Total tax amnesty

I’m not going to get to do predictions on the upcoming elections, given the tangled situation that has arisen. However, I can make a judgment on the strategy that Silvio Berlusconi seems to have planned. The fact is that it is a very effective strategy and should not be underestimated by opponents because it’s potentially winning. It uses a mechanism that was not invented by Berlusconi and that existed for decades in Italy, but Berlusconi is an entrepreneur and, as such, he is very clever in making efficient ideas that others have only been able to sketch.

Such a mechanism is very simple. Basically it works like this. In Italy we have always made laws that are absurdly restrictive and often difficult to apply. It is not made for superficiality or stupidity but for a very specific reason: to encourage people to lawlessness. Why? This is only the first part of the mechanism. The second is based on the fact that the institutions turn a blind eye on purpose on those “small” illegalities in order to create such a culture of venial sin.

In practice, evasion is a crime, but some work in black is not; to infringe local building regulations is illegal, but a few minor variations to the house of property are not. In a civilized country these peccadilloes would not be crimes because law would leave some flexibility to people, severely punishing on the other hand those who “seriously” evade or commit real crimes. In Italy, however, everything is forbidden but everybody plays dumb. So each of us are liable to be blackmailed and it is then easy to win votes by amnesties, remissions, and wiping the slate clean, because basically honest people who have some stain on the conscience live with guilt and feel better if someone gives a clean, while the others, the real crooks, they consider those politicians as real role models, and how to blame them? After all they are, from their point of view.

Taking at its most extreme this mechanism, Berlusconi turns it into a winning strategy. In practice it is a matter of promising to begin with a clean slate for all evasions, the famous total tax amnesty. The fact is that many Italians, right or left wing, dodged anyway the taxes a little bit or have some small outstanding matter with the tax authorities, so that to remit everything and begin from scratch will lead to a significant increase in votes for Berlusconi. I would not be surprised if he could achieve a good 40%. And worst of all is that he can really do it with no cost at all, since it is not like the absurd promise to give back money to people, as in the case of the IMU (local council property tax), which is unrealistic given the state of our public debt, but simply to give up with the recovery of what was evaded in past. No impact on GDP or debt. And so he will fuck us all.

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