Ferrari Crackdown: Italy Declaring War on Tax Cheats
The war on tax cheats is an attempt to shore up $2.5 trillion of public debt.
May 22, 2012 — -- The Ferrari races through a small Italian town, accelerating around cobbled street corners. A police officer stops the car that does 0-60 in 3.5 seconds. The officer asks the driver for his license, registration – and tax registration ID.
Across Italy police are cracking down on Ferrari and Lamborghini drivers, but not because they are driving too fast. Italy, like so much of southern Europe, is drowning in debt, so police are pursuing drivers to make sure they are declaring – and therefore paying taxes on – earnings that would allow them to afford cars worth as much as half a million dollars.
The targeting is part of an ongoing war on tax cheats, an attempt to shore up $2.5 trillion of the country's public debt and change a culture that has often prided itself on avoiding taxes. Tax authorities have long carried out much-publicized checks on owners of luxury cars, yachts, even nightclubs that don't issue proper receipts. But since the unelected, technocratic government took power in November, it has made enforcing tax collections a priority.
The crackdown seems to be working and -- some say – slowly changing the tax culture. Italian officials say they have discovered more than $12 billion in unpaid taxes already this year, and have identified more than 2,000 luxury car owners who underpaid taxes.
"These people are pushed to defraud by the mirage of easy money, to allow themselves the luxuries that they would otherwise not be able to afford -- luxuries that are often the first clue" they aren't paying enough taxes, Italy's tax police said in a recent statement.
But the crackdown has triggered counterattacks. Tax collection branches of the national revenue agency have been targeted with letter-bombs and Molotov cocktails – more than 250 attacks in the last year, the agency says. One businessman held an employee of a tax office hostage for six hours at gunpoint, saying he was desperate because he couldn't afford to pay off a $1,250 debt.
Some of the attacks have been claimed by anarchists, but the violence is a sign that regular Italians are suffering as southern Europe struggles through recession after recession. Twenty-three small business owners have committed suicide this year, according to the Small Business Association, and suicides motivated by economic difficulties increased 52 percent from 2005 to 2010.
Last week, Prime Minister Mario Monti visited the tax authority's Rome headquarters and said army and intelligence officials would support police to increase security for tax collectors. He argues that rich Italians' avoiding taxes hurts the poorest Italians and so stands by the crackdown, saying tax cheats "are giving poisoned bread to their children."
Ferraris for Fiats
Police have found owners who were barely concealing cheating. One developer in Perugia who police often saw "speeding through town" in his Ferrari, Maserati or Mercedes had registered his cars in his mother's name. Police discovered he hid 7 million euros of property sales in the last three years.
Or there was the case of the plumber in Pescara who owned three homes, used 30 bank accounts and drove a Ferrari.
"It is not enough to put your big car in a relative's name to trick the inspectors," mocked the tax police in a recent statement.
Police have arrested 80 people so far and are investigating 2,000 more.