Tax Gap Italy

About Tax Gap Italy

Italy has one of the largest tax gaps in the developed world, estimated at approximately 90 billion annually, or about 5 percent of GDP. Italian tax evasion is concentrated in the underground economy, particularly in construction, agriculture, and services. Italy has used various tools to combat evasion, including VAT lottery systems that incentivize consumers to request receipts. The Italian Revenue Agency uses data analytics to identify patterns of evasion, such as restaurants reporting implausibly low revenue. The gap between reported and actual income has narrowed but remains substantial. The Italian tax system is complex, with high rates and numerous deductions and credits that create opportunities for evasion. Italian tax collection is also hampered by slow court proceedings and an amnesty culture. Italys experience shows that high tax rates combined with weak enforcement create significant evasion.