Italian mayor urges rich to duck yacht tax

CASTELSARDO, Sardinia, July 30 (Reuters) There are not many mega-yachts in the marina at Castelsardo this year, which the mayor of the medieval coastal town on Sardinia blames on a tax on the millionaire lifestyle.

Franco Cuccureddu says the tax -- on luxury yachts and beachside villas -- is scaring the rich away from what should be a playboys' paradise -- and he is encouraging visitors to say 'can pay, won't pay' to the tax collectors.

''We are doing all we can to avoid the tax legally, we tell people who come to our ports that we'll help them,'' said Cuccureddu, looking out to sea from the citadel town, perched on a rock jutting out from the island's northern shore.

Nationwide, Italy has enjoyed something of a tax windfall this year, helped by an economic upturn and efforts to crack down on tax evasion -- which Economy Minister Tommaso Padoa-Schioppa in June called ''a pandemic''.

Estimating the cost of tax evasion at 7 per cent of GDP or about 100 billion euros (137 billion dollar) a year, he said this was nearly double the rate of evasion in France, Germany and Great Britain and nearly four times that of Austria, the Netherlands and Ireland.

Sardinia's luxury tax is a charge of 1,000 euros for the right to moor yachts 14 metres long in Sardinia, rising to 15,000 euros for boats of more than 60 metres.

It is also imposed on beachside holiday homes -- to the horror of former prime minister Silvio Berlusconi who owns a holiday mansion in nearby Porto Rotondo.

The jet-set, whose summer parties on Sardinia's Emerald Coast are a mainstay of Italian gossip magazines, say the tax is an ideological attack by the island's left-wing governor.

But the man they portray as a Robin Hood-style villain who wants to take from the rich is, himself, richer than most of the people he is taxing.

Renato Soru made a fortune creating Internet firm Tiscali and was elected governor in 2004 on a centre-left ticket.

''It's not a tax on luxury, we don't tax all luxury items,'' Soru told Reuters. ''If you go into a restaurant in Sardinia it can cost 5,000 euros for a meal -- and not because there's a tax imposed by the region.'' DOT-COM TYCOON The 49-year-old dot-com tycoon plans eventually to return to his business, but wants first to pursue policies he says will stop environmental destruction of Sardinia's pristine coast and develop the island's poor mountainous interior, where some people still use donkeys.

Before Sardinia's luxury tax, introduced last summer to help fund his programme, Soru banned new buildings on the coast.

As house prices have soared, Soru says it is fair to ask for a ''rather modest'' tax contribution from home-owners -- especially those who only visit their properties for a few weeks a year -- of which 25 per cent will be spent on environmental protection and the rest on developing the interior.

As for yacht owners, Soru argues the tax will do little to dent their massive budgets. ''We're just asking for a contribution that's less than one day of fuel for a boat of that kind.'' But local mayors and marina operators say the tax has hit them hard. Cuccureddu, who chairs a group of local politicians opposed to the luxury tax, says the number of yachts visiting Sardinia was down 40 per cent last summer and looks set to drop 70 percent this year on 2005 levels.

Klaus Grude, a German holiday maker whose 12.5 metre yacht was moored in Castelsardo, was relieved his boat was just small enough to not qualify for the tax.

''A 14 or 18 metre boat is not for the upper classes, it's for people like me, pensioners,'' said the 67-year-old Bavarian.

''Rich people like Bill Gates can be charged, but if I had to pay tax I would leave.'' JUST DON'T PAY Cuccureddu says boat owners should continue to come, but suggests they don't pay -- at least pending a ruling by Italy's constitutional court which will test the legality of the tax at a hearing in September.

''If the constitutional court agrees with Soru, the European Union will intervene,'' he said. Cuccureddu says the tax violates EU rules by discriminating between Sardinian residents and people from other parts of Europe and impedes business.

In the meantime, he said the high-end tourist trade will suffer as fewer rich holiday-makers sail to Sardinia -- to the benefit of places like Spain, Croatia, Greece and Turkey and, especially, the French island of Corsica, visible on a clear day from Castelsardo.

When asked if his tax would hurt the economy Soru replied: ''It hurts the economy if the tax system makes people from small villages in the interior pay for the upkeep of the coasts.'' ''Should we evaluate everything only in terms of money or is there also a reasoning of equity and justice?'' The mayor of Castelsardo said Soru would eventually have to accept that the tax is driving away tourism.

''It gives a negative image of Sardinia which will be difficult to recover from,'' said Cuccureddu. ''If Soru can show he can raise taxes and can keep or increase the number of customers, he deserves the Nobel Prize for economics.'' Reuters RJ RS1121