- Dolce & Gabbana.
- Miuccia Prada.
- Roberto Cavalli.
- Valentino.
- Silvio Berlusconi.
That’s not merely a list of some of Italy’s most famous, most wealthy newsmakers. The names on that list have made news over the past few years for another, more dramatic reason: they’ve all been targeted (most successfully) by Italian taxing authorities for tax evasion.
Putting high profile taxpayers in the crosshairs is likely meant to frighten ordinary citizens into compliance. Italy has, it has acknowledged, an enforcement problem with an estimated $160 billion in going uncollected each year, the third highest rate in WesternEurope. For purposes of comparison, the U.S. has a tax gap of about 2-1/2 times that, or $385 billion, even though our population is more than 5 times bigger than Italy’s population.
Some attribute Italy’s high noncompliance rate to a relatively high tax burden together with a mistrust of the government. Still others blame the tax structure. But Rossella Orlandi, the newly appointed head of the Agenzia delle Entrate, had a different take: Italians do not pay tax because they are Catholic.
No, that’s not a misprint.
Orlandi is the chief of the Agenzia della Entrate, or Agency of Revenue. The Agency of Revenue is roughly the equivalent of our Internal Revenue Service, making Orlandi Italy’s counterpart to IRS Commissioner John Koskinen. Orlandi’s debut at the Italian tax agency kicked off with a speech outlining her plans for the agency. At the top? Tax evasion. She blamed the country’s heavy tax evasion rate on a dependency on religion, saying:
In Italy, tax amnesties and remissions are our daily bread. We are a country with a strong Catholic environment and we are used to committing a sin and gaining absolution.
Orlandi went on to say that those who commit tax evasion “expect that, sooner or later, they will be absolved. The Catholic environment leads these tax evaders to believe that a tax shelter or a pardon will come.”
(You can see the article about her statements in Italian here.)
Orlandi later referred to the comments as a “joke.” The Catholic church, however, didn’t find it very funny. Orlandi’s statements were blasted in Avvenire, an Italian newspaper affiliated with the Catholic Church. Eventually, Orlandi – now christened “Lady Tax” – was forced to issue an apology, saying, “I apologize if my words may have created misunderstandings or have offended the sensibilities of anyone.”
The apology came just a few days before the most recent economic data from Italy was made public. The data wasn’t encouraging. Italy’s gross domestic product declined 0.2% last quarter, the second straight decline.
Those numbers are worrisome for other countries in the west: Italy has the third-largest economy in the Euro Zone (the term used to refer to those countries which use the Euro as their currency) after Germany and France.
Prime Minister Matteo Renzi, who appointed Orlandi to her position, has been vocal about the need to grow the economy. He’s promised to cut spending and has refused to raise , saying, “on the contrary we will try to continue to cut .” With Italy’s debt load, that doesn’t seem possible. Enter Orlandi with her aggressive stance on increased collections and pursuing tax evaders. That stance is proving unpopular so far.
To date,Pope Francis has not responded to Orlandi’s comments. He has, however, made his position on tax evasion clear. Last year, in his apostolic exhortation (downloads as a pdf), he blasted “widespread corruption and self-serving tax evasion” which, he says, “has taken on worldwide dimensions.”
His words were markedly different than those of Cardinal Tarcisio Bertone, Vatican Secretary of State, who in 2007, advised, “We must all do our duty and pay taxes as long as they are imposed according to just laws and destined to pay for just works.” Those words were interpreted by some to imply that tax evasion might be justified if those responsible for paying the taxes felt that the money was not being spent wisely, a stance that has never officially been endorsed by the Church.
Leaders of other religions have also chimed in on taxes and fairness. Last year, Church of England’s Archbishop of York John Sentamu, who ranks second only to the Archbishop of Canterbury, seemed to share Pope Francis’thoughts when he made the payment of taxes a moral issue, saying those who did not pay their fair share were “not only robbing the poor of what they could be getting, they are actually robbing God.”
No matter what Orlandi actually thinks about the role of religion in tax evasion, it’s clear that Orlandi will have to tread lightly in the coming months if she hopes to win the support of the Italian people in her new post. Whether she actually meant her comments as a joke, they certainly weren’t interpreted that way by the Catholic Church. In a country with a rich history of church and state, that’s not likely to make her popular.
Balancing religion and taxes has long been a sensitive issue. We’ve seen that inside the U.S. when it comes to tax exempt issues (think Church of Scientology) and church clergy and payroll. We’ve also seen other countries struggle with balancing the two (consider Germany’s “church tax” or Kirchensteuer, for example).
It’s clear that the church will continue to play an important role in aspects of Italy’s culture, including government. How the current regime will balance that role may determine how long they stay in office.
