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Italy tops the table for tax dodging in Europe – again

The amount of lost VAT revenue in Italy was once again found to be the biggest in Europe, with the UK in second place.

Published: 10 September 2020 15:44 CEST
Italy tops the table for tax dodging in Europe - again
Photo: Ina Fassbender/AFP

Italy held on to the top spot in Europe’s rankings for VAT evasion once again, the European Commission said on Thursday.

The Italian state lost 35.4 billion euros in dodged VAT revenue, marking the biggest loss in absolute terms, according to a new EC study.

The figures, the most recent available, dated from 2018 and so were not impacted by the coronavirus pandemic.

Lost tax revenue in Italy was up from 35.3 billion euros in 2017.

The United Kingdom was in second place with a loss worth €23.5 billion, followed by Germany with €22 billion.

As a percentage, Italy’s tax gap was fourth-biggest at just over 24 percent, behind Romania (33.8%), Greece (30.1%) and Lithuania (25.9%).

“Today's figures show that efforts to shut down opportunities for VAT fraud and evasion have been making gradual progress – but also that much more work is needed,” commented Paolo Gentiloni, EC Commissioner for Economy.

“At this time more than ever, EU countries simply cannot afford such losses,” he said, urging countries to “step up the fight against VAT fraud with renewed determination.”

READ ALSO: Could coronavirus push Italy to adopt card payments at last?

Prime Minister Giuseppe Conte is looking at introducing measures encouraging electronic payments as part of his Progetto Italia Cashless, or Project Cashless Italy. 

Following the meetings on Tuesday, Conte spoke of the “importance for the country of encouraging everyone to use digital payments.”
 
“It will not only mean making the payment system more efficient, more transparent and traceable: it also means laying the foundations for recovering the underground economy, discouraging payments 'in the black'.”
 
Some studies estimate that up to 86 percent of all point-of-sale payments made in Italy in 2018 were in cash – the third-highest in Europe after Spain and Greece, where the figure is 87 and 88 percent respectively.
 
This compares to just 15 percent in Sweden and 34 percent in the UK. 
 
Photo: AFP
 
Several measures encouraging cashless payments were included in the 2020 budget last November, including the promise of tax incentives for those who pay by electronic – and therefore traceable – means, as authorities try to tackle widespread tax evasion.
 
The government also stated it would slash the maximum cash payment allowed from the current 3,000 euros down to 1,000 euros by 2022.
 
Italy has long been relatively resistant to adopting forms of cashless payment. But ministers may now be hoping that the public is more open to switching to electronic payments – either due to hygiene concerns, or after shopping online for the first time during lockdown.
 
As elsewhere in the world, some Italian shops and businesses had already taken it upon themselves to start asking customers to use contactless payments to avoid handling bills possibly touched by an infected person.
 
This includes payment via apps in some restaurants, as well as requests for customers in shops to use contactless payment methods.
 

 

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TAXES

Should you hire an accountant to file your Italian taxes?

Italy's tax system is notoriously complex. Can you realistically expect to navigate it yourself, or should you pay a professional?

Published: 21 March 2024 10:01 CET
Should you hire an accountant to file your Italian taxes?

The Italian tax system has a reputation for being particularly difficult to navigate. Don’t just take our word for it: the prime minister herself recently described her country’s tax rules as “illogical and vexatious… and quite useless too.”

But as you face the upcoming tax season you may be wondering: just how hard it can really be to manage your Italian tax affairs yourself? After all, this isn’t the most straightforward or pleasant task in any country.

READ ALSO: When are the deadlines for filing your Italian income tax return?

For Italy’s foreign residents, it’s frequently recommended that you seek help from an accountant or another tax professional, not least because the language barrier increases the risk of potentially costly mistakes.

The complexity of the system also means Italians themselves often seek professional advice on tax issues, particularly if their tax situation is at all complicated.

While the Italian inland revenue agency (Agenzie delle Entrate) has taken steps to simplify the process of filing a tax return in recent years, and even provides some Italian tax information in English, the tax forms themselves are not available in English and there’s a lot to understand about the rules.

When filing a tax return, getting professional advice can be particularly important if you’re making changes to the pre-filled sections of the 730 form, or if you’re self-employed and need to use the redditi PF form.

Find out more about these forms and the deadlines for filing them in 2024 here.

We asked readers whether they would recommend using an accountant over filing taxes yourself, and the majority agreed that, for them, professional help was worth the cost.

“There’s not a chance I would file my own taxes in Italy,” said self-employed British reader Greg in Lombardy. “The rules keep changing, it becomes very time-consuming.”

He pointed out that back in the UK most people do not need to file an annual income tax return, and said that as a result he thinks some British nationals in Italy tend to “underestimate” the difficulty and “think they can go the DIY route.”

“I see time and again people asking for advice [about taxes] on expat groups,” he said, adding that there’s a lot of “wrong information” being given in response.

“Not worth it. Just pay an accountant,” he advises.

READ ALSO: What is an Italian commercialista and do you really need one?

Janine in Tuscany said her commercialista (accountant) has saved her money. She has friends who have “tried to apply for some of the [tax] bonuses themselves but never heard anything back,” while her claims submitted by a professional were processed quickly.

“They know the ins and outs of the system and can just get things done,” she said.

Meanwhile, in a recent article on filing US and Italian taxes, some American readers told us they needed not one but two accountants – one in each country.

“Get professional tax advice for your specific situation. Know that double taxation is real, despite the existence of tax treaties,” advised one anonymous American reader who said they pay for professional help in order to avoid being audited in Italy.

READ ALSO: Reader question: Do US nationals in Italy have to pay taxes twice?

Others told us that, while they needed help with their American taxes, they found they were able to handle their Italian tax return themselves using software such as TurboTax.

Those who have hired a tax professional also stressed the importance of choosing someone with experience of handling international tax affairs.

“You will probably end up paying ‘expat rates’, especially if you need someone who speaks English,” said reader Nancy, from the US. “Make sure you get recommendations, make sure they understand your situation.”

If you have concerns about filing your own taxes in Italy, you don’t always have to pay for help.

Italy has a national network of tax assistance centres (Centro Assistenza Fiscale, or CAF) which provide free advice on tax matters and can also help you complete and file your tax return, submit claims for financial assistance, and more. Find your nearest office here – though be aware that not all staff will speak English, and they get very busy ahead of tax season.

If you’d prefer to look into hiring a tax professional, find out more about what exactly a commercialista can help with and how to find one in this article.

For general information on the tax requirements you may face, consult the tax agency (Agenzie delle Entrate). Find your nearest office here.

Please note that The Local is unable to advise on individual cases. Find more information on the Italian tax agency’s website (in English).

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