Columnist and former magistrate Bruno Tinti's Passaparola
Lining up...to avoid paying taxes
Good day to you all. My name is Bruno Tinti and I have spent much of my life, in other words just over 40 years, working as a Magistrate before deciding to change profession. It just seemed to me that spending as much time as I did as an economic crime magistrate and watching the vast majority, indeed virtually all the trials I was handling ending up being statute barred was just too masochistic, so I turned my hand to writing. Since then, I have written books, I also write for “Il Fatto Quotidiano” and I attempt to explain this sector that I have got to know via my writing. Today I would like to speak to you about taxes so let’s begin with a terrifying reality. Every year tax evasion eats up around 160 billion, which means that tax evasion is greater than the actual amount that the Country collects in taxes. Italian citizens currently pay around 45 billion Euro in taxes each year while tax evasion amounts to 160 billion. Another terrifying figure is our public debt, which currently sits at around two-thousand billion Euro, a figure that is greater than the Country’s entire annual production. However, if only we could somehow find some way to bring in that 160 billion Euro of tax revenue that is currently evading the taxman, we could wipe out our entire public debt in a matter of ten or so years and Italy would become a prosperous and happy Country. So how come we just can’t seem to get this right? I have tried to explain the reason why right here, in this little booklet entitled “The tax revolution” and the reason why we cannot seem to get this right is because the system is designed not to work. The very system that should be encouraging Italians to pay their taxes and hammering those that don’t, either administratively by confiscating their money or legally by chucking them in jail, was specifically designed to stop this from happening. Italians can evade the taxman with impunity and, in the highly unlikely event that they are caught out, absolutely nothing will happen to them and, more importantly, they will never land up in prison! The Tax Amnesty is a prime example of poor governance and of the favours that the Government hands out to those citizens who promise to vote for them. They say:”We need money. I know that you are guilty of tax evasion and that the profits of that tax evasion have been transferred abroad, so bring the money back to Italy and we will promise you that we will only make you pay a very small amount, indeed as little as 5% on the most recent amnesty”. Well, this amounts to fraud: 1) because what we’re saying to all Italian citizens for the umpteenth time is: "Go ahead, avoid paying your taxes because nothing will happen to you anyway". From 1973 to date there have been 15 separate pardons and tax amnesties with an average of 3.8 years between any two consecutive pardons, so any citizen simply needs to hunker down and wait patiently for the next pardon to be announced and, in the meantime, he continues to not pay his due taxes because the next pardon is bound to arrive long before any potential tax audit. Pardons encourage criminal behaviour and invite the citizens not to pay his taxes and giving him guaranteed impunity. Above all, however, pardons are effectively a form of money laundering, not only the laundering of profits from tax evasion, but also the laundering of profits from all sorts of other crimes such as drug trafficking, arms smuggling, human trafficking and robbery. Do you honestly think that the money earned from tax evasion is a different colour to that earned from drug trafficking? What is stopping a common criminal, as opposed to a tax criminal, from taking the billions that he has earned from his crimes to Switzerland, the Cayman Islands, Austria or anywhere else for that matter, and then to bring them back into the Country by exploiting the tax amnesty and paying a mere 5%? Are you aware that Columbian drug traffickers stuff small aircraft headed for Miami full of dirty banknotes that are the proceeds of drug trafficking activities. When the planes land in Miami there are people that launder these drug trafficking proceeds for a fee of 40 or 45%, yet here in Italy we are laundering their money for a mere 5%. By making use of the tax amnesty, Totò Riina will suddenly land up with a ton of money in hand and if anyone asks him: "Where did you get the money to you buy this hotel or that pizza parlour?” or “Where did you get the money to buy this building?", his response will be: "What’s it got to do with you, I simply took up the offer of tax amnesty!"
Every tax evasion equals one vote
Perhaps things will change now that we have the Monti Government in charge, which is a so-called technical government. I remember when, back in August last year, Minister Alfano, who is an extremely intelligent person notwithstanding the fact that he chose the wrong side, appeared on a Sky television programme. At that time, back in August, no one knew whether or not the Italian State would be able to make the public service salary and government pension payments for September since the Country was on the verge of bankruptcy. Alfano stated that: "Dear citizens, beware of what you are asking for when you call for a technical government because these guys just move in, raise taxes and then they simply move on." According to Alfano, this was the reason why we should actually prefer to have a political government, one of the many governments that had eventually led Italy into the very situation that we were in back in August. Well, as it turns out, he was absolutely right! The Technical Government came in, raised taxes and there is now a risk that they will actually have to simply move on in 2013, when the Caste will want to take back the position that they made their own for decades. But how could such a thing happen? At the moment we are talking specifically about taxes but the same argument holds true for pretty much anything else too. The rate of taxation and particularly the impunity enjoyed by tax evaders is a form of currency that is exchanged for votes. No politician in any government has ever dared to do anything against the tax evaders for the very simple and excellent reason that they have used this guarantee, this concession to avoid paying tax, to buy these people’s votes. Today, however, perhaps things are changing. Let’s start by saying that the Monti Government has introduce what we could call the weapon of mass destruction against tax evasion, namely, the obligation for financial intermediaries to inform the contribution registry, namely the Internal Revenue Department, of their clients’ bank account movements. Not the existence of these accounts mind you, because the Revenue Department already knows about them, but rather how much money there is in the accounts in question, which the Government could use to identify those citizens that should be subjected to a tax audit. I would say that someone who drives around in a Ferrari and has 500 million in his bank account while declaring an annual income of 15-thousand Euro should not be allowed to escape from us any longer. Today, the Monti Government is the only one to date that has encouraged, permitted and indeed guaranteed that tax blitzes like the ones carried out in Cortina and Via Monte Napoleone in Rome will be ongoing. These are measures that have a dual value: firstly, if we manage to find out that, on the same day last year, a certain establishment declared a sales turnover that was 400 times less than the declared sales turnover for the day of the blitz this year, I would say that the blitz was an unmitigated success. Secondly, and more importantly, is the intimidatory effect of these blitzes because, as I said right from the outset, why should anyone pay any tax if the taxation system was designed to fail in the first place? This is especially true if the person knows full well that nothing is going to happen to him and that there is a strong likelihood that he will never be audited anyway since the Inland Revenue Department only manages to audit about 10% of the country’s taxpayers in any single year.
90% of the tax evasion is never picked up
You should know that 90% of potential audits are never done. If any one of you had a 90% probability of winning at Bingo, Enalotto or the Totocalcio lotteries, wouldn’t you play some numbers each and every week? If you didn’t win anything this week, you will surely win something next week. This is the position that the tax evaders are currently in. They know that 90% of cases are not checked. Well, now that assurance has been dealt a blow. They no longer know whether or not they will be audited. On the contrary, there is a very real risk that they may well be audited! Obviously there is a lot more to be done. A radical idea would be to allow people to deduct all expenses incurred. We all know what happens when we want to renovate a bathroom at home, when we have our motorcar repaired or when we go to a lawyer, a doctor or a restaurant: the bill comes to 100, 1000 or 3000 Euro, however, if you insist on having an invoice, then the bill comes to 120, 1200 or 3600 Euro because of VAT. So, all of us, well perhaps not all of us but certainly most of us will say “No, I don’t need an invoice because I cannot do anything with it because I cannot claim back the VAT anyway", and so the citizen and the tax evader enter into a new pact in which the citizen himself becomes a tax evader like the independent businessman and the State loses out on the VAT and on the income tax that the businessman should pay, but doesn’t because he has not issued an invoice. But what if we were to create a conflict of interests, if we could somehow convert this alliance between the citizen and the businessman against the State into a competition between citizens? What if I could say to the State: "Yes, it is true that I must pay my taxes, but first you must allow me to deduct the 3,000 Euro that I paid the Plumber, look here’s his invoice!" then there would no longer be this alliance and I would say to the plumber: "No, look, I’m very sorry but I need an invoice because, with this invoice, I will pay less tax so, I’m sorry for you, but you must see to your own taxes and I’ll see to mine”, so it’s not difficult at all! Obviously, there are a number of technical issues to be finalised, such as computerisation for example. What do you think happens behind the scenes when we use our credit cards to pay for something? The simple fact is that when a credit card is inserted into the POS machine, the machine is sending out a flow of information without us even realising what is happening. This goes on behind the scenes each and every day. If my bank has to pay over 500 Euro and the bank that supplied the POS machine knows that it is due to receive that money and the money will be credited to their credit card, how difficult would it be to send two additional information flows to the taxman, one for my side of the transaction and one for the party to whom I am paying out the money in question. In the end, all the taxman needs to do is to do the calculations, after all, he knows that Mr. Tinti has spent 500 Euro and he knows that Tom, Dick or Harry has taken 500 Euro, how difficult can it be? This would not only enable the tax authorities to collect their money, but it would also re-establish our trust in the Government. The people currently have no faith in the Government, and quite rightly so because for them, the Government is merely a political class characterised by two overriding features, namely a high level of technical incompetence and an extremely high level of criminal behaviour, indeed with what is probably the highest rate of criminal behaviour in the entire Country and even higher than in notorious places such as Via Prè in Genoa or Porta Palazzo in Turin. So the Italian citizens equate this criminal environment, infested with criminal behaviour, with the Government and so they don’t trust the Government and ask themselves: "But where the hell does all our money go to? What do they do with it?" The truth is that no one knows the answers to these questions in a modern Country. No one knows how those 150, 200 or 300 billion Euro are allocated each year, however, their representatives are there to ensure that they are properly allocated. Obviously we have to trust them. So the vicious circle should be turned into a virtuous cycle. On the one hand, the ruling class should be absolutely above suspicion and should perhaps be made up of people just like us, where our Deputy would be someone just like us, just like us but looking after our interests and get paid the same as anyone of us because he provides a service while, on the other hand, there should be citizens who do their duty and who report anyone that doesn’t, at which point they know that what they are doing is not useless but that in order to live a prosperous life they will have to obey the Government’s laws, particularly those pertaining to taxes.
Posted by Beppe Grillo at 05:34 PM in Information
(1) | Comments in Italian (translated)
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