Underground Economy Costs Italy EUR100bn In Tax Annually

by Ulrika Lomas, Tax-News.com, Brussels

05 October 2009

The Italian Institute of Economic and Social Research (IRES) has calculated that the underground economy in Italy costs EUR100bn (USD146bn) in uncollected taxes.

At a recent conference, using information provided by the Ministry of the Economy, the National Institute of Statistics and the National Institute of Employment Insurance, IRES said that the Italian underground economy oscillates between 17% and 19% of the country’s GDP. In monetary terms, the consequent subtraction from GDP is therefore some EUR240bn to EUR279bn. According to the Ministry of the Economy, that also represents a loss of EUR100bn in lost taxes, or more than 15% of total Italian tax collections.

It was also said that the tax loss has also increased over time. In only the last five years, earnings 'hidden' from the tax authorities have increased by 30%, it is claimed. The total tax avoided in those years amounted to EUR400bn.

The number of employees within the underground economy was calculated at 5.5m - the equivalent of almost 3m full-time jobs, or 12% of the total Italian workforce. From the data, it also emerged that 55% of those undeclared jobs were filled by Italians and 9% by foreigners (the remainder being filled by either at any one time).

Amongst other details, it was disclosed that 52% of the undeclared workers are less than 34 years of age, that 63% are to be found in the centre and south of the country and that over 15% of all employees are undeclared in the southern provinces of Italy, reaching almost 27% in Calabria and over 21% in Sicily.

The service industries are said to constitute the major sector where they are to be found – for example, 53.4% of all employees in domestic services, 35.8% of those in hotels and public services, and almost 30% of those in transport and communications.

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