Social Trust in a Cash Economy
Austerity in Italy, and where you hide the tax hikes.
There is a recurring bill I pay in Italy, in person, with a credit card. When I finish the transaction, the secretary makes a handwritten note in a small book. She makes the same note on a card-sized piece of notebook paper which I carry. One time, I forgot to bring the card-sized piece of paper. The secretary urgently retrieved an identical card and wrote down the entire history of our financial transactions, so that if she ever tried to cheat me, I could say, no, look here, in your handwriting it says I paid, because this ballpoint numeral is more meaningful than a credit card statement.
I have another monthly financial transaction which I hesitate to call regular, which is made in cash. It is due on the third of the month, but that is never when I pay it. On the third of the month, I bring my money to the shop. The entrepreneur, who is also the primary laborer, is busy. “Dopo, dopo,” she waves me off — bring it later, I’m busy now, my hands are too busy for money. The next day, I have the money with me, and the next day, until eventually there comes a day when my arrival aligns with a task break. Have I brought the money? Yes, I have it. She makes a note in her calendar. There is no time to give me a receipt. Perhaps two weeks later, on an unexpected day, she hands me a receipt, handwritten.
ATMs here dispense 50 euro notes; they are Italy’s $20 bill. But they are too much money and no one wants to make change from them. They are Italy’s $100 bill.
My door has five deadbolts and my windows are protected by thick aluminum shutters. I live in a safe neighborhood, but this is standard. Italians tell me that property insurance won’t cover theft, except in certain circumstances. It covers the theft of jewelry from a locked safe, in a room with locked windows, while you’re in the home. Fire insurance only pays for the loss of a home if it was near enough another house where fire might have spread. I think they might be pulling my leg, but I buy American home insurance.
A plumber is fixing my water heater. He tells me a friend lives above a store, and the store was robbed three times in a month. The friend caught one of the robbers climbing his drainpipe, and fired a warning shot with a hunting rifle. The robber froze, still on the drainpipe. The robber pulled out a cell phone and called the police. The police charged the friend with irresponsible discharge of a firearm. It was a 300 euro fine.
When I walk down the street, the hawkers call me princess, but the one who gets my attention calls me doctor.
My taxes have gone up lately, in small and sneaky ways. Italy’s still under austerity, externally imposed; although unemployment is high and voters favor economic stimulus, the government is forbidden by E.U. law from deficit-spending. The ceiling is 3 percent of GDP, set in the Treaty of Maastricht. When this law was written in 1992, most E.U. governments were regularly running deficits larger than 3 percent of GDP, and it wasn’t a problem. However, the number three sounded nice to a French economist named Guy Abeille, working for Francois Mitterrand, a socialist dying of prostate cancer. It reminded them of the holy trinity. It has a similar ring to “cut two regulations for every new one.” They thought they could use it temporarily to wave off frivolous requests. It has not been temporary, or exclusively French.
Passing a tax bill in Italy is exactly as difficult as passing a big income tax increase in the U.S., although for different reasons. There’s more political support for the idea “tax the rich” in a country where Mussolini’s fascists were defeated by homegrown communist partisans, where “capitalist” sounds more like “mafia” than “meritocratic job creator.” But it’s the simplest thing in the world to work cash-only and not report it, especially since it’s rude to talk about money. A recent proposal in favor of more progressive taxation failed based on a not-unreasonable fear that everyone would lie about their income — an argument similar to the one around the U.S. corporate tax rate, and whether it prevents cash repatriation.
There is a sense that if I am too honest and too prompt, I am perhaps a chump — someone who can’t read context clues. Avoiding a bill is not the equivalent of “using tax loopholes makes me smart.” It is the equivalent of a neighborhood watch sign, demonstrating one is not an easy mark. Since I am obviously smart, my occasional attempts to pay things early are viewed with suspicion. I am asked for documentation to prove I really owe something, in case this is a sly-fox gambit.
Revenue must be found, in ways that are not immediately visible as tax increases. Services must be cut in ways that are not immediately visible as service cuts.
The price of postcard stamps to the USA jumped from 85 cents to €2.50. The cost of mailing a postcard from the U.S. to Italy remains $1.15. It doesn’t cost twice as much to send something through the same set of hands one direction than the other. A small piece of paper isn’t three times heavier than it was a few months ago.
Schools can’t be closed, because education is a fundamental civil right. If teachers were to strike, parents would have to be reimbursed for the school’s closure. Therefore, when teachers and staff aren’t paid, there are strikes which are not strikes. They are merely suggestions that the kids not be brought to the school, which is open.
Our garbage tax went up. Simultaneously, there is a new recycling sorting requirement. I used to need three bags: paper; un-recyclables; plastic, metal, and glass. Now, I need a separate bag for glass. My kitchen is the size of a minivan. It is difficult to find room for a fourth trash can. The new bin on the street requires me to put the bottles in one at a time, instead of in the bag all at once. This adds an extra half hour of free labor each month, although I am not indifferent to the joyous sound of shattering glass.
Rather than sales tax, Italians pay V.A.T., charged not to the end user but at every stage of the process. (In a sales tax system, a store doesn’t pay sales tax to the manufacturer. A store does pay V.A.T., and the customer pays V.A.T. again.) In 2018–2019, V.A.T. is set to increase to 27 percent. This will look like an increase in the costs of goods — like inflation — because tax is not listed separately on a receipt. It’s built into the sticker price.
Perhaps people will buy less. Perhaps they will pay in cash, and be too busy to write receipts.
Italy is not a poor country. It’s the world’s eighth largest economy. Its export surplus is around $60 billion. Although the black market isn’t useful for tax revenue, its estimated value is included in GDP figures, to add a little breathing space at the top of the 3 percent deficit threshold.
These things feel uniquely Italian, but they’re not. They have an Italian flavor — a sense of place and culture — but other countries and states get themselves into similar trouble. Britain’s in it. Oklahoma is. You see it in private businesses sometimes, when hitting a numeric target replaces the memory of what the metric was meant to measure.
This is the dream of a fiscally responsible future, with debt ceilings and balanced budget amendments — a fabled utopia that ignores “good debt” and forgets the existence of downturns. Keynes argued against it in the 1930s. Paul Krugman does now, Joseph Stiglitz, and Yanis Varoufakis. Even the IMF has come around. But laws and contracts are hard to change. The religious fervor of deficit hawks, even more so.
Meanwhile, unemployed people can’t pay taxes. I can’t not produce trash. A country can’t decide to not educate its children, or not rebuild bridges. I can send fewer postcards. And I do. It’s a shame.
Romie Stott’s essays have appeared in The Billfold, The Awl, Atlas Obscura, The Toast, and Strange Horizons. For an extremely frugal Italian sojourn, she suggests you close your eyes and eat a tic tac.
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