taxable because according to the law of 1877 his assessable income would be 600 times six-eighths or 450 lire. When, however, the question arises as to what the abatements should be in such a case, there are still further complications. According to the new law he would be assessable, if there were no abatement, at 300 lire; but instead of deducting the old abatement of 250 lire from these 300 lire, there is now abated only the sum of 166.66 lire. He would therefore pay a tax of 20 per cent on 133.34 lire (300-166.66), that is, he would pay about 27 lire. The same would be true of other abatements.1

When we come to the administrative features of the tax, we are confronted by several interesting facts. The list of persons subject to the tax in each commune is supposed to be prepared annually by the municipal council (giunta municipale). If prepared with care this would, of course, be of very great value; but as a matter of fact, the lists are scarcely ever revised, and are of little use. The chambers of commerce in the different towns are legally required to notify the authorities of the formation of any new corporations or the opening of any new business, and the notaries, as well as the registers or managers, etc., are supposed to send to the tax office a list of all documents. Moreover, the court officials are prohibited, under severe penalties, from taking note of any document which is not shown to have paid the tax. As a matter of fact, however, this penalty has never been applied.2 Every taxpayer is also compelled to make a declaration of his income, under heavy penalty; but in practice the penalty is not enforced, and he therefore never does so. As a result, the officials (agenti delle imposte) have either to depend upon the indirect payment of the tax, that is, in those cases where the tax is stopped at the source, or they have to make their own assessment in all cases of the direct taxation of the individual. The tax agents, therefore, almost universally make the assessment of the income themselves. The assess

1 Cf. for other calculations Spoelberch, op. cit., pp. 88-92.

2 Spoelberch, op. cit., p. 137.

ment was only recently made on the average of the two preceding years, in the case of private business or unlimitedliability companies; on the income of the current year, in the case of incomes from securities, pensions, and fixed allowances; and on the basis of the business year ending in the preceding July, in the case of banks and limited-liability companies. In 1907, however, the biennial valuation was changed to a quadriennial valuation, to the extent, at all events, that the government itself cannot change the valuations for four years, while the taxpayer still has the right of altering the valuation at the end of two years.

Originally, when the income tax was an apportioned tax, the assessment of the shares payable by individuals was confided to a commission of citizens elected by the local council. When the tax became a personal tax, the government entrusted the matter of assessment to the fiscal agent, although a little later the local commission, to which references will be made in a moment, was also given the right of aiding the fiscal agent to fix the assessments. As a matter of fact, however, the commission never utilized this right, so that the matter rests in the hands of the tax officials.1

Owing to the enormous rate of taxation, the fiscal agent is very moderate in his demands. He scarcely ever thinks of assessing the so-called actual income at the real figures, and he generally comes to some amicable understanding with the taxpayer. If, however, the taxpayer objects to the assessment levied by the fiscal officer, he may appeal. There are two kinds of appeal - administrative and judicial appeal. The bodies to which is entrusted the administrative appeal consist of three kinds of commissions. The commission of first instance, or communal commission, is composed of a presiding officer appointed by the prefect, and of four members elected by the communal council. This commission often divides itself into sub-commissions and, being generally favorable to the taxpayer, ordinarily reduces the assessment as fixed by the fiscal agent. Either party may then appeal Spoelberch, op. cit., p. 136.

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within twenty days to the provincial commission, consisting of five members, one of whom is nominated by the provincial council, one appointed by the chamber of commerce of the province, two appointed by the department of direct taxes, and one, who presides, by the prefect. As the majority of this commission represent the government rather than the taxpayer, they generally take the opposite attitude, and ordinarily uphold the fiscal agent as over against the communal commission. A third and final appeal is possible to a central commission of twelve members, appointed by the government. This central commission not only acts as a court of appeal, but also takes up in the first instance other questions like that of double taxation. This exhausts the possibility of appeal on questions of fact, but on questions of law a further appeal is possible to the courts, and in Italy there are no less than five such instances of appeal.

In making their assessments the fiscal agents have broad powers. They are permitted to do seven things: (1) they may demand from the public officers an extract of any document which they need; (2) they may summon any taxpayer to appear before them for examination; (3) they are allowed access to any industrial or commercial establishment; (4) they may summon to their office anybody who they think can give them information; (5) they may examine the ledgers or registers of certain companies known as anonymous societies (the French compagnies en commandite); (6) they may demand inspection of securities; and (7) they may consider the house rent paid by the individual.

While they have these rather considerable powers, as a matter of fact they very rarely make use of any except the last; and accordingly they guess at the individual income very largely on the basis of the house rent and the mode of living. In other words, what was meant to be a system of direct taxation of income has become in practice a method of assessment based upon presumptions or outward signs.

Finally, it may be stated that the tax is collected not by the government officials themselves, but by contractors to

whom the collection of the revenue is farmed out, in return for a proportion of the tax collected, which must not exceed six per cent. The contract usually lasts for ten years, and is put up for public auction in the communes.

§ 4. The Question of Fraud

When we consider the actual working of the Italian law, we find that notwithstanding the many admirable provisions which it contains, the tax rates are so enormously high that evasion and fraud are almost universal. Almost from the very beginning of the high rates complaints of fraud were heard, and these have not been diminishing in recent years. In 1893, for instance, we are told, "a large part of incomes, perhaps, in fact, the greater part, completely escapes taxation." So notorious have these frauds become that a special study of this subject has recently been made by a Frenchman, Perdrieux, in a most interesting volume, to which the present prime minister of Italy, Sig. Luzzatti, contributes a preface.2 We are told that the officials are at least honest. Luzzatti emphasizes the fact that the government has succeeded in eliminating the "fraud of frauds," - that is, the favoritism due to political or religious reasons. "In Italy," says Luzzatti, "if we have not attained the ideal, which belongs to heaven and not to earth, every taxpayer at least has the assurance that such stormy passions do not enter in the least into the assessment of taxes."3 More than that is not claimed, even by Luzzatti. He speaks of Minister Sella as the real author of this "code of financial torture." While he maintains that the taxpayer in Italy is "the most peripatetic, the most admirable, and the most patient human animal known in fiscal history," he also finds a limit to the sacrifices that can be made, and agrees that "the tendency

1 Vinci, op. cit., p. 20.

2 Les Fraudes dans l'Impôt Italien sur les Revenus de la Richesse Mobilière, Avec une Lettre-Préface de M. Luigi Luzzatti. Par Pierre Perdrieux. Paris, 1910. 3 Op. cit., p. 8.

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to fraud develops in proportion to the fiscal greediness (l'apreté fiscale) with which the taxpayer is afflicted." Luzzatti refers to the attempts made by the government to change the law or the customs, and points out that they all failed in the presence of the outcry on the part of the taxpayer. As he wittily remarks: "We officials carry on art for art's sake, but the taxpayers carry on art in order to live." In Italy only about four-tenths of the tax is collected by stoppage-at-source, so that in the greater part of the tax the door is wide open to fraud. We are told that perhaps the worst frauds are found in the professional classes, where, as Luzzatti again so well puts it: "the diversities and the undulations' of conscience attain a degree of refinement of which the higher talents alone are capable. The common people are always more frank." 2

Where declarations are made by the ordinary business man, they are notoriously inadequate. Obviously an income tax running up to twenty per cent, to which all manner of other kinds of local taxes are to be added, would indeed be unendurable if enforced to the hilt. Satisfactory arrangements are therefore usually made between the individual and the fiscal agent. But for a great mass of income from personal property the agent has no means at all of estimating the real income. He does not dare, as we have seen, to use his powers, for such an attempt would lead to a revolution -- and so far as the owners of securities are concerned, they either have to put their money into foreign securities, which as we have seen, by a great defect in the law, are not taxable at all, or they can deposit their securities in private banks or in the particular kind of companies which are not in any way subject to inspection by the officials. The consequence is that the ad

1 "C'est que nous autres financiers, nous faisons de l'art pour l'art, et que les contribuables font de l'art pour la vie." Op. cit., p. 7.

2 The professional classes "où les diversités et les ondoiements' des consciences atteignent des degrés de finesse dont seulement les talents supérieurs sont capables. Le peuple dans sa rudesse est toujours plus ingénu et plus franc." Cf. also Spoelberch, op. cit., p. 139 and in general Lia, op. cit., pp. 109–121.