24.8 million Italians do not declare their income: 30 per cent pay 79 per cent of personal income tax

18.78 per cent of taxpayers (just under one in five) earn a gross income of 35,000 euros or more, and they pay 65 per cent of all personal income tax. If we also include those earning between 29,000 and 35,000 euros (11.44 per cent of the total), it becomes clear that 30 per cent of Italians bear the burden of paying 78.7 per cent of personal income tax. And, as the Observatory points out, this picture is ‘a far cry from the false myth that the entire Italian population is being harassed by the tax authorities and burdened by excessive taxes’.

Just to get a sense of the scale, those declaring between 35,000 and 55,000 euros (5.33 million) pay 52.6 billion in tax, with an average payment of 9.815 euros, whilst there are 1.9 million taxpayers who declare annual incomes of between 55,000 and 100,000 euros, who pay 39.75 billion in personal income tax, amounting to an average of 20,634 euros.

There are 745,615 people with an income in excess of 100,000 euros, accounting for 1.75 per cent of taxpayers and contributing 22.25 per cent of personal income tax (IRPEF). As the Osservatorio Itinerari Previdenziali explains, these are ‘individuals who, whilst making a vital contribution to the country through their taxes, are essentially overlooked by all proposals from trade unions and politicians, and are in fact often “threatened” with further taxes or cuts, such as a wealth tax’.

According to Stefano Cuzzilla, president of Cida, said: ‘Today, less than 19 per cent of taxpayers alone account for almost two-thirds of total personal income tax. This high concentration of tax collection is accompanied by another paradox: over the past sixteen years, welfare spending has more than doubled, rising from 73 to over 180 billion, without a corresponding reduction in poverty’. This is a sign that “it is not enough to redistribute more: we need to redistribute better”. For this reason, according to Cuzzilla, “a change of course is needed: less pressure on those who already sustain the system, a stronger fight against tax evasion, and a welfare system capable of focusing resources on those who really need them and of helping people into work and towards self-sufficiency, thereby broadening the base of contributors”.

“Cida calls for those who progress through work and professional development,” continues Cuzzilla, “and who declare their full income not to be systematically penalised. Paying more as one’s income rises is progressive; losing tax reliefs, concessions and benefits at the same time, however, can turn into a genuine ‘benefit trap’. An effective welfare system must protect those in difficulty and support them towards self-sufficiency, not create new disincentives to work and professional development. This is why we need to correct the ‘threshold effects’ and make the system more neutral, avoiding unequal tax treatment between income from employment and self-employment where the ability to pay is the same.”

“We now need a new agreement,” concludes Cuzzilla, “between the tax authorities and the welfare system: to restore the ISEE to its original purpose, to build a single database to track who receives what, and to focus resources on those who are genuinely in need. And any structural recovery from tax evasion must, as far as possible, result in a lower burden on labour and duly declared income. We must move towards a responsible welfare system that protects the vulnerable whilst promoting work and independence: not new taxes on the same taxpayers, but more taxpayers being called upon to do their bit.”

Brambilla (Pension Pathways): the burden of ‘hidden’ progressivity

To quote Alberto Brambilla, president of the ‘Itinerari previdenziali’ Centre for Studies and Research, there has been ‘a massive redistribution of wealth, which not only goes unnoticed by the majority of citizens who benefit from these services free of charge, but which, moreover, leaves other state functions with nothing but residual indirect taxes, excise duties and the perilous path of debt’.

As Alberto Brambilla points out, Italia is a country characterised by a threefold form of progressivity: ‘The first relates to the fact that the more a person earns, the more they pay; the second, equally legitimate, stems from the increase in the tax rate. The third, however, is a form of progressivity that could almost be described as ‘hidden’, because it is never highlighted by advocates of tax cuts, who rarely consider that, as income rises, deductions, bonuses and tax relief, thereby implicitly encouraging potential under-reporting. One might, provocatively, ask: why declare one’s actual income if this means foregoing potential social benefits or other concessions (school meals, transport allowances and so on) provided by the State, regions and local authorities?’

The Observatory’s analysis highlights that, as regards the self-employed, 36.89 per cent of taxpayers earning over the 35,000 euro threshold pay almost all of the IRPEF due in this category: approximately 89 per cent. Here too, the study highlights a problem of long-term sustainability, as the total personal income tax paid by the self-employed amounts to €25.64 billion: 11.86 per cent of total tax revenue in 2024. This is despite the fact that this category accounts for only 5.12 per cent of taxpayers filing tax returns and around 600,000 self-employed people benefit from preferential tax regimes.

In this regard, Alberto Brambilla goes on to comment that it remains ‘essential to repeal the flat tax, which, as well as raising concerns about its constitutionality, undoubtedly fuels the black economy; however, the figures show that the common perception that employees pay the taxes is not entirely true. It is true that employees pay taxes, but, as the breakdown by income bracket shows, these are primarily middle managers, civil servants and executives – categories now poorly represented by both politicians and trade unions, which instead focus their proposals on further reductions in taxes and social security contributions for the lowest income brackets, who, however, according to the data, already pay little or nothing today’.

Among the proposals put forward by the Observatory is that of a far-reaching review of the ISEE and the development of a centralised social welfare database appear to be the ways in which tax evasion can be curbed, enabling the State to provide more targeted and effective assistance only to those who are genuinely in need. In this regard, the Observatory points out that ‘in 2025, 10,369 households applied for the DSU (the Single Substitute Declaration) required to obtain ISEE certification: taking into account an average of 2.9 members per household, this means that more than 29 million Italians have therefore benefited from support in the form of cash or services’. These figures, according to the Observatory, ‘illustrate the trajectory of a scheme designed to address genuine vulnerability but which has now become widespread and often inefficient, in the absence of checks and means-tests that are not so easily circumvented’.

‘On the one hand, the rush to introduce new bonuses and benefits by politicians perpetually seeking electoral support, and on the other, inefficiencies within the administrative system – including in terms of checks and controls,’ notes Brambilla, – “have, unfortunately, fuelled the myth that ‘the less you declare, the more you’ll get from the state’, to which the country now seems dangerously clinging.”