Tax-dodging is as much a hallmark of Italian life as good wine and fashion so many commentators scoffed when Romano Prodi made curbing it a major policy plank ahead of last year's general election.

According to official estimates at least 13 per cent of Italian workers pay no taxes and do not officially exist, far higher figures than in most advanced economies.

However, data suggests that by ruling out amnesties for transgressors, stepping up checks and even closing down firms that employ workers in the black economy, Prof. Prodi's centre-left government may be succeeding where many of its predecessors failed.

Tax revenues surged by more than 11 per cent last year and economists say only part of that can be attributed to one-off factors and stronger than expected economic growth.

Italy is hoping that getting people to pay their taxes can kill two birds with one stone: Slash the budget deficit and - eventually - ensure sustainable growth by enabling tax rates to come down which would boost consumer spending.

The public finance results are already being seen. The deficit fell sharply at the end of last year and the government just cut this year's forecast to 2.3 per cent of GDP, well inside the EU's three per cent limit for the first time since 2002.

Economy Minister Tommaso Padoa-Schioppa said this month that if tax evasion were "eliminated or reduced to minimal levels", tax rates could be cut by up to six percentage points.

He faces a daunting task, not least because evasion is often viewed with indulgence even by those who pay their taxes.

"Hats off to the evaders, taxes are much too high and I'd evade too if I could," said Assunta Morisco, a teacher at Rome's Ada Negri nursery school, whose taxes are deducted at source.

Housewife and mother of five Sabrina Anastasi was only slightly harsher, despite being married to a tax inspector.

"I don't justify them but I don't really condemn them either," she said. "And I can't rule out that I'd do the same if I had the chance."

But analysts say Italy's economy, among the most sluggish in the eurozone for at least a decade, can increase its potential only if consumer demand moves onto a higher plane. And nabbing tax dodgers may be a pre-condition for that to happen. Private consumption was the one black spot in an unexpected growth spurt at the end of last year, edging up just 0.2 per cent from the previous three months compared with a record 1.1 per cent jump in gross domestic product.

Retail sales made a poor start to this year, falling 0.4 per cent in February after stagnating in January.

According to economic orthodoxy, the classic elements needed to get people to spend are already in place: buoyant growth of wages and, in particular, jobs.

Wages rose 2.8 per cent last year after a 3.1 per cent gain the year before, easily outstripping inflation in both years. As for employment, Italy created 425,000 new jobs in 2006, up 1.9 per cent and the best result since 2001.

So with both jobs and salaries on the rise, why aren't Italians hitting the shops? Analysts blame high tax rates and the country's long history of wayward public finances.

"It's all about trust," said Deutsche Bank economist Susana Garcia. "High fiscal deficits in Italy stop people spending because they think sooner or later governments will have to raise taxes to bring them down."