's silliness is that it has allowed this one man's situation to dominate its policy-making, particularly in relation to tax, with the Finance Minister desperately trying to find enough revenue from other sources to allow him to accede to Berlusconi's demand for abolition of the IMU, a tax on real estate, which all impartial observers agree should stay in place. The President, himself an honorable man who would like to retire (he is 87), was forced to stay on for an extra term because the parties couldn't agree on anyone else who could be relied on to be sensible in the face of Il Cavaliere's onslaught. The President has now exacerbated the political stasis by (foolishly, as I see it) refusing to allow Berlusconi any escape route from his conviction. So the country is being held hostage to Berlusconi's situation. That may be good justice, but it is silly statesmanship. Surely the right thing to do would have been to give Berlusconi a pardon on condition that he leaves politics? Instead, there are now umpteen ways in which the Government may fall in the coming months, all of which Berlusconi is orchestrating with relish, knowing that his (right-wing) party is likely to emerge the winner from any new, chaotic post-electoral stand-off. Meanwhile, the country judders sideways, and downwards. It's just too silly. And sad.
    Source: www.lowtax.net/asp/story/front/Italian_Property_Tax_Reform_Study_Causes_Trouble____61689.html

  • May 30, 2013   Italy: sinking

    Italy remains paralyzed, politically speaking. There was a moment of hope when the protest 5-star party led by Beppe Grillo gained 25 percent of the vote in February elections, but its mostly young deputies have proved ineffective due to their inexperience and in-fighting within the party. Faced with a political vacuum and an economic crisis, the conventional parties reappointed the already ancient President Napolitano to another term and cobbled together a coalition which is riven with disagreements and can truly be said to be fiddling while Rome burns. The price of coalition demanded by Berlusconi (right-wing) was the abandonment of the contentious tax on housing created by Mario Monti's "technocratic" government last year, but he must know very well that the loss of that EUR5bn of revenue makes the extra 1 percent of VAT from July 1 inevitable, so he calculates that the electoral tide will turn in his favor and will bring down the Government at a moment of his choosing later this year. Meanwhile the Parliament is doing little except playing with a new electoral law to replace the current system, known cynically as "Porcellum" (pigsty) and which makes strong government next to impossible. Whether Berlusconi is playing these games so as to avoid conviction in his various trials (the popular theory, at least among the intelligensia) or whether he truly sees himself as Italy's savior through another term in charge is known only to him. Since neither the existing coalition nor a strong Berlusconi government would change anything for the better, a financial collapse or crisis of some sort seems inevitable. I said to a friend over lunch yesterday that Italy needed either Margaret Thatcher or the Troika, and that didn't go down at all well! But it's true.
    Source: www.lowtax.net/asp/story/front/Italy_Warned_On_Effect_Of_Upcoming_VAT_Rate_Hike____60836.html

  • Apr 18, 2013   Italy: mistreat China

    One country which is conspicuous by its absence from the TPP talks is of course China. Although there are ongoing negotiations between the Middle Kingdom and various other countries, and China has FTAs with a scattering of other countries, notably including ASEAN and New Zealand, on the whole it is lagging. And it considers itself as an injured party in trade affairs, complaining this week about the level of "dumping" and "counter-vailing" measures it is subject to, particular emanating from the USA. A lot of the problem revolves around the designation of China as a "non-market economy" (NME). For anyone who, like me, finds it extraordinary that China should still be regarded as an NME, a word of explanation is in order: an NME is a country in which the State subsidizes enterprises or indulges in other non-market behaviour, despite WTO rules against it. So, an NME is allowed to cheat, if you will; but the other side of the coin is that for an aggrieved counter-party, the burden of proof is lower in anti-dumping proceedings. China's accession agreement to the WTO allows it to retain NME status only until 2015; but the change is not in China's gift, and both the USA and the EU persist in regarding China as an NME, despite frequent requests from China for them to treat it as a market economy.
    Source: www.lowtax.net/asp/story/front/China_Sees_Itself_Subject_To_Increasing_Trade_Friction____60398.html

  • Apr 04, 2013   Italy: drowns in data

    My jaw dropped when I read the story about the reporting of financial transactions to the Italian tax authority. I couldn't believe they are seriously expecting every bank and every other financial institution to report opening and closing balances and transaction value totals of every single account in the country. Surely there must be de minimis rules, I thought to myself, so I read the actual legislation in Italian, helped by the trusty Google, and as far as I can see, no there aren't! Since there are sixty million Italians, give or take, the Agenzia dell'Entrate is going to get a minimum 60m sets of data (allowing for different types of account and institution it's probably far more) to burrow into. The bureaucracy is mind-blowing, although admittedly it is all going to be done electronically; but what really should bother everyone is the degree of intrusiveness, which would be unthinkable in the USA, the UK or most other developed nations. Add to this data the redditometro (the compilation of facts about each family's purchases, spending, car ownership etc) and Big Italian Brother will be theoretically capable of knowing every single financial fact about any citizen it chooses to pursue. We know why they're doing it: because they are convinced that taxpayers are nothing short of crooks, out to defraud the state of every last penny they can get away with. They are not wrong, either, except that the solution is not to drive Italians and their financial transactions into the shadows, but to reduce tax rates to a point at which people will pay them willingly, or at least honestly, if reluctantly.
    Source: www.lowtax.net/asp/story/front/Italy_Issues_Delayed_Financial_Transaction_Reporting_Rules_____60247.html

  • Mar 07, 2013   Italy: at the crossroads

    Italy. I don't know what to say! Amidst all its other worries, a financial transactions tax went into effect on March 1, at 0.1% or 0.2% of dealings in the shares of larger companies, and at various lower rates on derivatives trading. Italy is one of the eleven "variable geometry" countries forging ahead with a eurozone FTT, of course, but like France has chosen to impose its own local tax as part of Mr Monti's "Save Italy" package. Heaven knows what will save Italy now. Strong government is needed to take an axe to the bloated bureaucratic State, and that's the last thing the election will deliver. I read last week, but don't know where the figures came from, that there are 70,000 official chauffered cars in Italy, as against 500 or so in the UK. Actually, taking a long term view, the election of the "grillini" is a good sign that the people are turning against their nepotistic, corrupt bosses. Perhaps a leader will emerge among the 150 or so young tiros in parliament, and perhaps, if we are lucky, it will be a Margaret Thatcher and not a Benito Mussolini. Keep your fingers crossed.
    Source: #

  • Feb 14, 2013   Italy: will turn left

    My fellow Jester in Italy, Silvio Berlusconi, is continuing his Theatre of the Varieties, or perhaps it's a Theatre of the Absurd, by offering to repay the EUR5bn raised in 2012 by the IMU tax on real estate. Mario Monti called him a "snake charmer", so one may fairly assume that they are not going to be bed-fellows in any post-election coalition. Opinion polling has finished now, but the last set of figures make it reasonably certain that a left-center coalition between Bersani and Monti will take charge. Silvio aims to pay for his largesse out of budget cuts and money reclaimed from illicit Swiss bank accounts, but he must know that such a flow, if it ever comes, is still years away. He is safe enough, knowing that he won't be re-elected, so all he is doing it to try to make sure that in opposition his party has as many seats as possible. A very recent survey carried out by the SMEs association put the average tax total for those Italians who pay tax at 54% (many don't) so it's difficult to see that much more can be done to increase the tax take. Rather surprisingly, another recent survey says that tax evasion is worst in the north of the country, but that's probably just because more people live there. It reckons that tax evasion accounts for one third of all tax due; that fits with what I observe in the south, where I have a holiday cottage. I would have guessed it to be higher, in fact. For certain, I would hate to be in charge of Italy over the next few years, between the rock of public-sector unions and the hard place of taxpayer fury.
    Source: http://www.lowtax.net/asp/story/front/Berlusconi_Would_Repay_Tax_On_First_Homes____59582.html

  • Feb 07, 2013   Italy: ready to vote

    To complete this week's trio of over-taxing, over-spending European countries there is Italy, where technocrat turned politician Mario Monti is waving the magic tax wand ahead of elections, now just a matter of weeks away. No point spending time on trying to predict the outcome of the election in tax terms, except to say that Italy is just as boxed-in as France and the UK. Cameron and Osborne at least had the honesty to say last week that there wouldn't be any tax cuts until just before the next election (well, we knew that!). These countries' budget deficits in 2012 were 3.9% (Italy), 4.5% (France) and 6.5% (UK), and all three countries have high and rising national debts. One has to be really worried about the course of interest rates: just a small uptick in today's historically low rates would have a catastrophic effect on the sustainability of these debt mountains. For that reason, these governments, like Washington's, will continue to print money, under various disguises such as quantitative easing, with inflation as a result, while pensioners and savers pay the penalty. For political and electoral reasons, they all remain in denial of the true situation. So I want to know: where are the spending cuts? Becuase that is the only way in which these countries can save themselves.
    Source: http://www.lowtax.net/asp/story/front/Monti_Lays_Out_TaxCutting_Campaign_Promises____59457.html

  • Jan 17, 2013   Italy: theatre of the absurd

    This not the first time that I have held the Italians' "redditometro" up to ridicule, but now that the offensive and absurd machine is finally going to be put into action, it deserves another bashing. In some parts of Italy they are even starting to talk about independence from the state which has served them so badly. The officials who are now, with no doubt the best of intentions, going to pick out families who are apparently living beyond their declared means, make an assumption that there is a settled bargain between the State and its citizens, and that they are on the trail of a minority of people who perversely want to upset that bargain, to the "unfair" disadvantage of their fellow taxpayers. Well, I've got news for them: in all of my many conversations with Italians of various ranks I have yet to meet one who had anything but contempt for the workings of the State. The new property tax, IMU, illustrates this perfectly: the second instalment was due in early December, but the local administrations that were supposed to set the rate managed not to do so until 24 hours before the due date for payment, resulting in monster queues at town halls just to find out how much to pay. Luckily I have an out-of-work friend who was prepared to do it for me; but is this how to run a country?
    Source: http://www.lowtax.net/asp/story/front/Italys_Redditometro_Comes_Into_Operation____59110.html

  • Nov 29, 2012   Italy: having the tax man to dinner

    I don't know whether to laugh or cry about Italy's redditometro, and the pious hope of the tax authority that people will use 'the family computer' to find out if they are 'incongrous', tax-wise. Will a person willingly instal an official program on her computer, accepting official assurances that using the program will leave no trace on the Internet, just to find out what she must surely already know, ie that she is or isn't gaming the system? Then, what will be the response of individuals and businesses to the redditometro itself? The machine relies on information provided by credit card companies, retailers etc to build a picture of a person's expenditure, to compare with their declared income. Now, will that cause more or fewer transactions to be carried out in cash? No prizes for guessing the answer. There is only one way for Italy to dig itself out of its crisis, and that is to cut public expenditure and tax levels. There isn't the slightest sign of either happening. The tax authority may win a breathing space this year or next by raking in, as it hopes, EUR40bn from Swiss bank accounts, if the Italo-Swiss deal goes ahead as planned. But it is just putting off the inevitable.
    Source: http://www.lowtax.net/asp/story/front/20_Of_Italian_Families_Tax_Returns_Are_Incongruous____58398.html

  • Nov 01, 2012   Italy: fiddling while Rome burns

    I paid my garbage tax in Italy last week. It's not a vast sum of money, and the garbage crews (given that I live in the south, we don't enquire as to their - ahem - political affiliations) are timely and effective. But, and this is Italy to a T, the demand didn't come through the mail, but was delivered to my gate by an agent of the local government's garbage management service. Oh no, said my usual informant on matters municipal, they don't use the mail, they have their own postal service. Now how crazy is that? It's as if the IRS or HMRC had their own parallel post office, trudging down cart-tracks in the boondocks or the Welsh marches to deliver tax demands. Meanwhile the parliament is fiddling with Mr Monti's latest austerity package and looks as if it will succeed in making the various measures even more complicated to administer than they already are. And not a word about public spending, of course. I was amazed when a friend told me last week that he was on the way to visit his 'commercialista' (sort of combined accountant and business adviser) in order to set up a new, small business 'correctly'. I didn't say so, but that means he'll still be struggling with the bureaucracy in six months' time and he'll probably give up before he even gets started.
    Source: http://www.lowtax.net/asp/story/front/Italian_Parliament_Insists_On_Changes_To_Tax_Package____58025.html

  • Oct 11, 2012   Italy: Italy has the right idea

    Half a cheer for Italy, which is pressing ahead with its plans for incentivizing small start-ups by cutting formation bureaucracy and waiving some minor taxes. But only half a cheer, because nothing is being done about the tangle of taxation which is reported to take nearly 300 hours a year to deal with for an average business. In fact the provision that entrepreneurs can offset 25% of their investments against taxable income sounds good, but can you imagine the forest of paperwork that the tax inspector will demand? With taxes so high and officialdom so intrusive, can you wonder that most Italians wanting to start a business will simply do it 'on the black'?
    Source: http://www.tax-news.com/news/Italy_Proposes_Measures_To_Incentivize_Startups____57663.html

  • Sep 20, 2012   Italy: has good intentions

    I award Italy a star for proposing a sweeping reform of small business start-up procedures. The problem is that, like a ship's hull after 30 years in the water, Italy's polity is so encrusted with regulatory barnacles, rights and privileges, and the trade unions are so intertwined with big government, in all the nastiest senses of the word, that it a devilish job just to know where to start. In fact the problem goes way back: Italy was a founding member of the EU in 1952, so there has been 60 years for the Brussels gravy train to infect and undermine economic sanity in all branches of the Italian state, not just in the mezzogiorno (the south). Then there's the mafia, under its various names, and we all know how they react to any attempt to take away their patrimony. So, fingers crossed, and good luck to Mr Monti, who knows what to do. But don't hold your breath!
    Source: http://www.lowtax.net/asp/story/front/Italy_Formulates_Measures_To_Promote_Startups____57334.html

  • Aug 02, 2012   Italy: shows how not to do it

    What did they expect, the Italian government, when they imposed swingeing new taxes on movable assets such as yachts, Lamborghinis and executive jets, and set the tax police to checking on their owners? Gone away, haven't they, to marinas in Cyprus, airfields in Romania and garages in Germany. Who would go for a holiday now in Rimini or Cortina? Only rich people can afford these places, anyway, and the rich aren't going there any more. So, the net result of this major piece of silliness is to ruin the makers of expensive toys and restaurateurs in holiday resorts. I am confident that the overall tax take will be lower, not higher, as a result. One consolation: Ministers will be able to replace their 'blue cars' (which they are about to lose) with confiscated Ferraris.
    Source: http://www.lowtax.net/asp/story/front/Italian_Yacht_Owners_Flee_Tax_Inspectors____56532.html

  • Jun 28, 2012   Italy: is living in a make-believe world

    When a government says that taxes are too high and it can't increase them any further, you know things are really bad. And in Italy, they are really, really bad, and going to get worse, because the government is looking down the muzzle of a gun called VAT, which is going to go off in September when the state has failed to slim itself and a substantial, automatic increase will kick in, with a further devastating effect on the economy. There isn't a single Italian that I have ever spoken to (and I go there quite often) who has a good word to say for their government. Mr Monti gets a reasonable press; but even he seems lackadaisical when it comes to cutting state expenses. Nothing has been privatized in Italy; there have been no cuts to public sector staff or pensions; the whole state sector is a byword for inefficiency and feather-bedding. Any ordinary Italian will give you a list of excrescent expenditures which could be cut; but they won't be. And until they are, why should the average citizen sign up to the idea of 'fairness'? Depressingly, it is difficult to see how Italy's democracy is ever going to come up with a Thatcher moment. This is a broken state. That's certainly sad; but more importantly, it's dangerous. I can't tell you what is going to happen, but I don't like what I see.
    Source: http://www.lowtax.net/asp/story/front/Italian_Minister_Says_No_Room_For_A_Wealth_Tax____55989.html

  • May 31, 2012   Italy: shooting itself in the foot

    As usual, it's a lot easier to find candidates for execrations than encomiums (governments seldom act in the interests of their citizens), but from the embarras du richesse on offer this week I'll take my first pot-shot at Germany, which is refusing to reduce the level of its air travel tax, using as evidence an analysis produced by the finance ministry, and this just days after the Transport Minister said he was open to a discussion on the subiect. The finance ministry always wins, of course, in Germany as elsewhere. It disputes that people in border regions are choosing to fly out of neighbouring, cheaper airports, on the grounds that overall traffic has gone up,which is laughable. These taxes, which are very prevalent in the EU, are a direct attack on the freedom of movement of individuals, which is one of the EU's most basic principles, and one of the few areas in which it can really be said to have made a difference. Why doesn't the supine ECJ ban them?
    Source: http://www.lowtax.net/asp/story/front/Italy_Explains_New_Local_Property_Tax____55579.html


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