by Brian Mahany
Although we are best known for our foreign reporting tax work, we handle many criminal tax cases. While we see a fair number of people with unreported foreign bank and brokerage accounts, we also see the traditional “bread and butter” tax evasion cases involving cash transactions or two sets of books. Often those cases are difficult to uncover but that could soon change.
America’s underground economy isn’t drugs or illegal gaming – although those are true 100% cash businesses – its those sectors of the economy that operate primarily with cash. Commercial fisherman, pizza shop owners and cabbies are prime examples. The IRS has always had a hard time achieving tax compliance in these areas but recent tactics by Italian tax officials may change that.
According to a recent New York Times article, Italian revenue officials have begun to make a big dent in Italy’s underground economy. Tax collectors are doing spot checks on restaurants to insure that actual sales match register tapes. (When I was Maine’s revenue commissioner there was a sub shop within eye sight of the state capitol – when I would dine there cash sales went into the register drawer without being rung in. Credit card sales, however, were always keyed in.)
While increased spot audits might get some American businesses to grumble a bit, the new tactics don’t stop there. Italian officials are considering banning cash transactions for certain purchases! That didn’t get much play in the NYT’s coverage but the impact here would be huge. I suspect that many restaurants would see their reported sales double.
Another measure in Italy involves police stopping luxury motor vehicles and checking the ownership information against income tax records. From Las Vegas pimps in Escalades to Bentley owners that report no income, the impact in the U.S. would be dramatic. In a prior life decades ago, I would often be asked to prosecute people who declared hundreds of thousands of dollars in income on car loan applications yet nothing on their tax return.
There is no movement yet in the U.S. to resort to such police state tactics being used by Italy but that could change if Italian officials keep having such success with their program. Italian Prime Minister Mario Monte claims the measures have brought in billions of dollars in new revenues. When cash strapped cities and politicians in the U.S. hear those numbers, it won’t be long before such aggressive revenue measures are proposed here.
The law firm of Mahany & Ertl represents people accused of serious tax crimes such as filing false returns, tax evasion, conspiracy to defraud, failure to pay and failure to file. We are one of the few firms that concentrate in criminal tax cases and know how to effectively defend people accused of these serious crimes. If you are under investigation, under indictment or simply want to come into compliance before the IRS comes knocking on the door, give us a call.
For more information contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at All inquiries are confidential and protected by the attorney client privilege.
Mahany & Ertl – America’s Tax Lawyers. We proudly give taxpayers a voice anywhere in the United States. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota.