Italian taxes: Digital dodgers ? Financial Press

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Where have all the taxpayers gone?

MANY Italians have an awkward relationship with the taxman. This is hardly surprising. The authorities believe that more than 4m households, around one fifth of the country?s total, submit dodgy tax returns. Around a quarter of these declare an income of roughly zero, a claim often belied by the lifestyles of the taxpayers concerned. Since 1973 the authorities have been allowed to assess income tax on the basis of information they uncover about an individual?s spending habits; it has been up to the taxpayer to prove that the taxman is wrong.

Traditionally, the art of completing a tax return has centred on guessing how little income one can declare without sounding ridiculous and provoking an audit. Italy?s taxpayers now have an official helping hand to do this. On November 20th the Agenzia delle Entrate (tax-collection agency) released a program that allows families to calculate the income they should declare in order to avoid raising the authorities? suspicions. Called the Redditest, a test of reddito (income), the program can be downloaded from the agency?s website and allows taxpayers to juggle their figures on their own computers.

The Redditest kicks off with the key figure?declared income?and then invites the user to add details about his homes and cars and how much he spends on holidays, pets, jewellery, alimony and so forth. The program makes allowances for such things as where the taxpayer lives and how many children he has. It then tells him whether his declared income sounds consistent with his expenditure.

The Redditest adds to the tools that the authorities hope will bring down tax evasion, but will it attract users? Andrea Alfieri, an accountant in Rome, has doubts. Only about 65% of Italian households have computers, and the Redditest program is not especially easy to use. ?Keeping all the pieces of paper required for using the program accurately seems very burdensome,? notes Mr Alfieri. Moreover, independent tests have revealed anomalies in the way the program has weighted different towns and types of spending; changes may be needed.

However, the main reason to suppose that Italians will shun Redditest is that they do not trust the authorities. Often in the past, the rules have changed while the game was under way. The government insists that none of the numbers tentatively tapped into home computers will find their way into the taxman?s clutches, but not all Italians believe it.

Article source: http://www.economist.com/news/finance-and-economics/21567368-new-program-taxpayers-digital-dodgers?fsrc=rss|fec

Source: http://financialpress.com/2012/12/03/italian-taxes-digital-dodgers/

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