Italy’s Meloni under fire over plan to raise cash payments cap

1:30 pm Wednesday, October 26th, 2022

By Alvise Armellini

ROME (Reuters) -Italy’s new right-wing government is planning to raise a limit on cash payments, Prime Minister Giorgia Meloni said Wednesday, amid 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.

“I confirm that we will change the cap on cash (payments)”, Meloni told the Senate before a vote of confidence on her government, standing by a pre-election pledge of her rightist bloc.

Earlier, Matteo Salvini’s League, a junior coalition ally, presented a draft bill to hike the cap to 10,000 euros from next year. It currently stands at 2,000 euros and was due to go down to 1,000 euros from next year.

Since 2010, the cap has been moved up and down several times, ranging from 1,000 to 5,000 euros.

Italy has traditionally been one of the European Union’s more cash-based economies, but the trend has changed in recent years, with card payments becoming increasingly popular since the start of the COVID-19 pandemic.

Senator Franco Mirabelli of the centre-left Democratic Party said Meloni’s plan would be a “gift” to mafia groups. “It would favour (tax) evasion as well as money laundering,” he wrote on Facebook,

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 said.

Meloni insisted there was “no correlation” between cash payments and the size of the underground economy. “There are countries that have no limits and very low (tax) evasion,” she said, mentioning Germany.

However, a Bank of Italy study from last year concluded that “raising the threshold for the use of cash from 1,000 euros to 3,000 euros, as was done in Italy in 2016 to boost spending, had the side effect of leading to a larger underground economy.”

European Commission Vice President Valdis Dombrovskis, asked in Brussels about Italy’s plans, said that caps in the EU currently range from 500 to over 10,000 euros, and noted that the Commission has proposed a top limit of 10,000 euros.

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

($1 = 0.9980 euros)

(Reporting by Giuseppe Fonte, Alvise Armellini and Angelo Amante, editing by Gavin Jones and Nick Macfie)