In 2006 I posted the article "Christmas is Cancelled" which was a stab at trying to explain the tax stranglehold for a self-employed person living and working in Italy, I updated it in 2007 with Happy New Tax Year.

So now in 2014 it's now looking like this for a self-employed person in Italy who doesn't own land or property:

2014 Tax allowance is EUR 4,800

IRPEF Income Tax brackets and rates
from 4801 to 15.000 = 23%
from 15.001 to 28.000 =  3,450 + 27% on the part exceeding 15,000
from 28.00 to 55.000 =  6,960 + 38% on the part exceeding 28,000
from 55.001 to 75.000 =  17,220 + 41% on the part exceeding 55,000
from 75.001 =  25,420 + 43% on the part exceeding 75,000

INPS - (Compulsory National Insurance contributions)
Self-employed have to pay 29% (up from 18% in 2006) of their earnings to INPS as pension contributions. 4% should be paid direct by their clients. Therefore one has to add this to any invoice to a client. Note - this is then totaled BEFORE the VAT is calculated, therefore they also make VAT on your pension contributions). Self-employed pay the highest % of INPS but are NOT entitled to sick and unemployment benefits. You have to call and check with every client to make sure they pay this amount on your behalf and ask for written proof, if they don't it is you that is fined not them. Apparently 30% of a self-employed person's work time is used up creating paperwork or chasing it, or explaining it to someone else to do it and do the chasing for you.

IRAP - regional tax on productive activities
Generally 3.9%


TOTAL
AN HONEST PERSON'S ANNUAL EARNINGS AFTER DEDUCTIBLE EXPENDITURE
OF 8,000 and TAX ALLOWANCE  (actual invoiced totals in brackets)

First year - 15,200 (28,000)
Income tax = 3,504
IRAP = 592
INPS = 4,408
Advanced payment for following year (assuming the same as this year) = 3,504
Get to keep = 3,192

Second year - 17,200 (30,000)
Income tax = 4,644
IRAP = 671
INPS = 4,988
Advanced payment for following year (98% of tax paid last year) = 3,434
Get to keep = 2,646

Third year - 42,200 (55,000)
Income tax = 4,864+6,960 = 11,824
IRAP = 1,646
INPS = 12,238
Advanced payment for following year (98% of tax paid last year) = 4,551
Get to keep = 11,941

Fourth year - 62,200 (75,000)
Income tax = 17,220+5,248 = 22,468
IRAP = 2,426
INPS = 18,038
Advanced payment for following year (98% of tax paid last year) = 11,588
Get to keep = 7,688
 
So I guess there will still be more pressure on many people to work cash-in-hand in the ever increasing black market.


Personally I have given up 'working for the government' in this way and now work as a house husband bringing up our child on my wife's income. I am now allowed a tax allowance of 7,500 from 'casual' income. I get to keep the same money that I would with 42,000 taxable income if the previous year my tax bill was 9,000.

A no brainer really even though I have no longer make contributions towards my pension ( which will be worthless anyway by the time I can claim it).