Public Spending Problems

Bulgaria, Croatia, France, Portugal, and Italy are now facing the anger of the European Union. Each country was said to have violated the European Union’s rules for public spending. This announcement was made by the European Commission, which is the executive branch of the European Union. The European Commission will now keep a closer eye on each of those countries’ spending habits (The Local – Italy, 1).

Italy’s violations stem from two main areas. First, the Italian government has a very high level of debt. Second, high long-term unemployment figures will stymie future economic growth. Similar to the countries listed previously, Italy could face punitive action from and penalties levied out by the European Commission. Valdis Dombrovskis, the Vice-President of the European Commission, recently stated that countries which failed to improve their public spending practices “can be put in the corrective arm at any moment” (The Local – Italy, 1).

According to the European Commission’s website, the corrective arm is used to make members of the European Union conform to the Stability and Growth Pact. This pact establishes rules that members must follow to ensure logical and coordinated public financial policies in the European Union (European Commission, 1). Furthermore, countries with budget deficits must follow the Excessive Deficit Procedure. This requires member nations to limit their public deficits to “3% of deficit to GDP” and total public debt to “60% of debt to GDP” (European Commission, 1). It remains to be seen if Italy can follow through on the European Commission’s potential punishments. Team Mint Condition will keep our readers informed on any more announcements from the European Commission regarding Italy’s violation of the European Union’s rules for public spending.

Bibliography

“EU slams Italy for spending ‘imbalances’.” The Local (Italy). 08 March

2016. Web.

“The Corrective Arm.” European Commission. Web.

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Tax Evasion -Italy’s Fight with Itself

The Italian government has stepped up its efforts to punish individuals who are defrauding the government over taxes. Previously, in 2014, the national tax agency recovered from €14.2 billion from those involved in tax evasion. For 2015, the agency recovered a new record of €14.9 billion in unpaid taxes. Pier Carlo Padoan, Italy’s Minister of Economy and Finances, estimates that the money recovered has quadrupled in size since the start of this plan nine years ago (The Local – Italy, 1). Despite these recent successes, the amount of recovered taxes still pales in comparison Italy’s widespread issue of tax evasion.

As of last year, only three-hundred and fifteen thousand Italians were offered the chance to fix errors in their annual tax returns. Only half of this group chose to make changes with the incentive of only being liable for reduced financial penalties. This led to a recovery of €250 million, even though the government approximated that the country’s total losses from tax evasion reached €90 billion annually. To note, this value was lower than the organization Confindustria’s estimate of €122 billion annually (The Local – Italy, 1). Experts believe that this amount is equal to 7.5 percent of Italy’s GDP.

Regardless of the estimated value, close to half of this amount comes from non-payments of value-added taxes. Also, a third of the total amount comes from non-payments of payroll taxes (The Local – Italy, 1). This bleak reality will not help Italy’s national debt problems any time soon. Recently released figures show that the national debt has increased to 132.6% of annual output at the end of 2015. Team Mint Condition will keep our readers posted on any updates regarding tax recovery and national debt levels in Italy.

Bibliography

Italy announces record haul from tax fraud crackdown.The Local (Italy). 01 March

2016.