Rome, February 5 - Italy's Audit Court warned against further tax increases on Tuesday, saying these would have recessionary effects and worsen, rather than improve, public finances. The court's attorney general also warned that corruption is widespread within Italian public administration and has cost the economy as much as one billion euros in European Union funding. The court, as it opened its 2013 judicial year, noted that tax hikes and spending cuts introduced by outgoing Premier Mario Monti's emergency technocrat government have boosted the national accounts, raised investor confidence in the country and eased pressure on its borrowing costs. But they have also deepened the recession and there has been speculation another austerity budget may be needed after this month's general election to put Italy on course to hitting its target of balancing the budget in structural terms this year. As a result, Audit Court President Luigi Giampaolino warned that tax increases should not be considered, saying that the tax burden was already "out of line" and that the hikes would create "the conditions for further recessionary effects". Giampaolino added that austerity budgets produced the "danger of shrinking the economy", stressed the need to focus on "factors in favour of helping growth" and the need to cut taxes for "a fairer distribution of the tax burden". Meanwhile, his colleague Salvatore Nottola, attorney general of the court, stated that fraud has deprived the Italian economy more than one billion euros in European Union funding over the past decade. Despite the efforts of Italy's financial police, fraud related to the illegal use of EU funds has led to the billion-euro losses, said Nottola. Fraud is often found at the intersection of local authorities and local companies, who take on projects beyond their management abilities, he said. "The adverse effects of mismanagement or illegal behaviour, sometimes even criminal," contribute to the waste of EU funds, Nottola said. He also warned that corruption in Italy is a widespread problem found throughout public administration. Such corruption causes "serious damage to the public image (of government) and takes away from the peoples' confidence in institutions," said Nottola. Nottola insisted he was not commenting on the current national election campaign. On Monday ex-premier Silvio Berlusconi called for a broad tax amnesty to bring in revenues. A tax amnesty has both "intuitive and well-founded" rationale, said Nottola. But, he added, the outcome is not always certain as a tax amnesty can also mean that tax evasion is tolerated, rather than punished. Berlusconi says that he favours a new tax amnesty after his last government passed a controversial one in 2009-2010 that brought home 104.5 billion euros in capital and other assets hidden abroad.
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di Giovanni Pastore