For those of you who pay attention to world news you’ve already heard that Italy has implemented a series of austerity measures. One of these measures I find especially egregious:
Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
What am I supposed to do if I want to buy my friend’s $5,000 vehicle? Since cash is out do I have to wait for them to get setup to accept credit and debit card transactions? Perhaps we’ll have to insert a middle-man such as an auto dealer in order to complete the transaction now. Is the legality of the transaction based on the worth of the object(s) being sold or the method of trade being accepted. If it’s based on the worth of the object(s) this becomes a big deal since all large value transactions between individuals (selling your automobile for example) will basically be illegal as most individuals are not setup to accept credit and debit cards. On the other hand if this is based on the method of trade being accepted (euros in this case) than this isn’t too big of a deal since both parties could agree to transact using something of value like gold and silver.
This austerity measure also assumes Italy’s problems have stemmed from lost tax money due to minor transactions between individuals going unreported. I can tell you right now that’s not the problem. As this isn’t the problem I’m betting money this austerity measure is being put into place so the government can keep and eye on what people are purchasing and use that data in enacting future legislation.
Well I would wager that there is a significant amount of tax dodging that is going on in Italy. If you were faced with an 18% VAT on all of your purchases you would look for ways to avoid that as well. A smarter move would probably just be to drop the VAT so people have less incentive to cheat it maybe get it down to something more reasonable like 10%, they would also see a flood of European shoppers having the cheapest Tax Rate in the EU. Of course it is possible that the EU Treaties don’t let countries drop their VAT like that I am not sure, but I suspect the other countries would be pissed if someone actually cut taxes super low there. This thing reminds me of I saw something in Louisiana recently where they are trying to ban cash for second hand purchases. I think in Italy’s case this may be the beginning of capital controls before they lock down bank accounts and drop out of the Euro since it looks like the currency union is about to fracture before year end.
You have an excellent point, I would most certainly look for ways to avoid VAT. VAT is one of the worst ideas anybody has come up with as far as promoting economic growth. When an increase in cost is added at every stage of production that “adds value” the price soon swells to astronomical amounts. Worse yet is the fact that the mount you pay in taxes for a product is hidden so to the consumer it appears as though the “evil capitalist manufacturer” is jacking up the price for the sole purpose of being greedy.
I bitch often about sales and income taxes but if the United States implemented a VAT I may very well decide it’s time to take my money and labor to another country. Getting raped financially is not my idea of a good time or something that should happen in a free society.