04/01/24

ITALY: GDP revisions help Italy to meet EU tax evasion target ahead of schedule

As published on: reuters.com, Thursday 4 January, 2024.

Italy has met a tax evasion reduction target agreed with European Union authorities ahead of schedule, a Treasury document showed on Wednesday, although revisions to the country's economic data provided a helping hand.

Even though linked to statistical adjustments, the estimated improvement in tax compliance will help Italy to secure additional EU funds.

In its EU-funded post-COVID recovery plan, Italy in 2021 promised the European Commission to reduce a key gauge measuring propensity to evade taxes to 15.8% in 2024 from 18.6% in 2019.

The Treasury document showed that the indicator decreased as early as 2021 to 15.2%.

Commenting on the trend, the Treasury underscored the figures took into account "an adjustment of an extraordinary magnitude" adopted by national statistics bureau ISTAT in September, which resulted in an increase of around 40 billion euros ($43.60 billion) in 2021 gross domestic product (GDP).

Italy has so far received around 102 billion euros under the Recovery and Resilience Facility (RRF), the main component of the European Recovery Fund, out of a total national allocation of around 194.4 billion euros through 2026.

Treasury data released by Prime Minister Giorgia Meloni's government show that the estimated amount of missed taxes and social contributions fell to almost 83.6 billion euros in 2021 from 107.8 billion euros in 2016.

Since she took office in October 2022, Meloni has repeatedly called for a cooperative approach with taxpayers to curb chronic tax evasion affecting the euro zone's third largest economy, arguing more aggressive policies adopted by previous administrations had failed.

The document seems to dilute her argument, as the lower tax evasion is mainly due to VAT sales tax, "presumably driven by the various measures taken to strengthen the traceability of transactions."

In December 2022, Meloni was forced to backtrack on a proposal to cut sanctions against shopkeepers refusing to accept more transparent digital payments, following criticism from the European Commission.

Tags

Italy GDP revisions EU tax Tax evasion