Cash in hand: A man uses cash to pay for items while shopping in Milan. Italy is scrapping a provision from its draft budget to fall in line with other eurozone members. — Reuters
MILAN: Dropping a plan to boost small cash payments is the smart thing for Italy to do. The measure could not have stopped the inevitable digital transition, as the data shows, while it was already hurting the country’s image.
Italy is scrapping from the draft budget a provision on retailers who refuse card payments that limits fines to transactions worth more than 60 (US$64 or RM284).
The measure had sparked complaints from the Bank of Italy and the European Union (EU), who warned about the role that cash plays in aiding tax evasion.
A one percentage point increase in the use of cash leads to a 0.8 to 1.8 percentage point rise in undeclared value added tax, Italy’s central bank found.
“The government’s U-turn on card payments marks a victory for consumers and the country,” Italian consumer group Unione Nazionale Consumatori president Massimiliano Dona said.
“Thanks to the EU Commission, we won’t embarrass ourselves by going into reverse.”
Nearly 73% of respondents in a 2022 survey by the European House-Ambrosetti’s Cashless Society wished to reduce cash payments to improve speed and security, up from 60% in 2020.
With the highest median age in the EU, Italy is a digital laggard. Card payments account for 32% of total payments, trailing Europe’s 47% but increasing sharply from 17% in 2017.
The axed proposal targeted small businesses, which are among the key supporters of Giorgia Meloni’s right-wing coalition, along with the self-employed.
“It was designed to please a minority of shopkeepers who are ready to put up a fight when you want to use your card to pay for coffee or a bunch of apples,” PwC partner Marco Folcia said. “It had no real power, but it sent the wrong message.”
Even before the digital acceleration brought about by the pandemic, Italy had seen the share of cash payments in value fall to 58% in 2019 from 68% in 2016.
“It’s the consumers, not shopkeepers or legal provisions, who are the main driver behind the type of payment used,” Equita analysts said in comments to Reuters.
Under measures adopted to unlock EU post-pandemic recovery funds, Italy introduced in mid-2022 fines of 30 plus 4% of the value of the transaction for shops refusing card payments.
“The fines date back to June, yet cashless payments have been steadily increasing for years,” Equita said.
Over the past five years, Italy has recorded a 6.4% compound annual growth rate of non-cash payments per capita, said the European Central Bank, above the eurozone’s 5.3%.
Prevailing commercial offers from electronic payment suppliers charge no fees on transactions below 10 (RM 47.09).
Card payment machines carry monthly rental costs, which price comparison site SOSTariffe says have roughly halved in Italy over the past five years. — Reuters
