Italian 2014 Tax Evasion Estimated At Over EUR120bn

A study from Confindustria, the Italian business association, has estimated that tax and social security contributions evaded in Italy amounted to EUR122.2bn, or 7.5 percent of gross domestic product (GDP), in 2014.

Confindustria described tax evasion as “a serious obstacle to Italy’s economic and social development because it penalizes equity, distorts competition, and worsens the relationship between citizens and the state.” It calculated that halving tax evasion, if accompanied by tax rate reductions using the additional revenue, would add 3.1 percent to the country’s GDP and provide more than 335,000 more jobs.

Almost EUR40bn of value-added tax (VAT), EUR23.4bn of individual income tax, EUR5.2bn of corporate income tax, EUR16.3bn of other indirect taxes, and EUR34.4bn of social security contributions were evaded last year, it estimated.

Confindustria suggested that anti-tax evasion solutions could be found. For example, the tax information “databank” maintained by the Italian Revenue Agency could be integrated with those of other public agencies; the cooperative compliance model could be extended to small- and medium-sized enterprises in Italy; and Revenue Agency staff could receive training on transfer pricing and other specializations.

It also recommended that incentives should be provided to encourage businesses to modernize their VAT compliance and reporting arrangements.