Tax breaks: a windfall of 46 billion wasted

Italian companies’ coffers hold a pool of 46 billion euros in subsidies that are wasted every year – a sum that could be recovered for the benefit of businesses and workers alike. This emerged from a PwC study entitled ‘Wage Costs in Italia: Unlocking Competitiveness for Growth’, which was carried out on a sample of 400,000 businesses with 13 million employees, with labour costs totalling 457 billion, resulting in 33 billion euros of recoverable credits arising from inefficiencies, oversights and the failure to reclaim tax credits linked to incentives ranging from tax relief for the recruitment of young people, women, and workers in the South and in Special Economic Zones (SEZs), right through to expense claims. When projected across the entire workforce in Italy, this amounts to 46 billion in recoverable tax relief, explains Francesco de Mutiis, Director of People Transformation at PwC.

The Italian context, characterised by a great deal of bureaucracy and regulations that are often daunting due to their complexity, offers significant scope for tackling inefficiencies in one of the main cost areas for Italian businesses: staff costs. This is precisely the aim of the platform, Jet Recupero AI by Jet HR, created with the objective of recovering receivables. Marco Ogliengo, CEO and co-founder of the tech company specialising in HR consultancy, explains that ‘by analysing our clients’ payroll systems down to the most technical details, we have uncovered a world of opportunities that remain systematically underutilised – such as tax relief schemes that are difficult to identify, measures requiring very precise technical application to be fully exploited, and sometimes simply oversight. This phenomenon affects more than half of the companies in our sample, comprising over 250 of our clients. Jet Recupero AI is an intelligent agent that we have already deployed across several companies, achieving an average saving per employee of over 1,500 euros.” Some examples include Lexroom, with €210,000 in social security savings and €40,000 in administrative savings; Serenis, with €101,000 in social security savings and €49,000 in administrative savings; Octopus Energy, with €193,000 in social security savings and €36,000 in administrative savings; and Richmond, with €41,000 in social security savings and €5,000 in administrative savings.

In a country where the average tax wedge stands at 45.8 per cent – compared with an OECD average of 35.1 per cent, the fifth highest among the 38 member countries – almost one in every two euros does not reach the worker. According to PwC’s projections, out of labour costs of 100, around 46 are absorbed by taxes and social security contributions, and only just over half translates into net income for workers. This cost is one of the key areas for action to boost competitiveness, as Maria Anghileri, COO of the Eusider Group, also agrees, pointing out that ‘the main problem facing Italian businesses at this stage is the excessively high cost of energy, which prevents us from being competitive. When it comes to wages, we must all do more to make the country more attractive and address the mismatch between labour supply and demand. This is precisely why, as the Confindustria Youth Wing, we have put forward a proposal for personal income tax relief for those under 35 earning up to 50,000 euros for the first five years. This would allow workers to save up to 1,000 euros a month. We call on the Government to make an effort in this direction and to look to the country’s future’.

In 2025, the average hourly labour cost in Italia stands at around 32 euros, which is lower than both the EU average (34.9 euros) and that of the euro area (38.2). The issue of competitiveness, however, is not just about wage levels, but about how the cost is distributed between the worker, the business and the tax system. Of the total hourly cost of 32 euros, approximately 23 euros are attributable to wages and salaries and approximately 9 euros to non-wage costs. This component accounts for 28.1 per cent of the total, exceeding the EU average of 24.8 per cent and the euro area average of 25.6 per cent, confirming the central role of social security contributions and taxation in the structure of Italian labour costs, which represent the main cost item for businesses. The PwC study identifies 33 levers for optimising labour costs, divided into three categories: incentives with a fixed spending cap, levers expressed as a percentage based on the recipients’ circumstances, and management-related levers. These include exemptions for young people, women and workers in Special Economic Zones (SEZs), welfare schemes, electronic meal vouchers, VAT recovery on expense claims, certifications and other measures that can often be combined. Based on the sample analysed, PwC Italia estimates an average potential saving of around 31.2 billion, equivalent to approximately 7 per cent of total labour costs. Even a seemingly modest percentage reduction therefore has a significant economic impact on a large scale. Contribution incentives account for the largest share of this figure. 57 per cent of the estimated potential savings stem from levers with a fixed spending cap, 33 per cent from management-based levers and the remaining 10 per cent from levers expressed as a percentage. Optimising labour costs does not, therefore, depend on a single measure, but on the ability to combine social security contribution incentives, organisational tools and criteria for combining measures.

The potential savings by company size show that the benefit of adopting optimisation measures increases in absolute terms as the company grows in size, whilst still remaining in double-digit percentages of labour costs even in the smallest firms: from 7.37 per cent of labour costs per company in micro-enterprises, to 5.38 per cent in small enterprises, up to 4.47 per cent in medium-sized enterprises and 4.51 per cent in large enterprises. In conclusion, the problem does not seem to be a lack of levers, but rather the difficulty in identifying and applying them all. Delays in implementing decrees, the operational application of regulations, fragmentation across national collective labour agreements, regional and bureaucratic variables make rapid manual verification unsustainable, particularly when dealing with large numbers of employees; it is in this context that technology and artificial intelligence can play a role in improving business efficiency.