Imagine driving to the mall in your brand new SUV or luxury vehicle and, with no cause, a police officer stops you and asks to see your driver’s license and registration. Your information is then recorded and sent to the IRS where your tax returns are crosschecked to see if your income justifies your lifestyle.
Outrageous? Of course. Big Brother? The biggest. But if you live in Italy, this is reality -- and it is turning into an all-out war on the country’s tax evaders, who cost the country an estimated $150 billion in undeclared income every year.
Continue Reading Below
Consider: Some 15 million Italians reported no taxable income last year. At least three million of them own three homes.
According to Italian authorities, taxpayers reporting incomes of less than $26,000 actually owned 188,000 Ferraris and Lamborghinis, and about 42,000 yachts.
Former Italian Prime Minister Silvio Berlusconi has proudly claimed that evasion of high taxes was a God-given "right." But Mario Monti, Italy’s new technocrat PM is cut from a different cloth, one that doesn’t turn a blind eye to the rich.
The tax evasion war is being waged on numerous fronts. There have been raids on stores, hotels and restaurants. An advertising campaign compares tax evaders to parasites. There’s also a crackdown on money laundering where the maximum allowed for cash transactions has been lowered to $1,275. Border checkpoints are trying to stop cash rich Italians from driving their money to a Swiss bank account.
Back in December, tax agents visited Cortina D’Ampezzo, the ritzy ski destination in the Italian Alps, and found more than 40 luxury car owners had declared income of less than 30,000 euros for 2009 and 2010.
According to Italian police, another 19 luxury cars were owned by businesses which posted a loss in the previous year. A raid in Florence found a builder with no tax record who was driving a Mercedes with his wife who was receiving welfare.
Ironically, the crackdown designed to recover missing revenue is now hurting the luxury end of Italy’s economy. Demand for Ferraris, Maserati’s and Lamborghinis fell 53% in January. According to some dealers the price of exotic cars has fallen as much as 20%.
Some of Italy’s elite say it has gone too far, claiming it is frightening away business investment, but it is clear that a long accepted culture of tax evasion has helped to bring Italy’s economy to its knees.