Italy’s Tax Evasion Ranking

Challenges Faced by VAT Registered Businesses in Italy

In Italy, VAT registered businesses are struggling to achieve a rating of “8” in their tax assessments.
The disheartening scenario revealing a trend towards tax evasion was unveiled by the 2023 income tax declarations.
The map of tax evasion risk outlines vast areas of non-compliance, with professionals and commercial activities declaring minimal figures that are hard to believe (let alone by the Tax Authorities).

The rating in the reliability of the declaration has a minimum threshold identified at 8, which in tax assessments indicates the minimum level to consider the declaration reliable.
According to the 2023 declarations, businesses such as laundries, car rentals, restaurants, furriers, elderly care services, and aquaculture fishery are among those considered unreliable.

Analysis of Unreliable Declarations by VAT Registered Businesses

According to data published by the Finance Department on the declarations of 2.3 million self-employed workers, analyzed with algorithms evaluating the consistency of declarations based on the geographical and economic context, 147 activities were involved.
The unfortunate lead goes to laundries, with an unreliability rate of 78.5%.

Only a few laundries manage to obtain a sufficient rating, with average declared incomes around 26,000 euros.
However, the majority declared incomes below 7,000 euros.
A similar situation is observed for car rental businesses and restaurants, with slightly lower unreliability rates.
For instance, the average income declared by restaurant owners is about 53,000 euros, but 73% declared only 8,000 euros.

Sectors with Highest Tax Evasion Rates

Here is a list of sectors where tax evasion, based on reliability indices, is most prevalent: Laundries 78.5%; Car rentals 77.9%; Sports facility management 76.3%; Restaurants 72.8%; Furriers 72.5%; Elderly and disabled care 72.4%; Surveyors 71.9%; Fishing and aquaculture 71%; Tea and coffee processing 70.9%; Associations and organizations 70.6%.

On the flip side, the lowest positions in the ranking reflect categories with mostly impeccable tax assessments.
The top 10 categories with high reliability rates include Pharmacies 25%; Medical practices 25.9%; Actors 39.7%; Notaries 40.8%; Paramedics 42%; Paper article manufacturing 42.4%; Accounting professionals 42.6%; IT professionals 43.5%; Geologists 44%; Veterinarians 44.8%.

Regions at Higher Risk

Not only by business category but also by region of residence, some areas are at higher risk of tax evasion.
The bottom positions are held by Molise, Basilicata, and Sardinia, particularly the cities of Isernia, Taranto, and Nuoro.
Conversely, the most virtuous regions are Trentino-Alto Adige (Trento), Veneto (Belluno), and Lombardia (Lecco).

Italy counts nearly 6 million VAT registered businesses and small enterprises annually paying taxes based on estimates from previous years’ declarations.
Despite the introduction of electronic invoicing, predicting cash-based tax payments by declaring monthly earnings and expenses to calculate the difference remains uncommon, with taxes still paid the following year.

Furthermore, an algorithm determines each individual’s tax reliability by assessing the declared amounts over the last 5 years, assigning a rating (8 and above being reliable, 6 and below subject to preventive checks).
However, the algorithm may err in considering reliable those consistently declaring less and conducting part of the business off the books, deeming unreliable someone who, perhaps due to reasons like illness, maternity, extraordinary expenses, or lower income compared to previous years, declares less for one year.