Italy edges away from rules for cash payments

Italy's economy minister has announced the country's new government will tone down its plans to make cash payments easier rather than risk a confrontation with the European Union.

Earlier this month, Prime Minister Giorgia Meloni suggested that her draft budget for next year would change rules about card payments for smaller transactions, giving traders the power to decline digital payment methods for transactions of less than 60 euros ($63.77), as well as raising the limit for legal cash transactions from 1,000 euros to 5,000 euros.

Meloni is a long-standing critic of efforts to move the country towards increased digital payments, calling them a hidden tax, and suggesting it was an excessive use of government power.

The Financial Times noted that according to official figures from the Bank of Italy, the average Italian consumer makes just 85 card transactions per year, the lowest figure in Europe, as opposed to an average of 155.9 per year for the EU as a whole.

The Reuters news agency quoted figures from the bank saying that Italy's so-called black economy sees around 100 billion euros in taxes and social contributions evaded each year.

Political opponents said a further encouragement of cash transactions would increase tax evasion and be a backward step for the country, and now the government has relented.

"We intend to eliminate the measure on points of sales," Economy Minister Giancarlo Giorgetti told lawmakers, adding that there may be some help forthcoming for shopkeepers to pay the fees levied on card transactions.

Italy was one of the first countries in Europe to be hit by the novel coronavirus pandemic, and a detail of the pandemic economic recovery plan agreed between the government of former prime minister Mario Draghi and Brussels was sanctions for retailers who refuse to accept card payments, to encourage the shift towards more digital transactions.

Meloni's government had planned to ditch the requirement to accept electronic payment for purchases of less than 30 euros. Economics professor Alessandro Santoro, who helped broker the deal with Brussels, said that although the move would not have technically broken the agreement, it was contrary to its spirit.

"The proposal to reduce the scope of a previous law that introduced the obligation for sellers to accept electronic payments, is not in line with previous commitments to incentivize electronic purchases as a way to increase tax compliance," said Santoro.

So far, Italy has received around 67 billion euros out of the approximately 200 billion euros of EU funding that it will be getting through to 2026, with an additional 19 billion euros coming at the end of this year, provided certain milestones, including the one about payment reform, are reached at the same time.

There are, however, certain cultural reasons why cash remained so popular in Italy.

"We have an economy, which is characterized by very small businesses," Santoro added.

"For these kinds of businesses, the use of cash is probably more natural...we have a lot of very small villages where banks are not so present."