VAT registrations: the UPB warning – here’s why tax compliance among the self-employed is among the lowest in Europe

Tax compliance among the self-employed in Italy is among the lowest in the European Union. Lilia Cavallari, President of the UPB (Parliamentary Budget Office), does not mince her words in her presentation to Parliament of the report on budgetary policy. Despite the results achieved in the fight against tax evasion – thanks in part to the strengthening of digital tools and a greater propensity for voluntary compliance (results that have led to an additional recovery of 36.2 billion, an increase of 2.8 billion in 2025 as indicated in the DFP and the decline in the propensity for undeclared work over the last decade), the UPB considers the propensity for self-employed workers to evade personal income tax (IRPEF) to remain very high. And that is not all. The tax system still suffers from ‘inefficiencies in collection, particularly at local government level’, and there is still ‘ample room for improvement in the analysis of the risk of tax evasion’.

But that is not all. Another Achilles’ heel of the tax system is the marked disparity in treatment between different types of income. The main beneficiaries of the tax reform – and in particular of the IRPEF overhaul – are households, which stand to gain 20 billion euros over the three-year period. In contrast, corporate taxation has seen a substantial increase, particularly for the banking and insurance sectors, with measures to bring forward tax liabilities such as deferred tax assets (DTAs) or credit losses. This amounts to a total of over 8.5 billion over the three-year period.

The changes to personal income tax – the UPB emphasises once again – have led to a reduction in the tax burden, particularly on middle-income earners, mainly through the introduction of ‘specific tax credits and increased allowances’. However, the increased progressivity, combined with the expansion of flat-rate substitute schemes, the flat tax for so-called ‘lump-sum’ taxpayers, has, however, ‘exacerbated disparities in treatment between different types of income’ and, above all, has widened the gap from that horizontal equity set as one of the main objectives to be achieved through tax reform.

Corporate taxation is a separate issue altogether. As is now the case every year, the measures introduced in the latest budget to support investment and productive activities will need to be refinanced and will therefore require new funding. According to the Parliamentary Budget Office, tax breaks for businesses have accumulated over time ‘into a complex, disjointed set of measures’. For this reason, the government should proceed with ‘a reorganisation aimed at offering stable investment prospects, concentrating measures in strategic sectors and favouring businesses that would otherwise have limited capacity to invest’. An action plan that should be aligned with European programmes aimed at boosting competitiveness, productive autonomy and the capacity to respond to shocks within the single market.

Among the issues to be resolved is the selection of investments eligible for support, thereby avoiding, as the UPB argues, ‘the waste of public resources and an excessive administrative burden on businesses’. There must also be an end to bureaucracy and the excessive requirements for accessing benefits, which in practice limit “their actual usability, particularly for small and medium-sized enterprises”.