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Italy abandons plan to let shops refuse card payments in budget U-turn

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Italy abandons plan to let shops refuse card payments in budget U-turn
Cash remains the preferred method of payment in Austria. (Photo by GABRIEL BOUYS / AFP)

Italy's new government has scrapped plans to allow merchants to refuse card payments on amounts under 60 euros, following pressure from the European Union.

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Italian Economy Minister Giancarlo Giorgetti confirmed the U-turn on card payments as he set out amendments to the 2023 budget late on Sunday.

The plan to allow merchants to refuse payment by card for smaller amounts had been among the new hard-right government's first priorities, announced shortly after it came to power along with a plan to allow bigger cash-only transactions.

READ ALSO: EU approves Italy’s 2023 budget despite tax evasion concerns

The European Commission criticised the government's moves to boost the use of cash, saying these changes would jeapordise efforts to fight tax evasion, despite last week approving the general direction of Prime Minister Giorgia Meloni's first budget

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The government had proposed merchants be allowed to refuse card payments for transactions worth less than 60 euros without incurring penalties, alongside measures to raise the maximum for cash payments in shops from 2,000 to 5,000 euros.

Meloni was widely criticised for claiming that raising the cash payment limit would "help the poor".

The plan to raise the ceiling on cash payments will go ahead, though the government had inititally proposed a limit of 10,000 euros.

Italy’s cash ceiling has gradually been lowered over the past three decades, although it rose to a high of 12,500 euros under two governments of then-premier Silvio Berlusconi, whose Forza Italia party is also part of Meloni’s coalition.

The European Commission had previously recommended that Italy fight tax evasion by strengthening e-payments and limiting the thresholds for cash payments.

An increasing number of Italy's smaller shops, cafes and restaurants now accept card payments after years of government initiatives aimed at encouraging electronic payment.

Defenders of the current government's stance cite high card-payment fees for shopkeepers and the preference among the elderly for cash.

READ ALSO: Italy rated ‘worst in Europe’ for internet and paying without cash

Commission on card payments in Italy reportedly ranges from 0.4 percent to 4.5 percent, depending on the payment system used.

Italians used cash for 82 percent of transactions versus the 73 percent eurozone average, according to a 2020 study by the European Central Bank.

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But the Bank of Italy has also criticised cash payments as aiding tax evasion, which costs Italy about 100 billion euros per year.

The application of sanctions on merchants who refused card payments was one of the goals agreed under an EU post-pandemic recovery plan, from which Italy stands to receive almost 200 billion euros in grants and loans by 2026.

Another measure criticised by Brussels, a tax amnesty on debts of up to 1,000 euros from the period 2000 to 2015, has been postponed for three months under the latest budget draft.

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