Revenue blitzkriegs splashed across the media have left a wake of sulky entrepreneurs and petulant car owners

WHEN FIVE officials from Italy’s internal revenue service entered the Dal Duca restaurant in Rome’s trendy Trastevere neighbourhood one night a few weeks ago, they were not there to eat. Instead, over three hours, the tax collectors interviewed the staff, looked at the books and checked out cash register receipts at the end of a busy night of dinner service.

“We’ve always had controls of various kinds, health and social insurance officials,” said Anna Leo, the restaurant’s owner. “But this was a first.” The unexpected inspection was part of an intensified, all-out war against tax evaders that Italian officials have opened on several fronts, hoping to close Italy’s $2.5 trillion (€1.91 trillion) public debt and revive a frail economy that has been buffeted by the euro crisis.

In addition to banning cash transactions, the effort has included an advertising campaign comparing tax evaders to parasites. There have been headline-grabbing raids on stores, hotels and restaurants in affluent Italian cities.For good measure, tax officials have been stopping luxury cars and asking drivers to show their licences, then using the information to pull their most recent tax returns. Through such crosschecks in 2011, the internal revenue agency verified that 2,806 owners of luxury cars had not declared enough income to afford their expensive vehicles.

These boutique blitzkriegs have been splashed across the news media, leaving a wake of sulky entrepreneurs and petulant car owners. Critics lament that Italy is being transformed into a tax police state. But there has also been a growing appreciation among many Italians that the government is deadly serious in countering what, depending on one’s point of view, is considered either a birthright or one of the chief scourges of Italian society – the failure to declare taxes.

Leo, the restaurant owner, professed not to mind. “I think what they are doing is right – we all have to pay taxes,” she said, adding that the officers had been “very polite” and had tried not to get in the way. At the same time, she said, there was a “greater sense of fear” among her colleagues, at least those who were used to slipping under the tax radar. “But even that is better,” she said. “Too many people have taken advantage of others, and that isn’t right.”

Italian officials say that an estimated $150 billion is lost each year in undeclared income. The national statistics agency estimates the underground economy at about 17.5 per cent of gross domestic product. National debt is 120 per cent of GDP.

Since prime minister Mario Monti’s government has made clamping down on tax evasion a priority, tax officials have taken to the task with gusto, emboldened by the clout of new legislation and the blessing of public opinion. In late February, Monti announced more than $15 billion had been recovered from tax evaders in 2011. The prime minister has also suggested that future recovered revenues could be used to lower tax rates of honest citizens.

There are, however, concerns about some of the means to that end. For some, the news media hype around the new measures smacks of witch-hunts and retaliations, and more than a little envy. “Fighting tax evasion is more than welcome, but let’s not end up in a populist climate that penalises those companies that bring Italy’s name around the world,” Ferrari chairman Luca Cordero di Montezemolo told reporters at the Geneva motor show, adding Ferrari owners were becoming very concerned about spot checks on high-end cars.

“I don’t like the fact that someone who owns a Ferrari is automatically considered a tax evader,” he said. Others objected to the authorities’ tactics. “Cars are already registered, so there’s no need to adopt terrorist tactics to verify ownership,” said Andrea Nicoletto, president of the 50-member Lamborghini Club Italia. The luxury car can retail for up to $475,000, though many members own much older, and less expensive, models. He, too, objected to the spot checks that have become commonplace.

Recently, financial police officers stopped more than 100 people driving luxury cars during a series of raids in the Trentino- Alto Adige region, news agency Ansa reported. The Lamborghini club’s next meeting, scheduled to take place in Bolzano in April, could be at risk because “many members don’t want to take their cars out in public anymore”.

Besides, Nicoletto added, the controls are discriminatory. “People who collect valuable art don’t have the same problems, because they’re not in the public eye,” he said in a telephone interview. Critics also expressed concern about grassroots initiatives that have sprung up in recent months, including a Facebook page where disgruntled customers can name businesses that do not issue receipts, which is against the law in Italy because it can be used to evade VAT. There is also an app designed for the same civic purpose.

“The results were surprising,” said Edoardo Serra, one of the creators of the app, which, he said, has been downloaded 50,000 times since last June.

But the app users are anonymous, raising some concerns that people could make false accusations because they cannot be held accountable.

“It’s true, occasionally people make accusations of tax evasion because they can’t get away with it themselves, at least that’s what we’ve read in some comments,” Serra said. “Sometimes it’s hard to know whether you’re dealing with civic sense or envy.”

Italy’s financial police also have set up a call centre where citizens can complain when receipts have not been issued, though in this case calls cannot be anonymous.

In spite of the seeming public support, Equitalia, the collection branch of the national revenue agency, has faced what officials described as about 250 attacks in the last year, including some with makeshift bombs.

Employees were growing fearful and inhibited, Attilio Befera, the director of the Agenzia delle Entrate, told lawmakers during a parliamentary committee meeting in late January.

In a survey in February by the research institute Demopolis, more than 80 per cent of Italians said fighting tax evasion was key to getting Italy back on track.

Rossana Vigevani, a retired schoolteacher from Milan, said she was for the controls. “Apart from tax evaders, I think that all Italians are pleased,” she said. – (New York Times service)