Raise in tax revenue: public’s confidence or fiscal pressure?

In response to
the growing tax protest throughout the country, Premier Romano Prodi on Friday
argued that a boom in tax revenue demonstrated the public’s confidence in the
government and its actions. Speaking after Treasury figures showed State
coffers swelling by a projected 6% this year over the last, Prodi said that
“this means citizens are behaving responsibly and have faith in the
government”. The Treasury said revenue from income and corporate taxes
jumped 21% in January-August compared to the same period last year, and foresaw
an income of about 4 billion euros more than previously expected.
While Prodi attributed the rise to the government’s crackdown on tax evasion,
the centre right opposition linked it to an increase in taxes. Berlusconi’s
Forza Italia party said that “the government has robbed Italians of this
money by raising taxes   and is now
pretending that it is all due to the fight against  tax evasion”. The devolutionist Northern
League, which has already called for a ‘fiscal strike’ to protest against tax
raises, said that “this revenue boom triumphalism is misplaced given that
it is due entirely to an increase in fiscal pressure”.
Maurizio Gasparri, of Alleanza Nazionale, pledged to revolt against any further
tax hikes, referring to a government plan to lift the tax rate on capital gains
and bond yields from 12.5% to 20%.

The
government’s popularity has already suffered a blow by the 2007 budget, a
34.7-billion Euro package which contained extensive tax hikes and spending
cuts. Prodi defended the reforms and other tax-raising measures as essential
for straightening the country’s wobbly public accounts and meeting European
Union budget targets. He stressed that the government’s determination to
root   out tax evasion was a “battle
for civil justice”. Tax dodging continues to rage in Italy, with more than
270 billion euros of taxes going unpaid each year – the equivalent  of almost 20% of GDP. However, according to the tax office, Italians currently
carry one of the highest tax burdens in Europe. The agency said recently that
Italy’s official fiscal burden of 41-42% of GDP was far below the
“real” figure, which was above 50%.