Italy's new govt under fire over plan to raise cap on cash payments

© Reuters. FILE PHOTO: A man uses cash to pay for items while shopping in Milan, Italy, October 2, 2020. Picture taken October 2, 2020. REUTERS/Flavio Lo Scalzo

ROME (Reuters) – Italy’s new right-wing government is planning to raise a limit on cash payments, a senior coalition figure said Wednesday, drawing opposition complaints that the move would benefit tax cheats and money launderers.

Tax dodging is a chronic problem in Italy, with more than 100 billion euros ($100.47 billion) evaded per year, according to Treasury data. In 2019, some 18.5% of taxes due were evaded.

Cash is harder to trace compared to electronic payments, so it is more likely to be used for illicit purposes. Yet forcing people to use credit cards is unpopular in some quarters, ostensibly for reasons of freedom and privacy.

“Increasing the cap on cash payments is in our manifesto and we will do it in the first budget law,” Giovanbattista Fazzolari, a close aide of Prime Minister Giorgia Meloni, told reporters.

Fazzolari, a senator from Meloni’s Brothers of Italy party, spoke after Matteo Salvini’s League, a junior ally, presented a draft bill to hike the cap from the current 2,000 euros to 10,000 euros.

The bill would be a “gift” to mafia groups as “it would make it harder to follow money flows and would favour (tax) evasion as well as money laundering”, senator Franco Mirabelli of the centre-left Democratic Party wrote on Facebook (NASDAQ:).

Giuseppe Conte, a former premier and leader of the left-leaning opposition Five Star Movement, also protested.

“We don’t want to favour crime and corruption. We are instead concerned with helping … the majority of Italians, ordinary people. Those who do not normally go around with 10,000 euros in cash in their pocket,” he wrote on Facebook.

In their manifesto, the right-wing parties that won last month’s general election pledge to raise the cap on cash, “bringing it into line with the European Union average”.

Some countries do not have a cap at all, and the manifesto did not say what this European average was.

European Commission Vice President Valdis Dombrovskis said on Wednesday that caps in the EU currently range from 500 to more than 10,000 euros, and noted that the Commission has proposed a top limit of 10,000 euros.

He also said at a news conference in Brussels he would like to see “smaller cash payment limits”.

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