In 2025, according to the Public Finance Document, efforts to recover tax evasion amounted to €36.2 billion, but Italy continues to be characterised by one of the lowest levels of tax compliance in the European Union. This is stated in the ‘2026 Budget Policy Report’, presented on 10 June 2026 by the Parliamentary Budget Office (UPB). Significant instances of income tax evasion by the self-employed and inefficiencies in local government tax collection persist. Finally, there is considerable scope for improvement in data analysis to identify the risks of evasion. The tax system is also under the microscope of Upb President Lilia Cavallari, as the goal of horizontal equity seems to be slipping further away. On the one hand, there are incomes from employment and pensions, on which the progressive tax system is based, and on the other, self-employed workers, for whom the alternative schemes with a flat rate have been expanded.
Reviewing business support
The system of business incentives also needs to be reviewed; according to the report, it has become entangled in complex and disjointed layers that therefore require a reorganisation aimed at ensuring stability and effectiveness. Identifying clear criteria for selecting investments, concentrating resources on strategic sectors and favouring businesses with lower investment capacity are the recommendations of the Parliamentary Budget Office. In parallel with the reorganisation of incentives, a review of corporate taxation should be initiated, in line with the principles of tax reform. By encouraging the reinvestment of profits, capitalisation and technological innovation, the tax system could be used as a lever for economic growth, argues the UPB. Competitiveness and innovation capacity, according to the report, would benefit from this without compromising the neutrality of the tax system.
The PNRR effect
On the other hand, the impact of the PNRR has been positive in terms of both economic growth and public sector efficiency. In fact, local authorities have reported a faster pace in awarding contracts – with an average of 32 fewer days required for PNRR procedures – greater consolidation (+17.8%) and a greater presence of SMEs (+13%). The shift in pace brought about by the digitalisation driven by the PNRR could have lasting effects, according to the UPB. And that is not all: there is also greater competition in procedures not funded by the Plan, with a 22.4 per cent increase in bids and higher award discounts of 0.8 percentage points. However, contract awards in this case are slower: 12 days longer.
Managing the demographic transition
As regards the demographic aspect, however, the report states that in order to ensure the sustainability of expenditure and the adequacy of benefits in the medium to long term, it will be necessary to maintain the link between retirement age and life expectancy. If the proportion of the working-age population continues to shrink and age-related expenditure is set to rise (peaking around 2040), it is crucial to manage the demographic transition through greater participation in the labour market and appropriate management of immigration. Central to this is the strengthening of human capital: higher levels of education, greater scientific and technological literacy, and the enhancement of professional and digital skills are, according to the Office, to be encouraged.
Finally, in order to tackle the major transformations currently underway, there is a need for greater coordination with the European Union, which will enable the implementation of investments that individual states cannot effectively undertake on their own.