On Sunday, as part of a strategy to show the rest of Europe how fiscally responsible the third most important nation in the eurozone (and the world’s seventh largest economy) is becoming, Italy sanctioned a T-man blitz over Milan. Members of the little-feared Guardia di Finanza, 580 of them in fact, descended on merchants of that prosperous city, and—amazingly—found that one third of all the places checked out were indeed hiding revenue from the taxman. News of the raid was blasted all over TV; it was the front-page headline of every newspaper. And in all that coverage, as is all too customary in that country, not one cheat was either named or shamed.
Or indeed punished. You can imagine just how terrorized all these tax evaders were: No sales slips get you a 159 euro fine, or a scolding. It depends. Mostly it depends on just how connected you are to those in power. In other words, in Italy tax evasion isn’t simply commonplace. It is universal. It is the great national pastime. Next to Albania, I cannot think of a country more opaque: No one knows how much anyone makes. No one would dream of telling the government.
Here’s the best part, however, as pointed out by Corriere della Sera: Almost nothing is open in “the Milanese desert on a Sunday,” nor elsewhere in Italy—except for a few restaurants. Which raises the question: how anxious is Italy really to hammer tax cheats? And figure it out, the newspaper continues: “If you apply that one third delinquency rate discovered by the horde of taxmen on Sunday” to “the other 22,000 Milanese merchants and the other 6,000 bars and restaurants, the dimensions of tax avoidance in that city grow markedly.”
Well, yes. In fact, the dimensions are something of a worldwide joke. One in four Italians (that’s 15 million in all) reported no taxable income last year, which would of course be tragic for those poor souls, if absolutely true. However, as 3 million of those reporting no taxable income own at least three homes, we may be able to deduce that things aren’t quite as bad as might first appear.
Also, in another great news/bad news revelation, 188,000 Ferraris and Lamborghinis and more than 42,000 yachts are owned by those with less than $26,000 of reported income. What with Iran’s fresh threats on the oil flow through the Strait of Hormuz and other issues, you can imagine how difficult it is for cash-strapped Ferrari owners to tank up in Milan these days.
Another technique implemented ever since the gray-haired technocrat Mario Monti replaced the famous tax-avoider Silvio Berlusconi as prime minister: using dogs at the Swiss border to sniff out those Italians carrying large sums of cash, a common ruse to hide assets. The technique, according to Italian officials, nets $52,000 a day—in other words, not exactly the price of a Lamborghini.
Italy’s debt these days is around $2.2 trillion, or 120 percent of GDP. Its long-term debt scores an A-minus, now that Fitch Ratings has cut its rating by two notches.
You could argue, and I suppose it’s fair, that tax-loathing in Italy and a fondness for Swiss banks aren’t exactly unknown to, say, the occasional American candidate for high office (or the occasional French one, for that matter). But there is an important difference. The US is not part of a transnational political union. It does not share its currency with a lot of other nations.
Italy wants respect and it wants loans at low interest rates and it wants a balanced budget and it wants prosperity. But everywhere you look in Rome these days there are startling sights, spectacles that used to be two decades ago almost nonexistent: beggars, homeless people, dozens of them on each city block, blocking the exits to grocery stores in search of stale produce, pleading loudly for spare euros in front of cafes.
It’s not hard to figure out what has caused this brutal change.