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Technology helps crack down on tax fraud in Italy

Rob Carrillo,
IT systems can easily detect tax fraud, as evidenced by Italy's experience


Italy has been modernizing its bureaucracy in the past few years and last year, it seems to have paid off, according to a report by TheLocal.it. Up to €14.9 billion in unpaid tax was recovered in 2015.

Italy has in recently years beefed up its anti-tax evasion activites, even using an system to check discrepancies in filed tax declarations and recorded expenses. This resulted in an increase in recovered tax payments from 2014, which at the time stood at €14.2 billion.  The program has been running for nine years and according to Italian Finance Minister Pier Carlo Padoan during his interview with Il Sole 24 Ore, the amount of unpaid taxes recovered has quadrupled since the program began.

The report also mentioned that 315,000 people received the letters last year, which invited them to correct "potential errors or oversights" in their annual returns. The letter also mentioned that they would only be liable for reduced penalties. The result was almost half (up to 156,000 people) took up the offer which brought in €250 million.

Estimates made by the country put Italy's tax evasion losses at  €90 billion a year while Confindustria estimates it at €122 billion. Non payments were usually on value-added tax, which accounts for half and a third comes from non-payment of payroll taxes.

Role of Big Data

Big Data has been a big help to the government in identifying if a certain citizen is not paying the appropriate taxes. As explained in The Economist's article, a system can be designed to calculate the probability of a citizen not paying taxes by cross checking if their expenses are too large compared to their income.

As evidenced by the growing recovery of tax income, this system has proven to be an effective tool for the government.

To find out more about how governments and organizations are transforming themselves through technology, download our free ebok: 2017 IT Trends Digital Transformation!

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