Belgium, (Brussels Morning Newspaper) Bank of Italy’s head of economics Fabrizio Balassone warned the government against relaxing regulatory curbs on the use of cash.
Speaking in the Italian parliament, he stressed that relaxing planned curbs will help the black economy and make it more difficult for authorities to crack down on tax evasion, according to Reuters reported on Monday.
Italy previously agreed to implement the European Commission’s reforms aimed at phasing out the use of cash, but the new government headed by Prime Minister Giorgia Meloni is planning to scrap planned fines for retailers who do not accept card payments.
In addition, the government is planning to increase the limit on cash payments from the previous 1,000 euro to 5,000 euro, with new rules to come into effect next year.
Balassone stressed that “higher thresholds favor the black economy” and reiterated that “limitations to cash use pose a hurdle to several forms of crime and [tax] evasion.”
He warned that the government’s moves risk falling foul of the EU’s digitalization push. MP Francesco Filini noted that the Bank of Italy’s move was expected because electronic payments generate profit for banks and the institution is “an entity owned by the banks themselves.”
Commercial banks and insurance companies own more than 60% of the Bank of Italy.
The announcement following EC talks
Meloni announced plans last week to water down the planned package of rules against the use of cash, stressing that it will make it easier to settle small payments with cash.
She made the announcement after talks with the EC, with supporters of the idea pointing out that the move would protect small stores from unnecessary banking fees.
On the other hand, Balassone says that the use of cash is more expensive than card payments, pointing out that the Bank of Italy estimated so in 2016.
Commenting on the progress of digitalization in Italy, he noted that the number of yearly electronic payments per capita reached approximately 130 in 2019. Balassone stressed that this was significantly lower compared to the eurozone average of close to 300.
According to the Ministry of Economy and Finance, annual tax evasion in Italy stands at approximately 100 billion euros.
