Employers in Italy say they earn less than employees

'Widespread tax evasion’ suspected among entrepreneurs
By Lisa Jucca
|hrreporter.com|Last Updated: 04/03/2012

MILAN (Reuters) — In a country hard-hit by a deep economic crisis, Italian employers appear to have suffered more than those working for them — if annual tax declarations are taken at face value.

Data released from the treasury this week show that in 2010, a year of transition between the subprime crisis and the euro zone emergency, Italian employees declared, on average, 19,810 euros (C$26,200) per year.

But the entrepreneurs who hired them said they had pocketed a mere 18,170 euros (C$24,000) of average annual income.

According to the ministry data, 20.2 million taxpayers, or 49 per cent of the total, declared an annual income of no more than 15,000 euros (C$19,800), with 14 million on 10,000 euros (C$13,200) or less.

In part, the data reflected a genuine phenomenon of declining levels of real incomes, underlined by data on Friday which showed that wage growth lagged behind consumer inflation for the third month running.

But it also suggested substantial under-declaration of income and widespread tax evasion.

"The data released by the ministry of finance paint once again a shameful picture of tax evasion," said Pier Luigi Bersani, the head of centre-left Democratic Party, highlighting an ancient and deep-rooted domestic problem.

The data are at odds with abundant wealth in public display in Italy’s richest cities and holiday resorts and underline the challenge facing tax authorities looking to crack down on a phenomenon estimated to cost Italy 120 billion euros (C$159 billion) per year.

Italy's tax authorities, which recovered some 12.7 billion euros (C$16.8 billion) from tax evaders last year, have been trying to monitor discrepancies between low declared incomes and high spending on luxury goods like sports cars and yachts.

After decades of inaction, Prime Minister Mario Monti, who has pushed through drastic measures to contain the country's mammoth public debt, the second highest in the euro zone and equivalent to 120 per cent of gross domestic product.

But the finance ministry data illustrate the scale of the task the tax authorities face.

Despite having an estimated 8.8 trillion euros of combined private wealth, nearly three times the country's public debt, only one percent of taxpayers have declared an income surpassing 100,000 euros (C$132,000) per year, with only 30,500 earning more than 300,000 (C$396,700).

Yet, every year more than 200,000 buyers are able to purchase a luxury car in Italy costing an average 103,000 euros (C$136,000), data published on Saturday by daily La Repubblica show.

Lombardy, Italy's financial and business powerhouse, emerged once again as the country's richest region, with an average income per head of 22,710 euros (C$30,000). Calabria, in the south, was the poorest with 13,970 euros (C$18,500).

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