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Survey Puts Italian Tax Burden At 'World Record' 55%

by Ulrika Lomas, Tax-News.com, Brussels

23 July 2012


During his speech to a conference in Rome, Carlo Sangalli, the President of Confcommercio, the federation representing small and medium-sized enterprises, professionals and sole traders, divulged that its research has shown that the country’s actual tax burden has reached almost 55%.

He pointed out that the apparent tax burden - that which is obtained by comparing Italian gross domestic product (GDP) and total tax revenue - is currently 45.2%, and therefore at fifth place amongst the 35 countries in the Organization for Economic Co-operation and Development.

However, the actual burden on those who pay their taxes, after subtracting the Italian underground economy from the equation, has been found to be much higher at 54.8%. That, it is said, would be, by far, a world record, with Denmark a long way away in second place, at 48.6%.

In fact, the non-taxpaying economy in Italy has now reached 17.5% of GDP – another world first – although it has shown a slight tendency to reduce, given that in 1998 it had actually reached 20%.

In addition, Confcommercio has produced statistics proving that Italy is in first position in the world for the time that the government takes to pay its tax debts to companies, and in last place for the number of days it takes to obtain a definitive court judgement in a contractual dispute.

Its research has also demonstrated that it is not that Italians have a “genetic propensity” for tax evasion, but that the deficiencies in the Italian judicial and tax administration systems, the low quantity and quality of public services financed from tax revenue, the high cost and time taken in fulfilling tax obligations and, above all, the too-high tax levels, have led to a tendency towards tax avoidance.

It is emphasized therefore that the government’s actions against tax evasion will not be successful without a parallel process to reduce tax burdens, and the only possible conclusion is that a precise mechanism is needed to give back to regular taxpayers the higher revenues obtained by those actions.

Sangalli pounced on that conclusion in his speech and urged the government to introduce measures to reduce corporate and individual income tax rates, and encourage economic growth, using funds made available, on the one hand, by less or better-targeted public spending and, on the other, by increased revenues from reduced tax evasion.

While pointing out that the high taxation levels weigh heavily on both investment and consumption in the economy, he understood that, during the period that the country remained in fiscal deficit, it would be impossible to reduce direct taxes, without providing additional resources as cover. Confcommercio therefore hopes that the government will immediately solve that problem by putting together a separate ‘tax reduction fund’, to be filled with resources obtained, over time, from reduced public spending and measures against tax evasion.

At the same conference, the General Manager of the Italian Revenue Agency, Attilio Befera, pointed out that the 55% tax burden could be even higher for some, given that some businesses had indicated that they have paid an overall tax rate up to 70%. He is in favour of Confcommercio’s tax reduction fund, and promised that, by September 30 this year, the Agency will put forward its ideas, to discuss with all interested parties, of possible further reductions to tax compliance requirements.

TAGS: individuals | court | compliance | tax | business | tax compliance | tax avoidance | law | corporation tax | tax rates | Italy | individual income tax

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