European Commission attacks Italy’s support for cash transactions

European Commission attacks Italy’s support for cash transactions

European Commission attacks Italy’s support for cash transactions

The European Commission has warned Italy’s new right-wing government against launching plans to promote the use of cash, which Brussels says would go against Rome’s commitment to fight tax evasion.

Italian Prime Minister Giorgia Meloni, head of the arch-conservative Fratelli d’Italia, wants to raise the legal ceiling for cash transactions to €5,000, reversing a pledge by previous Italian governments to cut the limit from the current level of €2,000 to 1,000 euros from 1 January. Meloni also wants to give merchants the right to refuse to accept digital payments for transactions under €60 without fear of penalties.

However, in its assessment of Italy’s budget plans, the commission said measures to encourage the use of cash violate economic guidelines. Had the Meloni government gone along with plans, the commission said it would have reneged on previous steps taken by Rome to reduce tax evasion, a condition of receiving €200bn in EU recovery funds.

The commission said the measures “were not in line” with advice passed to Italy to “fight tax evasion . . by strengthening the mandatory use of electronic payments”.

Meloni’s first budget was seen by the EU and investors as proof of her commitment to fiscal discipline. Brussels officials view the new government’s spending and deficit-reducing plans as prudent. But they fear that cash promotion measures, seen as a populist concession to Meloni’s small business owners, could reduce tax revenues.

“The overall size of the budget is fine, its composition less so,” said a senior EU official.

Italian businesses are now obliged to accept digital payments for transactions of any value and can be fined at least €30 for refusal, a threat which infuriates small business owners.

However, Meloni has already indicated that she is willing to review her proposals on digital payments. “The threshold of 60 euros is indicative, for me it can be even lower,” she said in a recent video on social media, after protests from critics who called her proposals a step backwards.

Acknowledging that promoting electronic payments is one of the objectives of the EU-funded coronavirus recovery plan, he added, “we’ll see how that plays out”.

Meloni argued that Italy’s current low limits on cash transactions disadvantage the country compared to other European countries, many of which impose no caps on the use of cash. He also rejected the notion that increased use of cash enables and encourages tax evasion.

“The more I can legally use cash, the less I’ll have to avoid using it,” she said in a video posted to social media this week.

Meanwhile, as part of its anti-money laundering efforts, the EU Council proposed this month that the bloc impose a cap on cash transactions of €10,000 across the bloc, but the measure has yet to be accepted.

After the council’s proposal, Italy’s infrastructure minister Matteo Salvini tweeted that the EU Council had “confirmed the freedom to use your money as you wish”, with a proposed cash cap double the one proposed. from Italy.

Italy has one of the lowest rates of digital payments in the EU, although their use grew by 22% in the first half of 2022, compared to the same period last year. The average size of a digital transaction in Italy is just over 47 euros.

Further reporting by Giuliana Ricozzi in Rome

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