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Last week I vacationed in Italy spending time in Venice, Florence, Rome, and the Almafi Coast. For those of you who have not yet been but are considering a trip, you will find the Italian people to be warm and helpful and, in my opinion, possessing the best food in the world.

As is my custom when I travel, I love to talk with local residents about their lives and try to get a pulse on their "take "on life. This year it is even more fascinating because of the serious economic problems most of Europe is facing.

One person I met was a young American woman, who has spent the last 9 years in Italy as a travel writer and guide. She spends her time writing about food and takes tourists to local restaurants to sample Italy's wonderful food and wines. I specifically wanted to know how, as an outsider who has worked in the country for a long time, she viewed the current situation. She has noticed, she said, that many of the smaller, locally owned businesses had closed and were replaced by high-end chain stores like Prada, Gucci, Cartier and many others of similar ilk. Personally, I saw this at every stop of my trip.

She also mentioned that times were very hard for the average Italian. Gas was close to $9 per gallon and taxes in general, were very high. The VAT tax on consumer purchases was a whopping 21% and she expressed the general view of many Italians that the best jobs to have were government jobs which were paying $10,000 Euro a month!

The next person I asked was my Roman guide to one of the city's many underground excavations. This gentleman has a lot of experience as I have used him in the past and has worked his whole life in and around the city of Rome. He is entrepreneurial...a scrapper so to speak, working more like an American than a typical Italian. He will take you anywhere, arrange anything including transportation and give you the kind of experience which makes him worth every single dollar (whoops, Euro).

I asked him for his thoughts on the current situation. He says it's bad for Italians right now. The government is trying to collect every euro of tax it can which he estimated would be 68 cents of every euro he earned. So he does what most Italians do, he works for cash or if he must accept a credit card he has created an off-shore company to receive the payment.

This brings to light the challenge facing Italy and the other countries on the periphery of the EU. These countries are severely in debt and their challenge is to raise enough money to pay down the debt or at the very least, operate without taking on any more. They have two basic choices; Raise revenue by increasing taxes or create a more open business environment to let the entrepreneurial spirit of the Italian people express themselves. Italians, in general, are a firmly mercantile culture. Venice and Florence were trading capitals of the world for centuries. Rome, of course, was the seat of power for centuries and trading is in their blood.
The challenge for every country caught in the debt trap, and this includes the United States, is balancing the need to reduce its debt by raising revenue while at the same time, creating an environment to kindle man's natural "animal spirits".

We've Been Here Before

In the late 1979's, this country was stuck in a recession accompanied by high inflation. This was the period in which I had just begun to work and raise a fledgling family. Becoming more aware of the economy and various job opportunities for myself and my wife, we both noticed a peculiar anomaly. We figured that it hardly mattered to us economically whether or not she worked. We calculated that tax rates were so high; her extra income would push us into a higher tax bracket taking an even larger chunk of her earnings. Higher taxes proved a huge disincentive so she eventually stopped working. And, like my friendly Italian tour guide, I thought the best job one could have was that of a postal employee. Government service was safe, secure and represented steady income---very important in bad times. Of course, in better times we now know it's better to take calculated risks to build your financial future.

Will the countries in the EU learn this lesson? It's hard to say but at this point, their economic future is in doubt. Let's hope, however, that they figure it out very soon and do the right thing.

جديد قسم : Taxes

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