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Italy’s Well-Heeled Poor

The Owner of this Floating Gin Palace Earns €20,000 a year. Not.

That levels of tax evasion in Italy are laughably high is no secret.  Mario Monti, Italy’s replacement for tax-evasion encouraging Prime Minister Silvio Berlusconi, is attempting to bring Italy’s army of tax evaders to heel.

One recently introduced, if not yet permanent, measure of the Monti-led Italian government means it is now impossible to pay more than €1000 in cash for anything in Italy.

There has been talk of introducing a wealth tax to plug the holes in Italy’s leaky public finances.  The trouble is, identifying the wealthy in Italy is not going to be at all easy.

Italian newspaper, Il Sole 24 Ore published a few facts which have been duly regurgitated by other Italian newspapers and websites.  These facts were rather startling.

The Owner of this Floating Gin Palace Earns €20,000 a year. Not.
The Owner of this Floating Gin Palace Earns €20,000 a year. Not.

For a start, 42.4% of the 42,000 luxury boats in Italy are owned by people who say they earn less than €20,000 a year!   Something is amiss, is it not?  Such poor wealthy individuals would neatly avoid a wealth tax if it were to be based solely on declared annual income.

Of course, if you have a flash boat, you need an impressive car to go with it.

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Italy, apparently, has more than 200,000 owners of luxury cars made by the likes of Mercedes and BMW, yet these poor people only manage to earn between €20,000 and €50,000 a year.  Or rather, they only declare such earnings to Italy’s tax man – the rest is obviously spent on the latest Merc and a €1,000,000 motor yacht.  Perhaps these clever Italians are declaring what is left over after they have paid the insurance on their motors and the mooring costs on their big boats?

Italy’s tax man is starting to wise up to the furbo tricks of Italy’s poor wealthy and putting two and two together.

One day, maybe, curious stories such as the one about the Italian who declared an annual income of €500 but managed to run no less than five Ferraris may become a thing of the past.

The only slight worry is just what Italy’s fantastic politicians will do with all the money clamp downs on tax evasion may recoup.  Italian governments are not exactly famed for their prudent management of Italy’s finances.  Some, such as a chap called Craxi, have been suspected of keeping a little back for themselves – perhaps so they can buy a suitably impressive mother yacht.

A clamp down on tax evasion in Italy is highly likely to net a few politicians too, even if their “capture” may be kept from the pages of Italy’s press.

In the meantime, Italy will first have to identify its wealthy before it can even start to think about introducing a wealth tax.

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