NEWS » Italy high up the table of complex tax systems

Italy high up the table of complex tax systems

Italians have always complained about heavy taxation. From now on they could complain even more, as apparently Italy has one of the world’s most complex tax systems. The study was carried out by TMF, a global provider of business and compliance services, which has produced a financial complexity index, ranking 94 jurisdictions across Europe, the Middle East, Africa, Asia, the Pacific area and the Americas.

TMF Group says it used four weighted complexity parameters, considering the accounting and tax rules and regulations in different jurisdictions, and the risks associated with non-compliance. 

Turkey is the world’s most difficult country for accounting and tax compliance, followed by Brazil. Turkey is the most complex jurisdiction in which to stay financially compliant because of the extremely high number of tax articles. Italy and Greece are in third and fourth places. Vietnam is in fifth place. The least complex was that of the Cayman Islands while the UK is in the top 20 for simplest compliance regime.

In recent years, the Italian Revenue Agency has tried to simplify the tax system. A cooperative compliance programme was introduced to help companies obtain opinions on their tax treatment ahead of making investments, but Italy is still a difficult place to set a business or just work out taxes, and accountants spend considerable time dealing with the tax system. 

One of the main characteristics which makes the Italian system particularly complex is that taxpayers have to pay a high number of individual taxes because taxation is levied at national, regional and municipal levels. VAT evasion is a major problem in Italy and electronic invoicing is now mandatory in some cases, adding a new layer of red tape.

In general, the study revealed that multiple layers of taxation, and the rate of legislative change in some jurisdictions requires increased effort to meet compliance requirements.

However, there is not only bad news: the study acknowledged that Italian tax rules are becoming “fairer and more aligned” to international standards, with more flexibility introduced regarding taxation of international companies.  

According to the same TMF Group survey, The UK’s accounting and tax compliance regime is rated amongst the top 20 countries worldwide for ease of doing business.

The Cayman Islands took bottom position as the least complex place for compliance from an accounting and tax perspective. The UK’s score of 78 puts it in the top 20, above the US (ranked at 70) and Ireland (58), but still a more complex jurisdiction than Switzerland (87).

Giulia Lombardo

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