Patrizia Flammini’s cafe does a good business selling coffee, pastries and sandwiches in the heart of Rome, with prices starting at €1.20 for an espresso.
But she said her heart sank every time a customer tried to buy small pick-me-ups using a cash card – which gives banks a discount on the sale price. “It’s almost offensive,” she said. “I make the coffee, I wash the cups, but [the bank’s cut] is more than what I earn.
Small business owners such as Flammini could soon be spared from accepting low-value digital payments if Italy’s new right-wing coalition government has its way. In her draft budget for 2023, Prime Minister Giorgia Meloni has proposed giving Italian merchants the right to opt out of digital payments for transactions below €60. The government also intends to raise the ceiling for legal cash transactions from €1,000 to €5,000.
Meloni, who leads the far-right Brothers of Italy party, has previously criticized Italy’s decade-long efforts to promote digital payments as an “illegitimate gift to banks” and a “hidden tax” on consumers. small businesses and families. In the run-up to her September election victory, she has vowed to push back.
“It is no longer tolerable to burden the economy with a hidden tax. . . with the aim of fattening the banks, spying and profiling all the habits of the citizens,” she wrote in a post on Facebook in July.
But while many small businesses have welcomed the move, it could meet resistance from Brussels, which has advised Rome to promote greater use of digital payments as part of its 200 billion euro funded Covid recovery plan. by the EU, in order to accelerate growth and put its efforts to the test. public finances on more solid foundations.
In Italy, some analysts and opposition politicians have expressed dismay at what many see as a step backwards. “This is a mistake that will increase tax evasion,” said Carlo Calenda, leader of the centrist Azione party. “It’s designed to cater to small businesses that primarily work with cash to avoid paying taxes.”
Valeria Portale, director of the Innovative Payments Observatory at the Politecnico di Milano management school, said she was surprised at the plans. “I don’t know how it is possible to encourage cash payments instead of digital payments in 2022,” she said. “It’s not just a tax evasion problem. You also need a well-developed digital payment framework to develop new modern services. It is a path to modernity.
Italy is among the lowest adopters of digital payments in Europe: the average Italian consumer uses cards for 85 transactions a year, compared to an EU average of 155.9, according to the Bank of Italy.
Meanwhile, the average size of such a transaction in Italy is €47.50 – one of the highest in Europe, reflecting the trend towards using cash for small purchases, according to the Innovative Payments Observatory. of the Politecnico di Milano.
Italy’s underground economy was estimated at around €183 billion in 2019, equivalent to around 11.3% of gross domestic product. Of this amount, tax evasion in otherwise legal activities is estimated at 90 billion euros.
But Italian digital payments – seen as a tool to reduce tax evasion – are growing. In the first six months of 2022, the total reached 182 billion euros, an increase of 22% compared to the same period of the previous year, the observatory said.
Successive Italian governments have tried to encourage the trend. In 2012, Italy theoretically made it mandatory for businesses to have point-of-sale machines for digital payments on their premises – although there is no penalty for non-compliance.
In December 2020, the Giuseppe Conte-led coalition of the populist Five Star launched a controversial refund scheme that offered consumers a 10% refund on all such transactions. The program was criticized by the European Central Bank, then abandoned by the government of Mario Draghi, then Prime Minister.
But Draghi tried to give teeth to the rules, decreeing that companies that refuse to accept digital payments could be subject to fines equivalent to €30 plus 4% of the value of the transaction.
“It was really important to change the culture,” Portale said. “I don’t know how much [the penalty] was used, but it was symbolic of pushing digital payments.
However, businesses complain about the high costs of accepting digital payments. Transactions worth less than €5 usually have no fees, but beyond that they vary widely. Larger businesses pay 0.5-1.5% of the transaction value to payment providers, while smaller businesses have to pay more.
So far, Brussels has not publicly commented on Meloni’s plans. But in a statement last week, the government said “the discussion with the [European] Commission are underway” and could influence the final policy.
Antonella Trocino, a lecturer in economics at Luiss University in Rome, believes concerns about fees should be addressed in ways other than simply trying to reduce digital transactions.
“It could be that the fees on [card] Payments. . . are a little higher than in other countries, but in this case the solution is to negotiate with the banking system and align [them],” she says.
Flammini said she hoped a solution would be found to ease the burden now borne exclusively by business owners.
“Banks don’t want to pay transaction fees; we don’t want to pay transaction fees and customers don’t want to pay transaction fees,” she said, adding that Italy “wants to be modern [but] at someone else’s expense.
Additional reporting by Giuliana Ricozzi in Rome
Data on Luxembourg card payments has been removed from the chart in this article.
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