Shadow economy and tax evasion are the result of many determining factors: the size of the tax claim, the efficiency of the judicial and tax system (prevention, deterrence and punishment), the perception of citizens on the quantity and quality of the public goods and services offered by the State and Local Authorities, the difficulty and cost of spontaneously fulfilling tax obligations. In the "Note on the underground economy" the Research Department raised the question of establishing, albeit as a first approximation, the weight of these factors. The result is that these factors have a significant impact on the determination of the undeclared economic rate. Therefore, in order to pass from a repressive tactic of undeclared money and evasion to a strategy for the mass emergence of taxable incomes, it is necessary to work to improve all and all the determining factors together. Always remembering that the resources removed from the undeclared area and tax evasion must simultaneously migrate to the benefit of taxpayers in good standing. The fight against evasion without this tax refund is impossible. In the Note, great attention was paid to finding an adequate measurement of the determining variables of the informal economy, for those (few) countries that present reliable statistical evidence of this phenomenon. It is neither easy nor immediate to quantitatively measure the perception of public output or the cost of compliance. It was therefore necessary to use a framework of elementary indicators both of perception and of direct detection of particular aspects of the various phenomena, in order to compose composite (synthetic) indicators to be used then to quantify the impact of the determining variables on the undeclared economic rate .
Among the variables analyzed for this purpose, using qualitative and quantitative indicators elaborated by international bodies (WEF and World Bank), it is worthwhile to dwell on three particularly significant factors: expected value of the sentence, perception of public output, costs and time of fulfillment. The actual value of the sentence plays a very important role. Faced with the complexity of finding adequate indicators to account for the deterrent effect operated by the tax administration, the solution was adopted of analyzing the quality of the judicial system as a whole, on the assumption that a good judicial system in general also replicates an effective deterrence system for tax and social security offenses. To this end, it was decided to construct a composite indicator calculated on quantities linked to the business-justice relationship, such as the presence of an efficient reference regulatory framework, the diffusion of irregular payments and bribes, the waiting times for justice in the solution of problems related to economic activity, the complexity of bureaucratic procedures related to civil justice. The results of the composite indicator show for Italy the lowest level of efficiency of the judicial system among the countries considered, a situation that has not been recorded over the years big changes. In the 2010 ranking, Italy occupies the last place out of 26 countries, preceded by Greece, Slovakia, Slovenia and Mexico, signaling a deterioration of one position compared to 2000.
The analysis of the basic indicators that have contributed to defining the composite index clearly explains Italy's position in the ranking. For example, the indicator on the efficiency of the reference legal framework for disputes between companies shows a highly critical situation for Italy. The assessments expressed in the WEF survey on the suitability of our system to resolve disputes quickly and efficiently are decidedly negative: in the 2010 ranking, Italy occupies the penultimate position preceded by Portugal, Greece, Slovenia and Mexico. Italy's position is even worsened by comparison with 2000.
Furthermore, Italy stands out for the diffusion of irregular payments and bribes and occupies the 2010th place in the 25 ranking, ahead of Slovakia. On the contrary, the countries of Northern Europe, where corruption is considered almost non-existent, occupy the first places in the classification. Also for the waiting time for a bankruptcy or insolvency sentence, Italy, while not positioning itself in the last places, recorded a very high value in 2010, equal to about two years and significantly worsening compared to 2000 when the waiting time was equal to one year.
Another determining factor of spontaneous compliance is constituted by the perception that citizens have of the quality-quantity of the services provided by the public administration. Fiscal correctness is a bilateral taxpayer-public administration relationship: if the latter behaves badly – or is perceived to behave bad - it is possible that the other party reacts by adapting its attitude in a non-cooperative sense. The favorable perception of public output is therefore positively correlated with spontaneous compliance, directly influencing the civic-economic sense (the greater this, the lower the tax evasion ): an inefficient public administration does not favor the spontaneous fulfillment of tax obligations by citizens; if citizens, on the other hand, perceive that their interests are adequately represented in political institutions, their identification with the State and their willingness to pay taxes increases. To measure public output, first of all, the sectors where the services provided by the public administration play a significant role in the life of citizens: institutions, health, education and infrastructure. A composite perception index of public output was then constructed which incorporates the 4 basic indicators of the identified sectors.
The perception of how the State, in its political and administrative articulation, responds to citizens-businesses has remained substantially unchanged in the last decade in our country. But in comparison with other European and non-European countries, the quality-quantity of public output in Italy is among the worst, occupying the third last place in the ranking of the 26 countries taken into consideration, surpassed in the negative opinion by Greece and Mexico in 2000 and by Slovakia and Mexico in 2010. Finland confirms itself as the country with the best perception of public output. By analyzing the specific variables that make up the composite index, very different situations emerge. The quality and efficiency of the institutions, the first among the elementary indicators, certainly represents a crucial point for the competitiveness and growth of an economic system. Italy is fourth from last in the rankings, recovering only one position compared to 2000. The result was obtained by the Wef by comparing a series of sub-indicators including the weight of bureaucracy, excessive regulation, the degree of transparency of political-institutional decisions, the level of wastefulness of public spending, the level of independence of the judiciary, the degree of trust in the ruling class, the high level of corruption and the ability to deal with organized crime.
For the overall quality of the infrastructures (roads, railways, ports and air transport) Italy, in 2010, is in last place in the ranking of 26 countries, far from both France and Germany (which are respectively first and in fifth place), and from countries such as Spain, Greece or Ireland. This gap does not seem to decrease over the years. On the contrary, there has been a progressive worsening, with a growing gap between the Italian situation and that of the main European and non-European countries (compared to 2000, our country has lost as much as 3 positions).
The basic indicator relating to health and primary education assigns Italy an excellent 7th place (against the 12th recorded in 2000) in the ranking of 26 countries. As regards health, the elementary indicator (which takes into the other of the high life expectancy and low infant mortality) places Italy among the most virtuous countries. To integrate the information, 2 other quantitative variables were taken into consideration which account for the hospital supply: the number of beds and the number of doctors in relation to the population. As far as hospital beds are concerned, Italy appears to have one of the lowest values in the offer; below our country are Denmark, the United Kingdom, Portugal, Spain and Sweden. With regard to the number of doctors in relation to the population, Italy is characterized by a high density of medical personnel working in health facilities. In addition to health, this indicator takes into account the quantity and quality of the basic training received by the population.
The Wef survey highlights that the perception of primary school quality in our country is quite good. As regards higher education and training, Italy ranks 22nd, recovering one position compared to 2000 Although enrollments in secondary and tertiary schools are positive, the perception of the quality of the education system as a whole remains decidedly low: there are gaps in mathematics and science subjects and little diffusion of the web within schools. The voluntary fulfillment of tax obligations is the third factor which makes citizens' obligations towards the public administration more onerous. impacting directly on the choice of hiding or not taxable income and taxes from the tax authorities. In other words, all other things being equal, higher costs for spontaneous fulfillment imply the more convenient option of exiting the emerging economy system towards the underground economy.
In the absence of a specific measure of bureaucratic complexity, two elementary indicators developed by the World Bank were taken into consideration: a) the days needed to start a business; b) the hours needed in a year to prepare the paperwork to define the tax obligation and then to settle it. With these two variables, the composite indicator was then constructed which made it possible to have a measure, albeit approximate, of the degree of bureaucratic complexity comparable between countries. Based on the results of this indicator, Italy occupies the last positions in the ranking of 25 countries (Malta was excluded due to lack of reliable information), thus highlighting how our country suffers from excessive bureaucracy, a disease which has not recorded any improvement over the years. In the 2010 ranking, Italy occupies, in fact, the twentieth place, ahead of Portugal, Slovakia, Spain, Mexico and Japan, making its ranking one position worse than in 2000.
Attachments: Inefficiencies-bureaucracy Confcommercio_0812 (1).pdf
