In the Republic of Yachts

by TOM GILL

The rich don’t pay taxes. Everybody knows that. Especially in Italy, where governments have maintained firmly on the side of the 1%.

So no surprises then that new levies on large cylinder cars, yachts and private jets, introduced in December by the premier Mario Monti, have been a bit of a flop.

The tasse sul lusso were designed to placate the 99% who over the past 18 months have been forced fed with a poisonous array of austerity medicine including tax hikes and cuts to pensions, welfare and public services.

In particular the taxes on luxury were a ploy by the unelected millionaire premier to head off calls for a much more comprehensive wealth tax, or patrimoniale, in a country where private wealth stands at 8.6 trillion euros, according to the Bank of Italy, or more than four times the country’s public debt mountain of around two trillion euros.

If the top 50% richest were taxed at a rate of 2%, that could raise more than 100 billion euros, plenty to fix Italy’s dire public finances at a stroke with plenty left over to slash the near 11% unemployment rate, reverse swinging cuts to public services and lift the zombie economy out of recession.)

But even if the top 1% – the 240 000 Italian families that own 13% of Italy’s wealth, or one trillion euros, according to the Bank of Italy – were taxed, as in France, at a rate of 0.5% (the lower end of a wealth tax that rises to 1.8%), that would yield a very respectable 5 billion-plus euros a year.

But premier Monti, a former European Commissioner and member of the Bilderberg plutocrats club, wasn’t about to do that to his friends in the Italian and global elite. Hence his symbolic swipe at their ostentatious life-style.

To be sure it must have been entertaining to see some of the on-the-spot tax inspections that began in March in Cortina d’Ampezzo, a fashionable ski resort where many owners of Ferraris, Maseratis and Lamborghinis declared incomes of less than 24,000 euros a year.

Or this summer, when Italian tax police turned up at quaysides unannounced, boarding yachts and checking owners’ details against their tax files. In one of their first tax raids in April in the southern port of Bari inspectors found yachts owned by people who declared almost no income. One of the most shameless cases was a 1.2 million-euro yacht whose owner had never filed a tax return.

But the tasse sul lusso haven’t delivered on expectations, according to financial daily IlSole24ore.

They were supposed to have raised 387 million euros for the taxman. Instead he’s received just a quarter of that, or 92 million euros.

The biggest tax dodgers have been owners of the yachts of over 10 metres in length. By 31 May they should have paid a total of 155 million euros. Instead they coughed up just 23 million euros. One reason was a technical loophole taylor-made for high net worth individuals and their expensive accountants.

Originally the tax on boats was to be paid by anyone docking their yacht in Italian waters. The tax would have been applied on a sliding scale, reaching around 22,000 euros a month for a superyacht over 70 metres. But in March parliament passed an amendment exempting foreign owners – among them a wave of Russian oligarchs with their billions pillaged from their state and less fortunate compatriots –  following heavy lobbying by their friends in maritime businesses and associations.

Nevertheless, the charges still applied to Italian owners of boats. So what do you do if you are one of these? Nothing could be easier for a deep pocketed Italian with access to the best legal and financial advice money can buy than to change the ownership of the boat, arranging for it to be transferred to an obliging non-resident. That way the ports have been full, but the state coffers still empty.

The Treasury hasn’t done much better with the owners of aircraft and helicopters. By July 31 they had only paid 2% of the expected tax revenues. In this case, the circular on the implementation of the tax levy was conveniently late, and the date of payment is variable. So, later this year perhaps a bit more spare change from the pockets of the super-rich may yet get to the Italian finance ministry in Rome.

Despite headlines suggesting a reign terror waged against the elite by the tax authorities, Italy’s 1% can rest easy. La Dolce Vita rolls on…

Tom Gill is a business and political journalist in the UK and Italy. He currently writes on European matters from a radical left perspective at www.revolting-europe.com.

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Tom Gill edits Revolting Europe.

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