New Income Assessment Mechanism

The new “redditometro” will be ready by the end of October. Accountants: “Sector studies could become tool of repression”

Fighting tax evasion “is a war” and “I have to convince myself that we are not alone”. Attilio Befera, director of the national tax office, was speaking to the finance committee of the Chamber of Deputies. Parliamentarians pressed him on the usual issue – the Equitalia collection agency – and the severity of tax inspections. Mr Befera was forced onto the back foot: “Since I became director, we have recovered more than €40 billion in evaded taxes. Listening to you, I get the impression that we took the money by harassing honest taxpayers. I do not believe that is the reality”. No, it’s war and the new assessment mechanism is one of the battles. “We’re working on it and shortly I hope” to have it available, said Mr Befera yesterday. “I prefer to take things slowly and have a more effective instrument. We are preparing two assessment mechanisms, one for advance selection and the other for control purposes”. The two-stage assessment will give taxpayers the opportunity to demonstrate that their outgoings are compatible with their declared income before any inspection commences.

But almost a year after the scheme was presented, it is still being trialled. The mechanism will be used to winkle out tax evaders by comparing declared income with lifestyle, as revealed by a series of indicators. This means not just boats or luxury cars but also outgoings for home helps, mobile phones, children’s nursery or university fees and so on down to gymnasium memberships, vet’s bills and donations to not-for-profit organisations. In all there are a hundred indicators, divided into seven broad categories, which map out the taxpayer’s spending power and estimate “presumed” income. If the presumed income is too far below the amount declared, the tax authorities will be able to order an inspection.

The system was presented for the first time on 25 October last year. It was due to be trialled for a few months and be ready for June. However, a number of questions remain to be answered, such as the weightings to be assigned to the hundred items and how much lower than the income declared the taxpayer’s lifestyle has to be in order to trigger an inspection. The problems, however, are not just technical. This is also a political issue. Some view the new mechanism as potentially invasive. In other words, the fear is that the assessment mechanism could become a sector study applied to 22 million households and 50 million taxpayers. Expenses in the categories sampled will play a part in calculating income but this will then be multiplied by a coefficient based on geographical location and household. In a nutshell, the income of someone who purchases a car in a low-to-middle income region will be weighted more heavily than that of another taxpayer who buys the same vehicle in a higher-income region. It will also be necessary to calculate household member numbers for a total of 55 homogeneous groups which will generate the final calculation.

Claudio Siciliotti, chair of the accountants’ professional organisation, said: “Conceptually, this mechanism is fine but there is a concrete risk that the ‘redditometro’ could become automatic, acquiring legal value and reversing the burden of proof onto the taxpayer. It is true that on several occasions Mr Befera has, laudably, pointed out that the mechanism is only a tool that will flag up the highest-risk situations and trigger more detailed inspections. But the fear is that in future its use could escalate. This prospective concern derives primarily from the use of coefficients, the same coefficients that created so many problems in sector studies. This time, we are not talking about five million VAT registrations. We are talking about 50 million taxpayers”.

The new mechanism will also allow taxpayers to check for themselves empirically. A software program will be made available to accountants and individual taxpayers so they can insert their data and verify whether the income they intend to declare complies with the parameters, or whether it would set alarm bells ringing in the tax office. In which case, they might want to revise their declaration.

English translation by Giles Watson

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