Originally created 12/30/98

More than half of income of Italy's small businesses goes undeclared



ROME -- More than half the income from Italy's small businesses goes undeclared, the International Monetary Fund said in a report on the nation's endemic tax dodging.

Overall, tax evasion costs the government an amount equivalent to 12.6 percent of Italy's gross domestic product, said the IMF study, released Monday in Rome. That's about $1.5 billion.

Italy always has had a robust underground economy run by energetic workers who hide their profits from what they protest are the government's exorbitant tax rates. Even with tax evasion, Italy's total tax haul amounts to 43.6 percent of gross domestic product, above the European Union average of 42.6 percent, according to the IMF study.

The IMF named small- and medium-sized businesses as the chief tax evaders, saying 58 percent of the income of small businesses goes unreported to the government.

It also laid blame on Italy's sizable self-employed sector. About 29 percent of Italy's workers are self-employed -- almost three times the number in Germany and more than twice that of France.

That prevalence of small or self-run enterprises "make it easier to declare lower incomes than are really earned," the IMF noted.