ROME: Italy’s battle against rampant tax fraud has suffered a significant setback because of a court ruling that forced out hundreds of managers at the state tax authority, putting a brake on tax inspection.
An official at Italy’s tax agency said the bureaucratic chaos caused by the March verdict could cost Italy 1.5 billion euros ($1.6 billion) this year and reverse a 10-year trend of rising returns from a relentless crackdown on tax evasion.
The court intervention not only risks denting state finances, but it could also make Prime Minister Matteo Renzi’s ambitious tax-cut plan for coming years more difficult. It has also highlighted the bureaucratic and legal hurdles that beset the country.
Backing a complaint by unions, Italy’s Constitutional Court said in March that 866 managers at the tax authority had been promoted illegally. The agency had to sideline them all, leaving it with little more than 300 active managers.
This means, for example, that in Italy’s wealthiest region, Lombardy, which accounts for 40 percent of all cash recovered from Italian tax inspections, there are just four managers.
Not one of them has the authority to sign off on any of the checks carried out by inspectors, meaning any evidence of wrong-doing uncovered cannot be acted on.
In all of Italy, there are only five fully fledged directors in 107 provincial offices.
“In some cases, the situation is, quite literally, unmanageable,” Rossella Orlandi, the head of the tax agency, told parliament earlier this month, urging the government to sort out the mess as soon as possible.
EXAM
As an initial step, Renzi plans to introduce a decree next week that will enable the agency to hire some 570 managers on a temporary basis before organising public service exams next year to fill the posts on a permanent basis.
The tax agency had previously filled managerial positions via internal promotions. “We thought that merit should be rewarded,” the agency official said.
However, the court said senior posts should be decided by public exams.
The Economy Ministry estimates that tax evasion costs Italy around 91 billion euros a year, equal to about six percent of national output. This has hindered efforts to improve struggling state finances and cut the debt mountain.
However, the tax agency says it has grown more efficient in beating the fraudsters, raising some 14.2 billion euros in 2014 from tax evasion against just 2.1 billion in 2004. The agency was hoping to rake in a further 14 billion euros this year.
