Is not paying taxes evasion? Yes, it is. But what happens when the reason for your not paying those taxes is because you can’t afford to? Recently, courts in Italy have found that not paying taxes because you can’t afford to does not constitute evasion.
This is what a business owner recently argued before an Italian court in Milan when he was accused of evading €180,000 in VAT payments according to Il Messaggero. The court accepted the businessman’s claim that the crisis, both in Italy and abroad, had made it impossible for him to make the VAT payments on time. In the business owner’s favour was the fact that he had notified the tax authorities of his predicament and in doing so, he had not attempted to evade the payment of taxes. This line of argument was also accepted by the court. Common sense prevailed.
Common sense also prevailed in another case of “tax evasion” caused by the economic crisis involving a cash strapped entrepreneur in Bergamo.
On paper in Italy, if you do not pay your taxes, you are an evader. In reality though, if you had the cash, and you would have paid your dues if you could have, you are not a tax evader. You are simply someone suffering economic hardship or from poor cashflow. Such cases should not really end up in Italy’s courts.
Late Payment A Cause of Evasion
Late payment in Italy is likely to be a major cause of tax evasion.
Some ‘evade’ taxes simply because their cash doesn’t flow, while others may evade to ensure they have enough cash to pay their dues when tax deadlines approach.
Others in Italy though, evade simply to hide cash from the taxman. These are the evaders who need to be identified and made to pay up in Italy.
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Distinguishing between the different categories of ‘evader’ may not always be easy, though if a business has always had a good record, then they could be given the benefit of the doubt. Outstanding tax debts could then be settled in instalments, perhaps even at a reduced interest rate.
In cases of evasion which are down to financial hardship, recourse to legal proceedings should not be necessary in Italy. If any action is to be taken, it should be taken against those who owe money to the so-called evader. In Italy, this would become complex, seeing as many businesses are very slow payers. Banks won’t always help out either.
Public sector organisations are probably the worst offenders in terms of late payment in Italy. A requirement introduced in 2013 by the EU for Italy’s public sector to pay suppliers within 30 days is not being respected. By not respecting this EU regulation, tax evasion, whether illegal or though necessity, will continue. The EU regulation applies throughout the EU, not only to Italy, even if the problem of late payment in Italy is worse than many other major nations in Europe.
Italy needs to reform its tax laws, perhaps. It should also respect the EU requirement, as this might help a few people keep their jobs.