Tax dodgers' dolce vita: Patricia Clough in Rome describes the Italians' other national pastime

THE KING of the tax-dodgers, until he went bankrupt, was Renzo Sosso, a Turin scrap-metal merchant alleged to have done the state out of 25bn lire ( pounds 11m). Now the fiscal police may have a new record-holder: a businessman who, in three years, is suspected of having dodged 121bn lire in tax.

At the bottom of the scale is Olga de Francescantonio, a 14- year-old fined because she walked out of a shop without a receipt for a 34p chocolate bar.

In between marches an army of Italians who wittingly or unwittingly - but mostly very wittingly - defraud the state. But for this fiddling, experts believe, Italy would not have a colossal state deficit, would not be enduring drastic cuts in pensions and health care, and might not have had to devalue the lira last week.

'If it weren't for tax evasion, I believe Italy's annual budget would be balanced,' said Salvatore Tutino, of the Institute of Studies on Economic Planning. If everyone paid what they should, it would come to at least 70 trillion lire (pounds 32bn) a year, or almost half the deficit.

No one was surprised, therefore, when the medicine the government prescribed last week to put its finances in order included efforts to thwart tax-dodgers. It will be more surprising if they work, and downright miraculous if they solve the basic problem: the Italian mentality. 'The fundamental difference between Britain and Italy is that here taxes are something absolutely to be avoided,' Mr Tutino said. 'It is not seen as a crime: the state is regarded as an enemy. We envy and admire people who manage to do it on a large scale. It is like a national sport.'

Another difference is that they get away with it. Statistics show that the taxmen check on each Italian about once every 100 years. The huge Finance Ministry employs 150,000 people, including 40,000 fiscal police, the Guardia di Finanza, but only a few thousand actually chase evaders. Of the 22 million tax returns filed every year, a mere 1 per cent are thoroughly checked. Taxpayers who can hide a part of their income will almost certainly do so.

If they are caught - and when they crack down, the authorities can be extremely tough - they can fight the charge through six courts. The process lasts up to 15 years. Evidently, it can pay, said Mr Tutino, for the sum and fines are usually reduced. 'Your average Italian just hides among the other 22 million, thinking 'They will not get me'. The fear of being found out is lacking. We need to have this fear.'

After 25 years of delays, parliament passed a law last October to make Italy's tax system more efficient. A year later, it is still not in effect: the government has not appointed the directors to run it. So the official contract to rent a flat declares only a part of the real rent to pay. If you ask a plumber for a receipt, his fee rises by 50 per cent. Your doctor or lawyer won't give you a receipt either, and if you want to keep on good terms, you don't ask.

By law you need a receipt for a restaurant meal or a purchase from a shop. You must take it with you, or you and the proprietor can be fined. But checks are rare. You can be sure that restaurant owners, hairdressers and lawyers declare incomes well below what they pay their staff.

Tax-dodging is easier for some than others. Factory workers, civil servants and white-collar workers have income tax deducted at source. Unless they moonlight or have a business on the side, they have little scope for evasion.

One problem is Italy's five million self-employed people: craftsmen, shopkeepers, dentists, lawyers, consultants. The government has imposed a 'minimum tax' on such people, equivalent to that paid by the average employee. But experts doubt it would survive a challenge in the courts.

Another problem is the very rich. Now their fast cars, game reserves, aircraft and yachts will be taxed, though many will doubtless declare that these belong to their firms. The government is sharpening up an instrument called the redditometro, or income-meter, whereby people's income is estimated on the basis of their cars, homes, servants and other visible signs of wealth.

Companies will pay higher taxes, but there were no measures last week to catch large businesses which know how to disguise tax-dodging within complex transactions. One company suspected of such evasion is a state-owned bank. The problem is not likely to go away, Mr Tutino believes, until Italian attitudes change. 'People have to get it into their heads that it isn't the state they are cheating. They are cheating each other.'

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