(MENAFN - Jordan Times) Italian finance police recovered six billion euros (7.9 billion) in unpaid taxes in the first four months of the year and snared more than 2,000 people in a drive to plug a hole in Rome's finances.
"The biggest peaks in evasion were in the wholesale and retail sector [almost 25 per cent of the total], the construction business, the manufacturing business... and housing and catering industries," a police statement pointed out.
Tax evaders "were living the good life at the expense of businesses that respect the rules... flaunting powerful cars, dream villas and riches accumulated over years of dishonesty, while using services they did not pay for," it said.
Among the businesses caught were a ski resort in the Aosta Valley, a wedding photography company in Venice, cabaret theatres and a bowling centre in Rome, as well as a hotel owner in Grado who said he "forgot" to pay taxes.
A renowned cake shop in Reggio Calabria failed to declare an income of 400,000 euros over two years and used black-market labour, the police indicated.
A man in Avellino near Naples was found by police to be running a car dealership out of his house, including a showroom in his front garden.
One woman nabbed by police had no declared income but went around in two Porsches, owned a "Hollywood-like villa" and went on "super-luxury holidays", the police said, adding that she in fact secretly worked as a consultant.
Separately, Italian banks are launching cheap current accounts for low-income households and pensioners as a government crackdown on tax evasion limits the amount of payments that can be made in cash.
Prime Minister Mario Monti's technocrat government has introduced a 1,000 euro ceiling for all cash transactions in a move to curb under-the-counter payments in a country where dentists, masons and plumbers often offer discounts for bills settled in cash.
Tax evasion in Italy is worth an estimated 120 billion euros a year. Italian Banking Association (ABI) estimates that 850,000 pensioners in Italy do not have a bank account.
An estimated 850,000 pensioners in Italy do not have a bank account according to the country's banking association.
The government's move - flagged some weeks ago and formally launched on Tuesday - has caused an outcry among low-earning Italians who are now being forced to open a bank account to receive payments above the 1,000 euro limit.
At the request of the government, banks are now offering low-cost current accounts to pensioners with a monthly income of up to 1,500 euros and households with a gross annual income of roughly up to 23,000 euros.
The initiative was presented in Rome by Bank of Italy, Treasury, and ABI official.
Monti's government has launched a wide-ranging crackdown on tax evasion as Italy struggles under a vast debt mountain.
Monti also declared this month that reviving economic growth now had to take priority over belt tightening that could plunge the country deeper into recession.
The prime minister delayed by a year his technocrat government's goal of balancing the budget in 2013.
"Everything, everything, everything that we are doing now is aimed towards helping growth," Monti told a news conference.
Monti's strategy contrasts with those of other eurozone governments that plan more tough austerity to reduce their deficits.
His Cabinet approved new economic targets projecting a much deeper recession than originally forecast and raising the deficit goals from 2012 until 2014, when the government now aims to balance the budget.
Investors' believe that Italy's main problem is its chronically weak economy, not fiscal slippage.
Italy's budget deficit is one of the lowest in the eurozone as a proportion of output, whereas Spain's is one of the highest and its new Prime Minister Mariano Rajoy has yet to earn the levels of investors' confidence that Monti enjoys.
Markets have been tougher on Spain, which last month raised its deficit target for this year, though some economists say investors are in fact also more concerned about the effects of more austerity being imposed on the Spanish economy.
Italy's new forecasts raise the 2012 deficit target marginally to 1.7 per cent of gross domestic product (GDP) from 1.6 per cent, while the 2013 goal is raised to 0.5 per cent from 0.1 per cent. An almost balanced budget, with a 0.1 per cent deficit, is now targeted in 2014.
International bodies and Italy's European Union (EU) partners have remained fully supportive of Monti even as it became increasingly clear that he was unlikely to balance the budget next year as targeted.
The International Monetary Fund said Italy would not balance its budget before 2017 but urged Monti not to adopt more austerity measures that would weaken an economy it forecast would contract this year by a hefty 1.9 per cent.
US Treasury Secretary Timothy Geithner also said that debt-stricken European nations should avoid moving too sharply with immediate budget cuts and higher taxes.
"It's very important to get that balance right between... growth and austerity," he told an event at the Brookings Institution. Geithner called for "gradually phased in medium-term plans for reform".
"To try to do it all up front, the risk is ... you're undermining the prospects for some stability in growth," he said.
Monti said the new target was in line with the requirements of the EU's recently approved Fiscal Compact, which says that deficits should be adjusted for the business cycle, though it is not yet in force.
After factoring in the effects of recession, Italy will post a budget surplus of 0.6 per cent of GDP in 2013, Monti said, emphasising the damage that recession was inflicting on southern European countries.
Banca Intesa said in a note to clients that the deficit slippage was not only due to the weaker economic outlook, but also "the only partial effectiveness of some of [the government's] austerity measures".
The bank said the deficit goal was being revised up even though a fall in bond yields since Italy set its previous targets in December would save it about 14 billion euros this year.
The economy is forecast to contract 1.2 per cent this year, according to the government forecast, compared with a 0.4 per cent decline in GDP which it projected in December.
A 30-billion euro austerity plan that Monti rushed through at the end of last year, made up largely of tax increases, is partly to blame for this year's recession which has in turn worsened the outlook for public finances.
This austerity-recession-austerity chain is common to other peripheral eurozone countries from Greece to Portugal, and is exactly the vicious circle that Monti is trying to break, with growing support from economists.
Many economists believe investors are less anxious about austerity than growth.
"The markets are more worried now by Spain slamming on the fiscal brakes harder," said Nicholas Spiro of Spiro Sovereign Strategy. "The lesson now is that bond market credibility is at least as much to do with getting these economies off the ground and moving as [it is] with fiscal discipline."
One problem for Monti is that even his new growth projection is more optimistic than those of most independent forecasters, who expect a contraction of around 1.5 per cent.