September 2, 2012

Italian Revenue original tax meter: Napkinmeter

The Italian Government has deployed an unusual system to track tax dodgers in Italy, in the case of restaurant owners the Italian Revenue Authority is using a system called "Tovagliometro" o "Farinometro"  literally translated as napkinmeter or flourmeter to estimate how many clients a restaurant or a bakery had and the amount of revenue generated.

It consists of the following; they use consumption of the above items to estimate the amount of activity in the establishment and they send a tax request to the activity based on such calculation. The activity is forced to pay the tax in advance based on such calculation, of course businesses can ask for a revision of this decision which normally takes from 12 to 24 months to be completed if admitted.
The Italian courts following appeals from vexed businesses has confirmed the validity of such tools and is endorsing new creative ways to estimate tax evasion with everyday items regardless of their usage.
The fact that a Tax Agency is using such methods is a clear signal how corrupt is the situation in Italy and how desperate is the government to collect Revenue.
Stockpiling has become a dangerous activity for Italian businesses, if you buy too many napkins you could be taxed to death!

From FiscoOggi (translated from Italian via Google):

Once Upon a Time tovagliometro, now comes the bottigliometro. The Court of legitimacy, with ruling no. 17408 of July 23, gives equal dignity to both the build tools presumptive income. Logic dictates, in fact, that the reasoning according to which, for each room, the client of shift work towards a single napkin and, therefore, the "net" number of napkins used (ie not comprising those used for different purposes, such as meals employees) is the real representation of meals actually "served" can be naturally transferred to the consumption of mineral water bottles.For the Supreme Court, "the consumption of mineral water must be considered a fundamental ingredient, if not essential, in both food and drink purchased in the restaurant industry that the pizza."
It all began, in fact, a tax audit, conducted by the Bureau of Internal Revenue Caserta in a restaurant-pizzeria, which results in an adjustment of the increase in turnover and the subsequent recovery in taxation of a higher taxable income.The investigation, which started from the assumption that the company had not adapted to field studies, was carried out taking into account the fact that food purchased were not proportionate to the number of meals indicated in the receipts. The office, in particular, concentrated control over the consumption of bottles of mineral water, proceeding, then, for presumptions.
The taxpayer has no recourse to the Supreme Court and is based on two reasons:

despite the assumed office, it is considered reasonable and consistent with industry studies. The Regional Tax Commission, therefore, did not take into account the lack of basis for the assessment
its accounting records are regular, so there may be legitimate the inductive method applied against it (and even if the criterion used was "legal", it would be more realistic if it is based on other factors such as the consumption of gas, electricity , tablecloths, napkins, etc.).
The judgment of legitimacyAs anticipated, the judges of the Supreme Court, in rejecting the appeal of the company, have found fertile ground in their own settled case-law. In other similar occasions, for example, have argued that "in the test for presumptions, the relationship between the known fact that unknown and must not have character of necessity, it being sufficient that the existence of the fact to prove resulting as a consequence of the known fact in the same way of fees reasonable probability (see Supreme Court, judgments nos. 51/1999, 6465/2002, 9884/2002). "For the togas of legitimacy, the consumption of mineral water in a restaurant-pizzeria (as well as that of napkins), known fact, it may well become a test which suggests the number of meals actually served, unknown fact. This is because, according to "standards of reasonable probability," it can be shown that the existence of the latter is a consequence of the first.In addition, "the flexibility instrument is presumptive origin and foundation of their art. 53 of the Constitution, not being able to admit that the income is determined automatically, no matter what is the ability to pay of the person tested. "
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