Cash and Pnrr, that’s why the clash with the EU does not exist
What people say and what they don't say about cash caps and Pnrr. Giuseppe Liturri's analysis
On November 29, the newspaper La Stampa carried the headline on its front page “ Cash and PNRR, clash with the EU ” . According to reports from the Turin newspaper, in Brussels they believe that the provision contained in article 69 of the budget bill – which raises the threshold for triggering penalties for non-acceptance of credit cards from zero to €60 and leads to €5,000 the threshold for cash payments – “ is in contrast with the commitments made by Italy under the Pnrr agreement: «It goes in the opposite direction to that indicated by the EU recommendations» explains a European source .
Furthermore, it is argued that " The recommendations for 2019 are part of the commitments signed to obtain funds from the Pnrr and their respect is essential in order not to have problems with payment requests " and that " if Italy is not offered a way out or it will not be possible to find a different interpretation of the recommendations attached to the Pnrr, the executive has already made it known that it will renounce the provision ”.
None of these statements convinces us and is confirmed by the acts relating to the PNRR, as we will demonstrate below.
Let's start with the alleged scandal stone. Starting from 30 June and until today, the non-acceptance of electronic payment instruments entails a fine of €30 to which is added 4% of the refused transaction. The government simply intervenes to remedy, however modestly, an excessive penalty, which would see the operator punished with 30 € also for the non-acceptance of the credit card to pay for a coffee. This " in order to ensure proportionality between the amount of the sanction that can be imposed (in any case not less than 30 euros) and the amount of the payment refused and, on the other hand, to take into account the liquidity crisis and the cost increases production, management and operations, produced by economic operators from inflation and the increase in the cost of energy products” as stated in the explanatory report to the law under discussion. A reasoning based on pure common sense, to avoid merchants paying fixed commissions on receipts of modest value and which we do not see how it could unleash the appetites of hordes of alleged tax evaders, given the threshold set at €60. It truly escapes any economic logic to state that such a modest intervention can counteract an overall strategy to combat tax evasion which is based on much more solid foundations and tools, as we will see later.
This argument would already be sufficient to declare the matter of dispute ceased, but it is good to take the opportunity to highlight the confusion and the objective imprecision with which the subject is treated.
It is true that in the 2019 Country Recommendations we are asked to " counter tax evasion, in particular in the form of omitted invoicing, by enhancing mandatory electronic payments also by lowering the legal limits for cash payments ".
But compliance with them ( explaining how the Recovery and Resilience Plan contributes to effectively addressing all or a significant subset of the challenges, identified in the relevant Country Specific Recommendations, requests Article 18 of Regulation 241/2021) only as one of the many parameters for the overall evaluation of the PNRR. Among other things, it was not even required that all the "challenges" of the Recommendations be addressed.
In this regard, the Draghi government in the PNRR responded to the request, explaining that " the activity to combat tax evasion continues and, net of the adverse effects of the epidemic crisis on the revenue recovery activity, has produced positive results also in the 2020. According to the latest Report on the subject, the tax gap in 2018 was reduced by 5 billion, with particularly significant progress as regards VAT revenues 16. In the last two years, the expansion of the compulsory nature of electronic invoicing and the digital transmission of fees ('electronic receipts') have led to further increases in revenue. The diffusion of electronic payments was promoted with the “Italia Cashless” Plan, through the reduction of the maximum limit for the use of cash (from 3,000 to 2,000 euros from July 2020 and to 1,000 euros from January 2022 ”.
And that was enough for the Commission to approve the plan. Because in Brussels it is pressing to obtain the reduction of tax evasion and the electronic payment tool is only one of those recommended for this purpose. Achieving that goal complies with the recommendations. We must not confuse the objective with the tool which – admitted and not granted that it is effective – is not the only one available. Furthermore, among the tools, the threshold for penalties for non-use of the POS never appears.
Demonstrating the Commission's attention to the objective (and not to the instrument) is that among the approximately 500 objectives and reforms that affect the disbursement of the ten six-monthly installments, it is expected that the propensity for the gap – a measure that estimates the propensity to evade, by comparing the tax gap, i.e. the difference between theoretical revenue and actual revenue, to theoretical revenue – falling by 5% by 2023 and by 15% by 2024, compared to the basic figure for 2019. Considering the propensity for the 2018 gap equal to 19.6% (2019 will be available within a few weeks), it is a matter of falling to 18.6% by 2023 and 16.7% by 2024.
When the Commission wanted to set limits on tax evasion, it did so. In fact, various six-monthly deadlines of the PNRR contain objectives related to the increase of "letters of compliance" (the invitations to comply with taxpayers suspected of irregularities), the decrease in the number of false positives and the increase in the resulting revenue, which should increase by 30% compared to that of 2019.
Furthermore, failure to comply with country recommendations – which in any case does not exist – does not create “ problems in connection with payment requests” , because the latter are rigidly linked to compliance with objectives and targets in which country recommendations do not appear at all. There are no " recommendations attached to the PNRR " to be respected. Or rather, there are only over 500 goals and objectives in which there is no trace of POS obligations, related penalties and cash limits.
Finally – as the Commission is well aware – the most important results on the tax evasion front were achieved in Italy after 2017 , when the VAT tax gap (the most evaded tax) suddenly fell by 4 percentage points, without that the threshold for cash payments has not been touched at all. That result was simply the effect of the introduction by the Renzi government of the obligation to communicate VAT data on a quarterly basis (the so-called spend meter), in the wake of which the electronic invoice then arrived (an almost real-time spend meter that hardly added to the effectiveness of its forerunner) and the electronic receipt. Those are the rules that have reduced tax evasion.
Not the change in the payment threshold which – lowered or increased by a few thousand euros – has never produced tangible effects on the tax gap. Discussing the relationship between cash and evasion (which exists) is misleading because we need to look at the relationship between threshold variation and evasion (which does not exist).
This would be enough to put an immediate end to any cloying and unfounded discussion that appears to have only the aim of exploiting – only to create friction between Rome and Brussels – pure common sense measures adopted by the government.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/contante-e-pnrr-ecco-perche-lo-scontro-con-lue-non-esiste/ on Tue, 29 Nov 2022 19:03:27 +0000.