Tax revenues are also broadly aligned with the average of the other countries, even if the tax wedge on labour is higher. Where Italy differs most from the other advanced economies is in the extent of its underground and illegal economy and tax evasion, which translates into an excessive tax burden for those who always play by the rules.
The resulting injustices and profound distortionary effects reverberate on the economy’s ability to grow and firms’ capacity to innovate; they generate rents that damage the efficiency of the productive system. A comprehensive rethinking of the tax system that also takes account of the changes in the social welfare system must adopt the objective of reducing the tax levy on the factors of production.