Government Victim – Who’s Next?

by Kel Davis


I spent the last two weeks travelling around Italy and saw a sign: “Chiuso per Tasse: Vittima del Governo”. This sign is on selected retail stores that were vacant, prompting me to ask for the translation and explanation. Translated, this sign means “Closed due to TaxesA Victim of the Government“.

After investigation, I discovered that Italian businesses and the general population is struggling under the Eurozone austerity rules. Some villages have lost over 50% of their businesses during the last 3 years including manufacturing, food production and retail outlets. The remaining businesses have dropped their workforce numbers just to remain in business. All businesses I spoke to expressed dismay at the rate of tax increases. These are some of the examples shown.

Businesses

One door handle manufacturer decreased their workforce to 30 full time employees from 83 two years ago. This business remains in survival mode, slashing costs each time a new tax increase hits.

Restaurant business owners that I met all expressed dismay at the 15 – 50% increase in taxes, wondering if they can still survive for another year. The increasing costs comes generally from electricity, heating fuel, and waste removal. An example is the monthly waste removal which increased from €400 to €800. Many have already closed, unless family members can help work for minimal wages.

General population

Other than government employees that appear to be on a special package and remuneration, the general population are severely restricted with wages. Austerity measures imposed by the European Central Bank have increased all taxes, hurting the lives of everyday people. The average wage of €17,000 per year ($24,200 AUD) is transformed to a net of (after all fees, and taxes) approximately €8,000 ($11,400 AUD). This equates to approximately 55% personal income tax and fees.

Maria (a local) explained about her family’s situation. Maria earns €1,250 net income (after tax) with a €900 monthly mortgage payments. The family lives on €350 per month plus Angelo’s (her husband) part time income of up to €1,000 per month. They only just get through the monthly expenses.

Now the general population has become vocal by criticizing the Italian Government and Germany’s control of the Euro. A simple example is the heating fuel called ‘Pellets’ that is used to fuel the stove that heats the average Italian home. The government encouraged average home owners to install the pellet heaters as an economical heating fuel. This made sense so hundreds of thousands of families spent €8,000 installing the heaters. Fuel cost in 2012 was just €1 for a 5.5 Kg bag. Just 3 years later, the same bags of pellets cost € 5.50 as the fuel cost increases as well as taxes and duties. An announcement was made for another tax increase due to a special VAT rate of 22%. This is not a luxury item like a car or perfume, but a necessity for heating a home in the snow covered houses. Home tax, land tax and car registrations are all increasing to return money to the government.

Pensioners

Pensioners are living in attached housing, nearby or within the family. The family share living expenses like food, heating, security and transportation. Pensioners are forced to live on less than €600 per month ($857 AUD) with these rising costs. The situation in Italy is now almost the same as what I observed in Greece two years ago.

Youth Employment

Unemployment in the younger generation within the villages remains approximately 50%. It is common to meet university graduates who are working in the supermarket checkout, or sitting at home waiting for a job to appear. The more ambitious young people travel to other countries looking for employment. Young people are feeling the effects more than the older generations.

The future

I asked the local communities about the future and I received a mostly negative outlook. The austerity measures are taxing everything they can, wiping out the middle class. The wealthy have already moved their money out of Italy, relocating themselves to business friendly countries. This relocation of wealthy families is simply a repetition of what happened to Greece a number of years ago.

It is obvious that increasing government taxes and killing businesses is not a long term solution.

In my book The Secret Road to Wealth, I outlined where government around the world have lied on pensions, taxes and superannuation revealing that the future is not secure. My recent visits to Greece, Italy and Switzerland continue to show me that we all have to plan and take care of ourselves. Taking control of our personal lives, finances and wealth secures our future.

Australia, New Zealand and USA have also experienced tax increases, however, in more subtle ways to what I observe in Italy and Greece.

The future will hold higher taxes on the general population in the country you live in. The reason is that governments must increase revenues to repay their loans and survive. The rich will simply move to a country that looks after them and their business interests, just like what Italy is now experiencing.