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Berlusconi, Italy’s Former Prime Minister, Sentenced to 4 Years Jail for Tax Evasion

Written by Alessandro Fusillo Subject: World News
 
The news are on the first pages of all newspapers. On August 1st 2013 Berlusconi, three times Italy’s prime Minister (in 1994, 2001 and 2008), the man who governed Italy for the longest time after Mussolini, has been definitively sentenced to 4 years prison by Italy’s Supreme Court, which rejected his appeal against a decision by Milan’s Court of Appeal.

This may induce some reflections.

Berlusconi’s political career

Berlusconi, besides being an influential politician, is the owner of Italy’s biggest TV-broadcasting company. Italy has a public television funded by a TV-tax and by advertising. Until the ‘80s there wasn’t such a thing as commercial TV in Italy. Berlusconi is its initiator, he owns three TV-channels, two newspapers, a bank and many more business activities. He owes his ascent as a media tycoon to the protection and help offered to him during the ‘80s by Italy’s deceased socialist prime minister Craxi. In 1992, the latter and the leaders of the political parties in power since 1948 were wiped out by an investigation about cases of corruption. While the former communist party (constantly at the opposition until then) was about to step-in and win the elections in 1994, Berlusconi filled the void of the dissolved governing parties: in a few months he set-up a new party from scratch and won. Why did he win?

A phrase by Murray N. Rothbard, dedicated to Ronald Reagan, may accurately explain the reasons for Berlusconi’s success:

“…while using the inspiring rhetoric of freedom, tax-cuts, decentralization, individualism, and a roll back to small government, the Republican Party Elites will be performing deeds in precisely the opposite direction. In that way, the fair rhetoric of freedom and small government will be used, to powerful and potentially disastrous effect, as a cover for cementing big government in place, and even for advancing us in the direction of collectivism. This systematic betrayal was the precise meaning and function of the Reagan administration. So effective was Ronald Reagan as a rhetorician, though not as a practitioner, of freedom and small government, that, to this day, most conservatives have still not cottoned on to the scam of the Reagan administration.” (Murray N. Rothbard, Making Economic Sense, 2nd Edition, LvMI 2008, 471).

Now, our Italian experience bears a striking similarity to that so finely described by Rothbard. Berlusconi promised a “liberal revolution” [“liberal” in Europe always refers to classical laissez-faire liberalism, whereas what in the USA is labeled as “liberal” would rather be named “socialist” or social-democratic” in Europe]. Yet, he wasn’t able to hold one single promise of his flamboyant electoral speeches. But he won. Repeatedly and often against the odds. And he managed to keep the former communists (now “democrats” without any special doctrine except piecemeal social engineering for the sake of political correctness and the protection of “disadvantaged” social categories) out of government most of the time during the last twenty years. 

This triggered the hate of the left-wing parties and especially of the former communists who, following their founding father’s Antonio Gramsci advice, had pursued over the years a political strategy aimed at infiltrating schools, universities and, most important, the judicial order. The majority of the judges are indeed left wing oriented, as well as teachers, artists and university professors. Hence, unable to beat him at the ballots, the left set out to vanquish him by means of criminal trials. Berlusconi’s companies have been subjected to an unusual number of investigations and, up to 2013, he managed to avoid to be sentenced. There are three basic accusations regarding Berlusconi. First, that the origin of his money is obscure and that he was financed by the mafia, second, that he is a lecher engaging in sex with underage prostitutes, third, that he is a tax evader. If the accusations are true or not, is difficult to say and, from a libertarian point of view, it is quite irrelevant. The mob isn’t basically different from the state, although often it costs less, prostitution is a victimless crime as long as the persons engaged indulge in it voluntarily (as undoubtedly was the case for Berlusconi), the concept of legal age is absurd and tax evasion isn’t a crime, but protection of one’s property against the aggression by the state. Hence, if you are not a statist it is difficult to find anything wrong in Berlusconi’s alleged crimes or to develop a passion for the criminal investigations regarding him.

The Court case

The case decided by Italy’s Supreme Court regards a purported tax evasion committed by Berlusconi’s broadcasting company Mediaset. The prosecutor’s case is that the company bought licenses for US movies and sitcoms using offshore companies that in turn sold the licenses to Mediaset with a fat mark-up that reduced Mediaset’s profits and in turn, the taxes paid to the Italian state. The amounts are poor, especially if compared with Berlusconi’s wealth, about 5-10 million Euros per year. At the end of the day it all boils down to his company using a loophole and trying to pay less taxes by transferring part of the profits to off-shore companies. Hardly a strange thing. There isn’t one entrepreneur in Italy who hasn’t tried to reduce his fiscal burden recurring to loopholes, offshore companies or other tricks. It is a matter of survival. He, who is forced to pay all his taxes, should rather close his business, because it has no profitability. Suffice it to say, that one of the taxes imposed on businesses regards expenses and has such a structure, that a company could pay more in taxes than it makes in revenues.

Reaction and outlook 

What is most interesting is Berlusconi’s reaction both during and after the trial. Berlusconi always managed to inflame his electors affirming that taxes are too high and that the bureaucratic state should be rolled back. He once famously said that tax evaders are just acting in self-defense, because the cost of the state is too much. One of his finance ministers, Tremonti, himself a prominent tax-attorney and professor in fiscal law, wrote a book against the criminal law dispositions about tax evasion, able to transform honest persons in felons. In short, a big part of Berlusconi’s electorate, especially all the small and smallest individual firms that make up most of Italy’s productive structure, always voted him hoping that he would live up at least to some of his promises in fiscal matters.

Not only this didn’t happen, but Berlusconi also totally gave up his fight against taxes. As far as the tax evasion court case is concerned he denied being responsible shifting the blame on his directors and employees (which is probably true) or trying to defend the loophole-scheme. Even after the sentence he just keels affirming his innocence. He failed to say the only true thing: taxes are theft and the attempt to evade them is self-defense; the Italian system, where using loopholes is deemed equal to evading taxes is absurd and untenable.

Moreover, as a prime minister he never even tried to put in practice his idea of tax-cuts and roll-back of big government. As for the Reagan administration, he just was a successful seller of the idea, but his government constantly acted in the opposite direction increasing tax rates and especially enhancing the efficiency of the tax agencies in collecting taxes.

As Milton Friedman once said, Italy is a country that gets its strength from tax evasion. For a long time a secret covenant between the state and the many individual firms managed to keep the social fabric together. In spite of having tax laws that were quite similar to those of the other European countries, Italy had a very inefficient fiscal bureaucracy mostly unable to discover tax evaders and to enforce the enormous number of laws. If the state is weak, liberty will be enhanced. The more the powers and the effectiveness of the state, the lesser the freedom. Berlusconi was a traitor exactly on this. Italians would have been happy either to keep their inefficient and lazy state that basically left them alone, or to have the system changed in direction of roll-back and tax-cuts. Berlusconi did not live up to either expectation. On the contrary, he gave them a system that is gaining in effectiveness by the day and that costs more than two third of GDP. It is not infrequent nowadays to read about persons killing themselves because of the tax burden. 

Hence, the decision by the Supreme Court serves him right. It is a small but significant revenge for the millions of Italians that were fooled by Berlusconi.

Let’s hope that they will abandon the illusion that help and salvation may come from within the state.


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