Cash ceiling: Meloni’s plans, what happens in EU countries, ECB and Bank of Italy reports
How will the cash ceiling change in Italy? What do the Bank of Italy and the European Central Bank say? And what are the ceilings in force in other European countries? Facts, numbers and insights after the words of the Prime Minister, Giorgia Meloni in the Senate
The Meloni government will "put a hand" on the cash ceiling. This was confirmed by Prime Minister Giorgia Meloni in her speech in the Senate on the occasion of the vote of confidence . To support her thesis, also present in the electoral program of the Brothers of Italy, Giorgia Meloni relies on the words of former economy minister Pier Carlo Padoan and the ECB. The economic-financial newspaper Sole 24 Ore today speculates that the executive is moving towards a ceiling of 3 thousand euros.
WHAT IS THE CASH CAP
But what is the " cash ceiling "? With this measure, governments set a limit above which it is not possible to carry out transactions in cash. Limitations on the use of cash have existed in Italy since 1991, when the lira was still in force. Since then, the threshold has been changed on numerous occasions by different governments. The Conte II government, with the "tax decree", has foreseen a reduction progression from 3,000 to 2,000 euros starting from 1 July 2020, and then to 1,000 euros starting from 1 January 2022.
MELONI QUOTES PADOAN
“I will say it clearly, there is no correlation between the intensity of the cash limit and the spread of the underground economy. There are countries where the limit is not there and evasion is very low. Do you agree? No? These are the words of Pier Carlo Padoan , minister of the economy of the Renzi government and of the Gentiloni government ". This is how Giorgia Meloni introduces the issue of the cash ceiling, making her the words of a political opponent. These words were actually uttered by the former minister Padoan in 2015 when, as minister of the Renzi government, he raised the threshold from one thousand to 3 thousand euros (the Monti government had brought it to just one thousand euros).
THE REVERSE OF PADOAN
The premier, however, did not recall that Padoan himself, some time later, in 2019, publicly returned to that choice , making self-criticism. “It was a mistake, and I was against it”, the current president of Unicredit said to Agorà on Rai 3. "I have said many things to the Prime Minister and this too – added Padoan speaking of Renzi – I can say it now after some time".
LA PREMIER APPLIES TO THE WORDS OF THE ECB
Giorgia Meloni, to support her thesis, also relies on the words of the ECB. “The only legal tender currency in Italy and in Europe are paper banknotes issued by the ECB. Electronic money is not legal tender. It is no coincidence that the ECB has repeatedly reminded left-wing governments on the issue of the limit to the use of cash which, according to the ECB, penalizes the poorest ”.
THE LETTER FROM THE ECB REPRESENTING THE GOVERNMENT CONTE II
In this passage, the premier cites a letter signed by Yves Mersch , vice president of the Supervisory Council of the ECB, sent to our country on 13 December 2019. The letter was addressed to the presidents of the Chamber and Senate, Roberto Fico and Elisabetta Casellati, and to the minister of the Economy Roberto Gualtieri. In that letter, the European Central Bank complained that it had not been consulted by the Italian government before the introduction of the cash cap . “The ECB concludes that the legislative process for converting the decree-law into law is at an advanced stage. Nonetheless, the ECB asks to be consulted by virtue of its advisory competence under the TFEU ”. In addition, the Central Bank stresses that Member States should consult the ECB "in time for the authority that draws up the draft legislative provisions takes into account the opinion of the ECB before adopting the decision on the merits". In short, a pull of the ears to the Conte government.
WHAT THE ECB SAID ABOUT THE CASH CAP
The Institute led by Christine Lagarde did not express itself only on the form but also on the merits of the measure adopted (the lowering of the cash ceiling to 1000 euros). In the letter from the ECB, as mentioned some time ago byStartmag , it is emphasized that cash is the "legal currency" and this serves to distinguish the currency issued by the European Central Bank from the so-called "bank money", which is a form of private money, issued by commercial banks and accepted by all because it can be converted into legal currency . Unlike the ECB, commercial banks offer households and businesses payment instruments, electronic or otherwise, such as wire transfers, checks and cards, for which a commission must be paid. For this reason, the ECB had invited the Italian authorities to "carefully check" the availability of alternative instruments to cash "in all levels of society, at costs comparable to payments in cash".
THE DATA ON THE TAX GAP
The tax gap data also confirms the ECB's thesis, which decreased from 106 billion in 2015 to 103 in 2018. As the analyst Giuseppe Litturi recalled, "Much of the merit of this decline is attributable to the improvement in data relating to VAT, a tax that is considered more subject to the risk of evasion as a result of the widespread use of cash . But which in its progress shows that it has no correlation with the limits that have occurred over time. Despite a limit on the use of cash set at € 3,000, a miracle occurred between 2017 and 2019. In fact, the propensity for the VAT gap, equal to 27% in 2017, fell in 2018 to 23.4% and in 2019 to 19.9%. In absolute figures, a decline of 4.2 billion in 2018 and 5 billion in 2019 ".
THE LIMITATION ON CASH TO FIGHT LAUNDERING
The only limitation that the ECB considers acceptable in the use of cash concerns payments of high amounts, “which expose them to the danger of money laundering and terrorist financing” , as indicated by a directive of the European Parliament and the EU Council. In this case, checks on customers for payments equal to or greater than ten thousand euros are justified. On the other hand, extending these controls to the entire population, as if everyone were potential criminals or terrorists, is not acceptable.
WHAT THE REPORT FROM THE BANCA D'ITALIA STUDY OFFICE SAYS
If the controversial charge that the issue carries with it is certain, the link between unitary limits on cash payments and the drive towards tax evasion is in fact more uncertain in the economic literature. In summary, it can be said that there is no proof of this connection, but there are some important clues, Il Sole 24 Ore stressed today. Like those listed in the study published in October 2021 by Bankitalia with the evocative title « Pecunia olet », according to which «an increase in the share of cash transactions would determine, all things being equal, an increase in the incidence of the underground economy … The methodologies adopted have some limitations – warned the study relaunched yesterday by Senator Dem Antonio Misiani – but the work shows that restrictions on the use of cash can be effective in combating tax evasion ».
THE SETTING OF THE EUROPEAN COMMISSION
Responding to a question on the League's proposal to raise the cash threshold to 10,000 euros, Dombrovskis recalled that the EU Commission has proposed “a European ceiling on cash payments but an agreement on the text has not yet been reached. So the Member States are free to decide for themselves. ' However, he added that "the Commission would prefer lower limits to cash payments". The Commissioner for Financial Services, the Irish Mairead McGuinness, next to him on the stage, specified that "in our proposal on anti-money laundering, the proposed limit on cash is 10 thousand euros, but there are different visions around the table and the proposal is currently under discussion by the co-legislators. Let's see how the situation will evolve ».
ROOFS IN OTHER EUROPEAN COUNTRIES
But what happens in the other European countries? What are the other cash caps. Here is the map according to today's Corriere della Sera: "Sensitivities within the Commission are as diverse as those between Member States and the result is contained in the package (two regulations, a directive and the revision of a regulation) presented by Commission on 20 July 2021 to strengthen EU rules on anti-money laundering and countering the financing of terrorism, which includes a limit of 10 thousand euros on the use of cash and the creation of a new European authority for the fight against money laundering. money (which Italy would like to host). "The roofs vary from country to country, ranging from 500 euros in Greece to over 10 thousand euros, with some countries that don't even have a roof," Dombrovskis explained yesterday. Nine Member States have no limit: Germany, the Netherlands, Luxembourg, Austria, Ireland, Estonia, Finland, Hungary and Cyprus. Croatia has a ceiling of 15 thousand euros. The Czech Republic of 10 thousand. France, Spain and Sweden of one thousand euros. Latvia, from which Dombrovskis comes, of 7,200 euros ”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/tetto-al-contante-meloni-bce-e-banca-ditalia/ on Thu, 27 Oct 2022 08:38:55 +0000.