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Why Is Italy Short of Cash?

On our way back from the mountains yesterday evening, we encountered more than a little traffic.  Licence plates from just about everywhere in northern Italy were all over the motorway.

ItalyApparently back in 2008, around 65% of the cost of filling up in Italy goes into government coffers.  Quite a chunk, and that’s before all the taxes associated with running a car in Italy are taken into account.  On top of that, by far the fastest way to get anywhere in Italy is to use one of its networks of ‘autostrada’ – motorways if you are English, freeways or expressways, if you hail from the other side of the Atlantic.

You pay to use the motorways here, and the trip from Milan to Valle D’Aosta, for example, costs the thick end of 20 Euros.

The majority of Italy’s Autostrade network is under private ownership, with control of the publicly traded autostrada management company being in the hands of the well known Italian clothing dynasty, Benetton.

One assumes that motorway company pays taxes, so, again, on top of fuel taxes, the Italian government must be doing pretty well.  But it is not.

CIA Facts

According to the CIA; yes, the same organisation which can probably tell you the colour of Italian Prime Minister Berlusconi‘s underwear on Sundays; Italy is at sixth place in terms of countries with a high level of public sector debt.  Admittedly, Italy is doing better than Japan, which is in second place behind economic laggard Zimbabwe, which in turn, sits at number one.

The question is, though: ‘Why is the situation so dire in Italy?’.  Income and corporate Tax levels in Italy are high, though not excessively so.  It is true that tax evasion levels in Italy have reached ‘embarrassingly high‘ levels.  At least that was how Italy’s Finance Minister at the time, Vincenzo Visco, put it back in 2007, when centre-left Prodi’s government was in power.

Pessimistic Tax Returns

Italians, it has to be said, make seriously pessimistic tax returns, to the extent that you would believe the country is in the depths of poverty!  A 2007 report, based on 2006 figures, one assumes, mentioned that around 25% of Italy’s population state that they earn only €6000 annually.  This is probably all they have left after having paid to run the four or five cars each household seems to run, shelled out the fuel and mooring costs for that motor cruiser languishing in a Sardinian harbour, and after buying all those designer labelled clothes!

One gets the impression that Italians only declare income after making their own, very personal, tax deductions and granting themselves a good few, and equally personal, ‘allowances’.  I do know of one or two of the tricks used here to keep income levels to a minimum, and some are very creative.  Far be it from me to reveal what these cunning little tricks are, and anyway, it’s the job of the Italian tax man to find out. The Italian tax man, it must be said, probably knows just what everyone is up to, but has been overwhelmed by the sheer scale of the fiddles which exist.

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However, even with the novel approach taken by Italians to declaring taxable income, the Italian government must still be receiving quite a wad via indirect taxes in fuel and travel, especially during the summer months when just about everyone seems to leave the cities and head for the sea or the mountains.  And once they have reached their desired destinations, spending will continue.  This means that even if Italians are not paying up directly, they must be doing so indirectly.  Of course, this assumes that all the restaurants, hotels and other tourism related services are donating a little something to Italy’s tax men…

How Italy Measures Up

Here is how Italy measures up in taxation terms to some other countries which you might know:

Tax Levels - Comparison to Italy
Tax Levels - Comparison to Italy

Source:  WorldWide Tax – Tax rates for 2008.

All of the above begs one simple question:  How is Italy’s tax income being spent?

Benchmarking Anyone?

How about benchmarking the efficiency of Italy’s thickly spread layers of local government?  Should be fun!  Work out just what the cost of each public sector employee is per head of the area being controlled.  A nightmare task, if ever there was one!  Extraordinary expenses such as large public works schemes could be excluded to reach a figure for average annual expenditure.  If nothing else, the results would provoke one or two explanations as to why certain areas are spending much more than others.

Sorry, this is a daft suggestion, and probably not feasible anyway.


Gira e rigira, è colpa delle tasse sulla benzina – article in Italian from January 2008

CIA World FactbookRank Order – Public debt

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