The European Commission has warned Italy’s new rightwing government against enacting plans to promote the use of cash, which Brussels said would run counter to Rome’s commitment to fight against tax evasion.
Italy’s prime minister Giorgia Meloni, head of the arch-conservative Brothers of Italy, wants to lift the legal ceiling for cash transactions to €5,000, reversing a pledge by previous Italian governments to cut the limit from its current level of €2,000 to €1,000 from January 1. Meloni also wants to hand merchants the right to refuse to accept digital payments for transactions below €60 without fear of penalty.
However, in its assessment of Italy’s draft budget plans, the commission said the measures to encourage the use of cash breached economic guidelines. If Meloni’s government followed through on the plans, the commission said it would constitute reneging on earlier steps taken by Rome to reduce tax evasion, a condition for receiving €200bn in EU recovery funds.
The commission said the measures were “not in line” with past advice to Italy to “fight tax evasion . . . by strengthening the compulsory use of e-payments”.
Meloni’s first budget was regarded by the EU and investors as a test of her commitment to fiscal discipline. Officials in Brussels regard the new government’s spending and deficit reduction plans as prudent. But they are worried the cash promotion measures, seen as a populist concession to Meloni’s small business supporters, could reduce tax revenues.
“The overall size of the budget is fine, its composition less so,” said a senior EU official.
Italian enterprises are now obliged to accept digital payments for transactions of any value and can be fined at least €30 for refusing — a threat that infuriates small business owners.
However, Meloni has already indicated that she may be willing to revise her proposals on digital payments. “The €60 threshold is indicative — for me it can be even lower,” she said in a recent social media video, following an outcry from critics who called her proposals a backward step.
Acknowledging that promoting electronic payments is one of the goals of the EU-funded Covid recovery plan, she added, “we’ll see how it turns out.”
Meloni has argued that Italy’s current low limits on cash transactions disadvantage the country compared to other European countries, many of which do not impose any ceiling on cash use at all. She has also rejected the idea that the greater use of cash enables and encourages tax evasion.
“The more I can legally use cash, the less I will be forced to evade using it,” she said in a video posted on social media this week.
Meanwhile, as part of its own anti-money laundering efforts, the European Council proposed this month that the EU impose a cash transaction ceiling of €10,000 throughout the bloc, but the measure has yet to be accepted.
After the council proposal, Italy’s infrastructure minister Matteo Salvini tweeted that the European Council had “confirmed the freedom to use one’s money as one wishes,’ with a proposed cash ceiling limit double what Italy has proposed.
Italy currently has one of the lowest rates of digital payment in the EU, though their use grew 22 per cent in the first half of the 2022, compared with the same period last year. The average size of a digital transaction Italy is currently just over €47.
Additional reporting by Guiliana Ricozzi in Rome
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