Italy Takes Swipe At Card Payments In New PM Budget Bill

December 6, 2022
Flying in the face of global trends, Italy’s new Prime Minister Giorgia Meloni wants to raise the limits on cash payments and support merchants to refuse cards for purchases below €60.

Flying in the face of global trends, Italy’s new Prime Minister Giorgia Meloni wants to raise the limits on cash payments and support merchants to refuse cards for purchases below €60.

Although most countries in the world are taking steps to expand the range of digital payments, Italy’s newly elected far-right Prime Minister, who has been known for her criticism of digital money and support for the use of cash, is going in the opposite direction.

Meloni, who became Italy’s first woman Prime Minister in October, published the budget bill last week, which included provisions for enhancing cash payments and reducing reliance on payment cards.

Among the proposals, the government is seeking to raise the current limit for using cash from €1,000 to €5,000, while allowing merchants to refuse debit, credit and prepaid cards for purchases less than €60.

Yo-yo cash limits

Politicians in Italy have historically been divided along partisan lines in relation to their approach to the use of cash.

Left-wing politicians typically support efforts to rein in cash, which they see as a tool to avoid tax and facilitate money laundering.

Meanwhile, right-wing politicians argue that the cap is a restraint on Italians’ personal freedom as well as on consumption.

As a result, in the past 11 years, rules defining the cap on cash payments have been changed back and forth several times.

In 2011, the cap was lowered from €2,500 to €1,000 in the midst of the financial crisis, to make tax evasion more difficult and increase the government’s tax budget.

The limit was raised to €3,000 in 2016, only to be lowered again to €2,000 in 2020. Finally, at the beginning of 2022, the Mario Draghi government set the threshold at €1,000, applicable from January 2023.

It came as no surprise then that Meloni proposed raising the cap on cash again, which was one of her campaign pledges. However, the PM gave a rather atypical justification for why she is against the use of digital money.

In a Facebook post on Sunday (December 4), Meloni said that “in Italy, the only legal currency is the cash issued by the European Central Bank”.

By contrast, “electronic money is a private currency. It's legal currency clearly, but it's private”, a service that comes at a cost.

Meloni added that the current cash limit disadvantaged the country’s economy and it only makes sense if all European countries have a similar cap.

She said there are several EU countries, such as Germany and Austria, where no such cash limit exists and the level of tax evasion is still low, according to the PM.

War on digital payments

In April, Meloni said she was against the country’s push to use digital payments, which in her view is an “illegitimate gift to the banks” and is a “hidden tax” on small businesses.

She said that the attempt to curb card payments will benefit small businesses, which often have to bear disproportionally high costs for accepting small payments.

Wolfango Piccoli of political consultancy Teneo told The Times that the higher ceiling on cash also benefits taxi drivers, “who you can never ignore in Italy” and this is good money for tax dodgers.

Although the PM has a very clear stance with regard to cash and digital payments, Meloni has recently toned down her message following discussions with the European Commission (EC).

Italy is the largest recipient of the EU's post-pandemic recovery fund and is supposed to receive €191bn throughout 2026.

However, the payments are conditional on the country meeting certain "milestones" and "targets", including efforts to reduce tax evasion and taking key measures for digital transition.

In the same Facebook post, Meloni said the €60 threshold is “indicative” and it could “even be lower”.

"Besides, there are obviously discussions on this with the EC because the issue of electronic payments is one of the issues of the [EU recovery plan]. So we have to see how the discussions end," she added.

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