Italy's Renzi rolls back Monti reforms on tax evasion, pensions

ROME, Oct 13 (Reuters) - Italy will increase a maximum threshold for cash transactions to 3,000 euros ($3,400) from 1,000 euros in order to boost consumer spending, Prime Minister Matteo Renzi said on Tuesday, raising a cap imposed in 2012 to combat tax evasion.

Renzi said in a radio interview he would introduce the change in the 2016 budget to be presented on Thursday. Chronically weak consumer spending has risen this year as Italy stages a modest economic recovery after a three-year recession.

“I want to give confidence to the Italians,” Renzi said. He did not explain why allowing people to pay up to 3,000 euros in cash rather than by credit card should lead them to spend more.

He said the 3,000 euro cash limit was in line with France, but Paris actually reduced its ceiling this year to 1,000 euros.

Italy is a traditionally cash-based economy with one of the highest levels of tax evasion in the European Union, amounting to some 91 billion euros per year, according to Economy Ministry data. Sales tax accounts for 35-45 billion of that amount.

Former Prime Minister Mario Monti introduced the 1,000 euro threshold to make it easier for the authorities to trace payments made to retailers and service providers.

Renzi said he agreed with fighting tax evasion but disagreed with Monti’s methods, which he said were too harsh and “created terror.” These included impromptu controls by the tax police of shops and restaurants, as well as the cash-payment limit.

Renzi has already approved a measure stipulating that tax evasion of up to 150,000 euros per year should carry no criminal sanction, raising the previous threshold of 50,000 euros. While critics say Renzi is too soft on tax evasion, he says business people should not be excessively penalised for what can be honest mistakes.

Renzi said he would roll back part of a pension reform adopted by Monti in 2012 which sharply raised the minimum retirement age, especially for women, in order to consolidate public finances in the medium term.

“Within a few months” he would make it possible for people to retire earlier, but with a lower pension, he said. He gave no details, saying the government was still looking at various options on how the reform would work.

Italian pension spending, at around 15 percent of national output, is the highest in the European Union. ($1 = 0.8787 euros) (Reporting by Gavin Jones; Editing by Raissa Kasolowsky)