Self-employment income tax evasion and inequality

Self-employment income tax evasion and inequality | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Self-employment income tax evasion and inequality Martina Bazzoli, Paolo Di Caro, Francesco Figari, Carlo Fiorio, and 1 more This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-6811499/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper provides new evidence on the extent and impact of income tax evasion by the self-employed, using a novel dataset that links a household income survey with tax administration records in Italy. We find that the share of unreported income among self-employed households is approximately one-third of total income, similar to what has been documented for other countries with lower aggregate tax evasion rates. We show that income tax evasion primarily originates from liberal professionals, who underreport their income by about twice as much as small entrepreneurs. The results suggest that the high level of aggregate tax evasion in Italy is a consequence of the economic structure rather than differences in individual tax evasion propensities or social norms. Our distributional analysis reveals the negative impact of evasion on vertical and horizontal equity, as well as the increased unequal distribution of the tax burden across households. JEL Classification: H26 , H31 , D31 Income tax evasion self-employment inequality Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-6811499","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":469916143,"identity":"3d10abcb-3c53-44a2-afbc-2fac7cab7963","order_by":0,"name":"Martina Bazzoli","email":"","orcid":"","institution":"Irvapp-FBK","correspondingAuthor":false,"prefix":"","firstName":"Martina","middleName":"","lastName":"Bazzoli","suffix":""},{"id":469916144,"identity":"96c86b48-4e53-4cad-80b9-830a53274fd8","order_by":1,"name":"Paolo Di Caro","email":"","orcid":"","institution":"Italian Ministry of Economy and Finance","correspondingAuthor":false,"prefix":"","firstName":"Paolo","middleName":"Di","lastName":"Caro","suffix":""},{"id":469916145,"identity":"0ec6637f-2f68-452e-8ea2-81a711771717","order_by":2,"name":"Francesco Figari","email":"","orcid":"","institution":"University of Eastern Piedmont","correspondingAuthor":false,"prefix":"","firstName":"Francesco","middleName":"","lastName":"Figari","suffix":""},{"id":469916146,"identity":"f2eb6242-f601-4190-a4ed-894ef26761c0","order_by":3,"name":"Carlo Fiorio","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAA1UlEQVRIie3SuwrCMACF4RM6uASyVlp8AyFSKDiIz+JSp67SURHSpejax6lkrbo6OFSEzhkdHEy9gA62BReH/Esu5IMEAphM/xnJgB7V4xwKoLCArMnoA96dkPRFmkxF7hOLvm19jcXbIlPgLnPk4jwSR7cfg0hVQ+x8yjcpOO2uJksvFCX1ZcPFOAJIiivlORFOKGQLwsqK8AcZtiJ28EZIG2IfSmxSrt+SkOUg2VWEzLO8hrB1QAoV8TGjnVNxmcmxv5dSRTXkeb2Plf4GJpPJZPqtG5hmSo35jAsIAAAAAElFTkSuQmCC","orcid":"","institution":"University of Milan","correspondingAuthor":true,"prefix":"","firstName":"Carlo","middleName":"","lastName":"Fiorio","suffix":""},{"id":469916147,"identity":"238f7e5d-3a44-4e8d-b752-e81324504b8a","order_by":4,"name":"Marco Manzo","email":"","orcid":"","institution":"Italian Ministry of Economy and Finance","correspondingAuthor":false,"prefix":"","firstName":"Marco","middleName":"","lastName":"Manzo","suffix":""}],"badges":[],"createdAt":"2025-06-03 12:53:29","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-6811499/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-6811499/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":87621334,"identity":"edff18bd-0ad4-4afb-9f1c-d98bd89aac28","added_by":"auto","created_at":"2025-07-26 04:31:38","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":1149933,"visible":true,"origin":"","legend":"","description":"","filename":"EvasionInequalityItaly.pdf","url":"https://assets-eu.researchsquare.com/files/rs-6811499/v1_covered_f995ae2f-cf80-488d-a233-57fa12c76fdc.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Self-employment income tax evasion and inequality","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Income tax evasion, self-employment, inequality","lastPublishedDoi":"10.21203/rs.3.rs-6811499/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-6811499/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis paper provides new evidence on the extent and impact of income tax evasion by the self-employed, using a novel dataset that links a household income survey with tax administration records in Italy. We find that the share of unreported income among self-employed households is approximately one-third of total income, similar to what has been documented for other countries with lower aggregate tax evasion rates. We show that income tax evasion primarily originates from liberal professionals, who underreport their income by about twice as much as small entrepreneurs. The results suggest that the high level of aggregate tax evasion in Italy is a consequence of the economic structure rather than differences in individual tax evasion propensities or social norms. 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