Interesting Austerity measure ?

I read this today too. Not sure the shaming thing will work here. I'd love an Italian's opinion on whether they think it would work. I also read they still haven't agreed the austerity budget as 600 amendments were put forward and they haven't agreed what will be changed.

Over 60% of italians would welcome it according to Il Corriere.   I prefer the plan to put tax evaders in jail - shame the limit is 3 million though - and Berlo says that this is 'socialism' - that would be the punishing of criminals or just punishing him and his mates?  The manovra is a mess- nothing to stimulate the economy, nothing immediate - all drip drip and then forgotten because there will be elections - so prepare for the next attack on Italy and manovra no 4 before Xmas.... 

I think that it could work; but they will catch small fish only. The big ones have nothing to fear. On the other hand, I agree that this is not  very constructive measure. More effective ones will be needed.

Yes Gala, you are probably right about small fry. Do you think Mr Berlusconi will be the first to publish his income?    From cynical old Fabbriche

  I don’t believe in 'fixing' money problems with money.  What is needed is a change in culture and mind set. Amazing how Italy amongst 60 others are now Libya’s ‘friend’ – incredible how many friends you have when you have oil and there are lucrative deals to be struck 

Actually, Berlusconi has always been Libya's friend!  Don' you remember how he kissed Gaddafi's hand when the man came to Italy? Follow the oil has ALWAYS been the West's policy, until the locals mess everything up by trying to throw off  the chains of tyranny...

Fabbriche, you are not a cynical but a realistic person and there is a big difference between the two positions. Anyway, here is the list of the ten richest people in Italy: http://www.famouswhy.com/List/Top_10_Italy's_Richest_People/749.html Poor Silvio is only ranked second on the list...

I've just been reading our UK papers - Daily Telegraph and Independent and apparently Signor Berlusconi has been taped making disparaging remarks about Italy. Personally I love the place and can't wait for our next trip at the end of next week to do some more sightseeing and chill out.

Just to follow on from Sebastiano - since 13 th August any payment over 2500 cannot be made in cash and must be traceable.  Over 3000 and you must send the fattura by certified email.   More paperwork for us all - but always fewer and fewer guardie di finanza to check up on it all - so it all becomes a bit pointless.  The problem with publicising tax returns is that they are full of personl info - what you pay for doctors etc, as well as how much you give to charity/the church etc - and this is against all the privacy laws.  You would have to cherry pick what you publish and that becomes a huge job of sifting information and so on.  Meanwhile the cardinals tell us that asking the church to pay their taxes is a move orchestrated by communists and freemasons to drag the church down - Perhaps I should join the masons?

13 September 2011  Italy's ruling coalition has struggled to implement austerity measures to calm the markets Italian government 'in bond buying talks with China' China's largest sovereign wealth fund is considering buying Italian assets, according to reports in the Financial Times and the Wall Street Journal. China Investment Corporation (CIC) and Italian officials have held meetings in the last month, the reports said. CIC is wholly owned by the Chinese government and has an estimated $400bn (£250bn) in assets. The news comes at a time when the cost of borrowing for the Italian government has reached record highs. "When you introduce a large buyer like China, it brings down the interest rate," Mark Young of Fitch Ratings told the BBC. "They can then fund their economic growth more easily," he added. Strategic stakes? The FT reported that Lou Jiwei, the chairman of China Investment Corporation, had met Italian finance minister Giulio Tremonti and other officials in Rome last week. It added that Italian officials had visited Beijing the week before, and negotiations had also taken place in August.  Continue reading the main story

“Start Quote

It is a natural consequence of creditor and debtor nations, one supporting the other”

Mark YoungFitch Ratings As well as buying bonds, the FT said the talks also covered investments in "strategic" Italian companies. According to the newspaper, Italian officials said further negotiations were expected to take place soon. The impact of the news on market sentiment could come as early as Tuesday when Italy issues up to 7bn euros of longer-term debt, including a new five-year bond. Italy's previous long-term sale at the end of August attracted poor demand for a new 10-year bond. Wu Xiaoling, a former deputy governor of the People's Bank of China and now a senior government official, said on Tuesday that Beijing was ready to work with Europe to boost market confidence. "We will continue to support Europe's measures in maintaining a stable euro," he told the Reuters news agency. News that China is looking at Italian assets caused US stocks to rebound in late afternoon trading on Monday, cutting their earlier losses. However, on Tuesday Asian markets had a mixed opening because many analysts questioned whether a purchase of Italian assets by China would do anything to resolve Europe's debt problems. They said there was still a danger the crisis would spread, not least because Greece was still at risk of defaulting on its debt holdings. "Europe is not just lurching from one crisis to another. It is lurching into a new one before the previous one is solved," said Makoto Noji of SMBC Nikko Securities. Creditor vs debtor Italy has a national debt of 120% of gross domestic product (GDP) and accounts for 23% of all eurozone sovereign debt. According to the International Monetary Fund, it will need to raise funds equalling as much as 20% of its GDP in 2012 to refinance its debt. On the other hand, China has been sitting on huge piles of cash, with foreign exchange reserves in excess of $3tn. Analysts said given its deep pockets, it was no surprise that countries were seeking China's help. "It is a natural consequence of creditor and debtor nations, one supporting the other," Fitch ratings' Mr Young said.

  13 September 2011 Italy pays higher interest rate to borrow money   Italy's borrowing costs have hit a new high, reflecting a continuing lack of confidence in the nation's finances. Italy raised 3.85bn euros (£3.3bn) in five-year bonds - but the interest rate rose to 5.6%, up from 4.93%. Before the fund raising, reports said that the Italian finance ministry had met delegates from China's largest sovereign wealth fund, CIC. This sparked speculation that CIC might invest some of its vast wealth in Italian assets and bonds. The European Central Bank has been buying Italian bonds, but there was no immediate disclosure on Tuesday if it had intervened in this latest auction. Peter Chatwell, a strategist at Credit Agricole, said: "Markets were positioned for a weak auction. The five-year yield of 5.6% is probably the most telling sign that issuance of new bonds into this environment is very difficult." Italy has about 1.9 trillion euros of debt and must raise about 70bn euros by the end of the year. The government will start talks in the next few days on more measures to stimulate economic growth and reduce the debt burden.

  The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

• An increase in VAT, from 20% to 21%
• A freeze on public-sector salaries until 2014
• The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
• Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
• There will be a special tax on the energy sector

The Italian president has made Mr Monti a senator for life. He was welcomed into the chamber at the start of Friday's session but then left for a meeting with President Napolitano. If the lower house completes its vote on Saturday, Mr Napolitano could accept Mr Berlusconi's resignation as early as Saturday evening. He could then formally ask Mr Monti or another candidate to form a government of technocrats. On Wednesday, the interest rate on 10-year Italian government bonds touched 7%, the rate at which Greece, Ireland and Portugal were forced to seek bailouts from the EU. An EU team has begun work in Rome, monitoring how Italy plans to cut its crushing debt burden, 120% of annual economic output (GDP). The Italian economy has grown at an average of 0.75% a year over the past 15 years. Extract -Full article here  

Analysis

Alan JohnstonBBC News, Rome All that Mario Monti has said publicly is that there is a great deal to do and there has to be an end to privilege - a reference, really, to the way the political class here is seen as getting too big a share of the national cake. The idea that politicians will have a lot of their benefits squeezed will play very well publicly, but Italy's problems go deeper than that. Everyone agrees the economy needs to be reformed, but the big question is how. If there is to be austerity, who should feel the pain most? In the street, they would tell you it needs to be the rich: the financiers, the bankers, the tax-evaders. On the other side of the debate, there are people who would say the public sector workers have had it too easy for too long - that employers must be allowed to hire and fire people more easily if business is to be given a freer hand.

In my opinion:

• An increase in VAT, from 20% to 21%

It is not a big increase; however, I think that VAT in general punishes those on small incomes. I would rather see increases in personal income tax, particularly for those on above average incomes.

• A freeze on public-sector salaries until 2014

This is what most other countries are already doing. Here again, I would diferentiate between high and low income earners.

• The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men

Nothing new here, Italy was due to change that legislation. Many other countries already do this.

• Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions

This is a good measure, providing that they will be able to monitor it. And I do not mean the "Guardia de Finanza" chasing ordinary people to check whether they have their "scontrino" for the cup of coffee they just had at the local bar....

• There will be a special tax on the energy sector

Gosh! This is a real disaster for low income people, pensioners, etc, as ultimately this tax will be paid by everyone. Italians already pay a fortune for their energy. A real worry!!!!!   

How about a planning amnesty? We could do with that!!

Sorry Gala but the €2500 cash limit is a bad idea. For example, if i want to buy something that costs more than that I will now buy it abroad and bring it over therefore not spending my money in Italy. Very short-sighted IMHO.

Sorry, Penny, but I do not see any restriction in paying for articles or services worth more than 2,500 euros. The only restriction concerns the form of payment, we will not be able to pay cash for it, but we can pay using any other means: cheque, money order, credit or debit card. The idea is to stop those cash payments which are not declared and do not pay VAT. On the other hand, I think that the VAT is not helping the economy. It may be a quick way for governments to collect money; however, it affects the purchasing capabilities of people on lower incomes. In my opinion, taxes should be collected on revenues and not on expenditure. The only exception I would make would be on alcohol, cigarettes and luxury goods, property and services. If people on average or lower incomes could have more money to spend by not paying VAT, this would help the economy as these people would be able to spend more money on many things they really need. And we know that if people are able to consume more, this would generate more production and keep the economy running. An extra 21% of purchasing power could go a long way and the government would be able to get back that many in many other ways.  

The reason is Gala that if I want to take more than €2500 out of my bank account or withdraw it from my UK bank account over the counter here in Italy (even to pay into my Italian banlk account) which I regularly do, it will now automatically get reported to the tax man. I pay all my taxes here as I should but do not want to get investigated because I regularly withdraw more than €2500. The Italian tax man can tell you to pay tax on what he thinks you should have earnt (studio settore and various other methods) and not what you actually earnt so I really do not want to be regularly reported to him. Hence I will now buy items over €2500 directly by credit card outside of Italy so as not to be reported to the taxman. Not paranoid - just sensible!

Wow! It is more complicated and subtle than what I originally thought... I can see your point, Penny.

Just reduce the amount you take out in cash from the bank by one euro to 2,499 euro instead.  Problem sorted.

I think you'll find that €2500 is OK, but €2501 is reportable. Anyway - when I bought my holiday home in Italy several years ago, all the Bankers Drafts had to be under €10.001, as these were reportable to the authorities - so things don't seem to change much. [and as for having to pay using 'transferable' Bankers Drafts - well lets not even go there!]

I shouldn't panic, the Italians are a resourceful bunch, it won't be long before someone has thought of a foolproof way to avoid paying a tax on that.....