Can’t Pay, Won’t Pay

On this mist-enveloped early morning which has completely blotted out the view from my garden I’m thinking about a news item I heard last night on RAI news which stated that the inhabitants of Italy are the most heavily taxed in Europe and some of the most heavily taxed in the world. A politician showed figures to demonstrate that the fact that Italy also had the highest tax evasion in Europe (and one of the highest in the world beating (for example) Sierra Leone) was not unrelated to the tax rate – the man in the street had to pay for the man that didn’t.

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(A bleak outlook no matter what your true colours are?)

So would a reduction in tax evasion lower taxation rates? Yes, according to him. Another MP tried to distinguish between tax evasion by the rich which he called “unacceptable” and tax evasion by the poor which he termed “survival fiscal evasion”. So was it all right not to pay taxes if you can’t afford to feed your family or pets anymore? Yes, according to him.

I want to examine these figures a little further.

First, the income tax rate on gross income: mine is taxed at 20% although; if I earn less than a certain amount it may be possible for me to reclaim paid tax. I do this every year around this time, and have, indeed, got some tax back…from 2007. “It’ll take time” says the Citizen’s advice bureau but you’ll eventually get it back.” Wonderful!

The potential European income tax rates vary enormously from country to country, (the figures are for the maximum tax rates for incomes above £150,000 pa). The lowest rate is 9% in Montenegro and the highest is 56.6%  in Sweden. Italy comes in at 45% – the same as the UK.

Outside the EU Russia has a flat 13% tax rate for anyone, regardless of income although, if you decide to move to the Middle East or the Bahamas or Benin, you’ll be taxed at only 0%. Andorra is a good place within Europe at 0% too. It is sort of in the EU where trade in manufactured goods is concerned, but not for agricultural produce. Ever thought of moving there?

Second, the VAT rates within the EU: these stand with the highest in Hungary at 27% and the lowest in Cyprus and Malta at 18%. Italy’s VAT (or IVA as it is known here) rate is currently 22% (and due to go up soon) and clearly higher than the UK’s 20%.

Of course, income tax and VAT rates are only part of the picture. With regard to family expenditure, Italy has the highest petrol prices in Europe and even the cost of that other essential liquid, wine, has almost doubled since I moved here eight years ago. With regard to public utilities the picture is a little less harsh with few rates increased (and some actually decreased) for gas, water and electricity. Perhaps this is due to attempts to open up the market to outside competitors.

I say little of that Rod Hull tax (I’m referring to IMU and even more aggressive than the famous bird) – which for Italians is quite sacrilegious since it taxes that on which one has expended blood, sweat and tears – one’s house.

It’s incredibly difficult to quantify the cost of living in any country accurately – there are so many pros and cons and so much depends on one’s personal tastes and whims, on whether one takes up gambling or gliding, for example, or bagpipe lessons or bungee-jumping. The easiest way, however, is to see how far one’s disposable income goes these days, and one thing is certain – it doesn’t go anywhere near as far as it used to. Gone are the days when people would come and live in Italy because it was cheaper (and lovelier) than their native shores – prospective DH Lawrences, Brownings and Shelleys are now seeking the rain forests of Vietnam or the creeks of Borneo for their idyllic fiscal paradise, I fear.

The main point of all these figures, however, is to show that the average employed Italian’s spending power has gone down quite miserably since 2008, largely because of three reasons:

  1. Rising prices
  2. Few wage increases
  3. Increased tax rates

At least those Italians have got a job. There are ever fewer jobs going around, especially for young people. This is because of

  1. Failure of home-grown businesses through increased competition (largely through cheaper labour costs and, therefore, costs to the public) from abroad.
  2. Removal of manufacturing and assembly centres to nearby countries with cheaper labour costs (e.g. Croatia, Macedonia)
  3. More than usual spate of natural disasters in recent years (like flooding and earthquakes) which has knocked many industries for six, and slowness of government support to help them get back into production again.
  4. Continued traditional reliance on “letters of recommendation” which give preferment to friends and family of the bosses rather than individual abilities through impartial interviews.
  5. Lack of investment in education and research for new technologies.

Italian companies are always having to re-invent themselves in this climate. Only this morning I hear that Vespa sales (the iconic vehicle apotheosised in that lovely film with Audrey and Gregory) have plummeted because of half-price Chinese imports which the young can afford. Vespa is, therefore, redesigning its models to cater for the luxury market.

Perhaps I should put a sticker on my Scarabeo scooter which says “my other scooter’s a Vespa”.


3 thoughts on “Can’t Pay, Won’t Pay

  1. A very interesting post ( as are the others!). You rightly address the economic and fiscal problems encircling the Italian economy and for that matter a large part of western europe.
    What is the answer? – I think its within our grasp if we are prepared to active collectively, but each country has its own political economic social priorities and sadly thats were real collective action founders – thats why a number of countries have gone in for quantative easing – the governments of those countries realise its probably as much as they can do, along with kick-starting capital projects if they can afford to do it. As for spending power in Italy, as a frequent visitor i’ve noticed a marked decline in the purchasing power of my pound or euro. It used to be dirt cheap to eat out at Santina’s, Del Sonno, I Foiletti, and Mamo. Its costs a lot more to dine out now, and the restaurant owners must be noticing fewer tourist visitors. We go to the pool in Bagni quite a lot and now know a number of British families who regularly holiday in Bagni but we notice when we go out that we don’t see them out as much as we used to. I think we started to visit Bagni in 2004, perhaps at the tail end of something marvellous, a sunny inexpensive prosperous confident Italy. I hope it returns soon.

  2. Pingback: A Sea Change | From London to Longoio (and Lucca and Beyond) Part Two

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