The Italian government is stepping up its efforts to reduce cash usage in the country. New and rather aggressive measures have been approved to make it more difficult for users to spend their own money.
Italy Wants to end Cash
It is a well-known secret how the Italian government wants to introduce a cashless society in the future. To do so, they need to come up with ways to dissuade consumers to rely on this form of payment. By actively approving a new law that makes it more difficult to spend cash, that goal can ultimately be achieved.
Today, there is a limit in place as to which transactions can be paid for in physical money. The limit for such transactions sits at 3,000 euro. As of 2020, that limit will be reduced by 33%, down to 2,000 euro. To make matters worse, the government has indicated how the limit will be cut by another 50% in 2021, down to 1,000 euro.
Although the Italian ministers claim this is a move to end criminal activity, it remains to be seen if the desired effect can be achieved. Dissuading consumers from using physical money in their wallet is never a smart decision. Although there are benefits to going cashless for all parties involved, it is not something that should be rushed either.
Fines and Other Requirements
To replace cash, the Italian government proposes how retailers all need to accept credit card payments. Those who refuse to do so are eligible for a fine, which can be quite steep. The flat fine is 30 euro per transaction, plus an extra 4% of the total transaction amount added on top.
To make the acceptance of credit cards more appeasing, Italy plans to remove all commission fees from the equation. It remains to be seen how the card issues, such as Visa and Mastercard, will look upon that particular aspect. Those companies often impose extra fees when payments occur on their network, and those fees have to be paid by someone.
Addressing Tax Evasion
Another reason why the government wants to reduce cash usage is to fight tax evasion. Officials think tax evaders spend cash money in large batches to remove any traces. Critics are convinced this approach by the government will have the opposite effect in the long run. It is still possible to spend large amounts of money by splitting it into several smaller payments.
India has gone through a similar venture several years ago. It too claimed the removal of large cash transactions would cut down on overall tax evasion. That was ultimately far from the case, as those forms of crime still run rampant in the country. India has also given up on going cashless, for the time being, and it isn’t unlikely that Italy will see a similar roadblock.
Negative Interest Rates
All countries around the world will fall victim to negative interest rates sooner or later. In Europe, that trend has become a lot more apparent in recent months. There is a genuine concern among Italian politicians as to how it will affect the country’s fragile banking industry.
If the country is to become cashless, consumers will be “forced’ to keep money in their bank account. As such, they will have to deal with negative interest rates. With so much money locked up, the Italian central bank can introduce new plans and measures without having to worry about capital flight.