It doesn’t come as a surprise, but Italy is the black sheep of Europe when it comes to VAT evasion. This was confirmed on Thursday by European Economy Commissioner Paolo Gentiloni, outlining the measures adopted by the Commission to combat VAT evasion, which include first and foremost the obligation of economic invoicing in trade between EU countries. For 2020, VAT evasion in Europe is estimated at €93 billion, of which €26 billion is in Italy. In France the lost revenue amounts to €14 billion, with €11 billion in Germany.
Gentiloni also said the Commission was working on examining the Italian budget law and is expected to give its opinion next week. On meeting the NRP targets, the real thorn in Italy’s side, he said that the contacts with the government in Rome and the prime minister show “a very serious commitment” on the part of Italy, and as a result the Commission is confident that this government, like the previous one, will also “meet all the targets.” Gentiloni did not go into the merits of the opinion on the budget law, but he did hint at one potential criticism: “It’s enough to read the NRP and the EU recommendations to see that for us, both electronic invoicing and the fight against tax evasion are high priorities.” Reading between the lines, this is a clear reminder to the Italian government that Brussels expects a change to the floor for mandatory POS payments.
Things are different on the ceiling for cash payments. Gentiloni is probably alluding to that item in the budget law when he insists on the urgency of the fight against tax evasion, but the ceiling at €5,000 decided by the government does not exceed the one the Commission is preparing to set at €10,000. While it’s certainly true that Italy’s tax evasion situation is far more serious than that of the major European countries, the Italian budget law follows the rules, and it is very unlikely that the ceiling will be changed. If anything, there is a temptation to do the opposite: to raise it further to counterbalance the possible step backward on POS payments.
In the end, tightening the limits on the ability to pay in cash is almost a certainty; however, at Wednesday’s government meeting, the premier said that both the €5,000 ceiling for cash payments and the €60 floor for mandatory POS payments are “common-sense measures that are not in opposition to the fight against evasion.” The willingness to lower the POS payment floor is there, but only as part of negotiations with Brussels: “The POS is not a problem for us. The principle remains the same, then we will see what happens in the negotiations with Europe. But the idea is to maintain the freedom for merchants to refuse POS payment for amounts below €60.” So, there is a possibility of revising the rule, but not without insisting that Brussels clarify the rationale for it and not without some quid pro quo.
The decision will have to be made by next week, because time is running out and there is a tangible fear at Palazzo Chigi that the process will not be done by December 31, making it necessary to resort to a provisional budget. The floor for POS payments is not the only sticking point, while the amount of funding passed by the Chamber to support the changes is set to rise from €400 million to €700 million, granting some extra breathing room to those affected. It is now certain that there will be an extension from November 24 to December 31 of the deadline for the 110% Superbonus, according to the date on the notification of the start of works, which will be accompanied by draconian measures against building managers for any misrepresentation of the actual date of the document. The solution to the main problem, that of assigning the credits to others, is much more unclear for now.
Another certainty is the extension of paid parental leave to fathers, at 80 percent of the salary, which was limited to mothers up to now; once again, with strict rules in case of abuse. Finally, there should be an increase in the minimum pension to €600, but only for certain categories and only over age 75. Some of the main items remain in doubt: the extension of the tax wedge, demanded by all the social partners, the increase in benefits for those who hire young people under 36, on which FI is insisting, and the raising of the amnesty ceiling for outstanding tax bills to €1,500 – a measure that Brussels will definitely not like.