Italy is one of the lowest adopters of digital payments

Meloni’s draft budget gives merchants right to refuse low-value digital payments

Business News

In her first budget since becoming Italian Prime Minister, Giorgia Meloni included a proposal regarding low-value digital payments. She proposes merchants should have the right to refuse digital payments for transactions below €60.

Meloni’s first budget was heralded as the fastest in Italian history. It has yet to be agreed by parliament and may face criticism from Brussels, but in it Meloni is keeping promises she made in her campaign. “It is no longer tolerable to burden the economy with a hidden tax . . . for the purpose of fattening the banks, spying and profiling every habit of the citizens,” she wrote in a Facebook post in July.

As well as addressing digital payment thresholds, Meloni’s government also intends to raise  the limit for legal cash transactions from €1,000 to €5,000.

Good for Italian small businesses, not so with EU

Meloni has criticised Italy’s push to promote digital payments in the past. She described them as an “illegitimate gift to banks” and a “hidden tax” on small businesses and families.

Naturally, raising the threshold for digital payments is a boon for small businesses. However, the European Commission has been advising Rome to promote digital payments for some time. It is also a contingent in its €200billion Covid recovery plan.

Carlo Calenda, leader of the centrist Azione Party, said. “It’s designed to satisfy small businesses that work mainly with cash to avoid tax payments.” Calenda feels it will increase tax evasion, though he failed to address the greater issue of an Italian tax system that is so hefty on low earners, that tax evasion is almost necessary. 

Other arguments are that it is a backward step to encourage cash rather digital payments. Valeria Portale, director of the Innovative Payments Observatory at Politecnico di Milano’s school of management, was quoted in the Financial Times as saying, “This is a problem not only for tax evasion. You also need a well-developed digital payments framework to develop new, modern services. It is a path to modernity.” 

Italy one of the lowest European users of digital payments

Data from the Bank of Italy shows Italy is one of the lowest adopters of digital payments in Europe. On average, an Italian uses cards for 85 transactions per year. This is in comparison to the EU average of 155.9 transactions per annum.

Graph showing average number of digital payment transactions made in 2020. Italy is the lowest, Luxemboourg the highest on the graph.
Italy has one of the lowest number of digital payment transactions per head in Europe. Source: Bank of Italy

On the other hand, the average amount per transaction in Italy is one of the highest in Europe at €47.50. This reflects the tendency to use cash for lower-value purchases, such as a cup of coffee or snacks, according to Politecnico di Milano’s innovative payments observatory.

Italy has a large black/shadow economy estimated at around €183billion in 2019. This equates to approximately 11.3% of the gross domestic product. It is believed that €90billion of that is tax evasion on legal activities.

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