Il income meter changes skin. The government has changed it once again anti-evasion tool which aims to find those who declare less income than they actually spend. This instrument, introduced in 1973, has been suspended and reactivated several times and, with the recent decree number 108 of 5 August, has been revisited again. The objective is to identify and target major tax evaders who, despite possessing enormous assets, declare minimal incomes.
What is the income meter?
The income meter compares the declared income with the expenses incurred during the year. If the expenses are significantly higher than the declared income, the control is triggered. Over time, the tool was refined, until it was suspended in 2018 by the Conte 1 government, which referred to a new decree to establish the methods of investigating taxpayers' living standards. With the decree of 7 May 2024, the Meloni government had listed the expenses subject to controls, but after the controversy, it did backtrack “waiting for further details”. Now, these insights have arrived. Let's see what changes.
New control thresholds: here's how the income meter changes
The Tax Office will take into account two thresholds before proceeding with the assessment:
- Lo deviation between the reconstructed income and the declared income must be at least 20%.
- The difference must be greater than ten times the annual social allowance (currently equal to 6.947,33 euros), i.e. the checks will begin only if the estimated total income will exceed 69.700 euros.
For example, with the old rules, it was enough to reconstruct an income of 12.500 euros on a declared income of 10 thousand euros to dispute tax evasion. Now, the alarm will only go off with a reconstructed income of around 80 thousand euros.
New technologies and risk analysis
The main objective is to reduce false positives and focus on cases of real evasion. To achieve this purpose, the IRS will exploit risk analysis, which allows us to avoid indiscriminate checks and give taxpayers the opportunity to justify any other income or savings accumulated.
The risk analysis makes use of new technologies and the financial administration databases to cross-reference the available information and identify the real evasion phenomena. A task force made up of the Revenue Agency and the Financial Police is already working to develop solutions that comply with privacy regulations.
How to protect yourself from the income meter?
The new system offers taxpayers extensive opportunities to to justify The deviations between declared income and expense supported. Taxpayers can demonstrate that the expenses were financed with income different from that declared in the same tax period, with income exempt, subject to withholding tax, or legally excluded from the tax base. Furthermore, they can explain that the attributed expenses have a different amount and that the savings used have accumulated in previous years.
In summary, the new approach makes tax controls more targeted and efficient, focusing on real cases of evasion and offering taxpayers greater possibilities for justification.
Expenses under the lens of the tax authorities
Despite the changes, the structure of the income meter remains unchanged. THE expense used to estimate taxpayers' real income cover a wide range of categories, including:
- Daily consumption expenses: food, drinks, clothing and footwear;
- Household expenses: mortgages, rents, bills, ordinary and extraordinary maintenance;
- Transport and vehicles: purchases, maintenance and leasing of cars, motorbikes, campers and also means of air and maritime transport;
- Health and Wellness: medicines, medical visits and insurance;
- Free time and culture: pay-TV subscriptions, cultural and sporting events, purchases of books and electronic devices;
- Education: school and university fees, expenses for study trips;
- Investments and savings: purchase of properties and luxury goods, donations and financial investments;
- Other expenses: domestic workers, insurance and taxes for cars, motorbikes, boats and planes, expenses for public transport, leasing or rental fees for means of transport, expenses for barbers, hairdressers, beauty salons, beauty centres, silverware, jewellery, costume jewellery. and watches, bags, suitcases and other personal effects, compensation to freelancers, meals and drinks outside the home, hotels, pensions and organized trips, periodic allowances paid to spouses, expenses for pets and horses, online games, expenses for sporting activities, cultural and recreational clubs, mandatory and voluntary social security contributions, commitment to personal care.
