Italy is using a tool called redditometro to look for tax evasion.
The new tool, known as the “redditometro,” or income measurer, aims to minimize the wiggle room for evasion by examining a taxpayer’s expenditures in dozens of categories, like household costs, car ownership, vacations, gym subscriptions, cellphone usage and clothing. If the taxpayer’s spending appears to be more than 20 percent greater than the income he or she has declared, the agency will ask for an explanation.
This is an interesting approach in that it focuses on the black market portion of the economy. One could argue that the result of this will be that income generated and not declared would simply not be spent or purchases would be made in cash. Such purchases wouldn’t have an electronic signature to be traced. Wouldn’t there be the potential for an increase in black market type transactions in a society where monitoring for tax purposes went to this degree?
It would be interesting to find out where the tax authorities are getting their data and if the acquisition/purchase of data would be considered legal. If a credit card company is selling your data, would you be ok with the data being sold to the IRS? If this happened in the United States, would there be outrage? Would consumer spending drop? Might a consumer not want to pay for a gym membership that requires an automated form of payment like a credit card or a debit from a bank account? A consumer may not want to upgrade that car they used to upgrade every 2 years for fear of ending up on a list. In an economy that is driven by consumer spending, this might be a very bad thing. Supporters might ask why a tax payer would care about the use of such a tool if they are above board in declaring their income in the first place. Similar to the arguments that are made on the relevancy of encryption to citizens if you have nothing to hide.
When someone that you don’t know stops you on the street and asks you how much you spent and exactly what you spent your money on yesterday, your response might be to look quizzically at them and say that “That’s none of your $$$$ business”. Why would this not be the same response made to tax authorities? And yes, they should have the ability to request and validate your income since that is what taxes are paid on after any deductions you may have. As citizens, we pay taxes because of the constitution:
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” Amendment XVI
The intent of this article is not to provide a summation of all of the positives and negatives of such a thing happening in the US but rather to pose the question for thought.