ROME – Italy’s Ministry of Economy and Finance formalized a sweeping overhaul of its fiscal policy on February 25, 2026, with the signing of an “Act of Guidance” outlining objectives for the years 2026-2028. The plan aims to integrate digital financial flows and automate tax declarations, effectively shifting taxation from a discrete, post-event process to a continuous one embedded within economic transactions.
The initiative, detailed in a document published by the Ministry, seeks to reduce the “tax gap” – the difference between taxes owed and taxes paid – and streamline the tax system for both businesses and citizens. According to the Act, the core of the strategy lies in the generalization of pre-populated tax returns, extending a system currently used for salaried workers to include VAT-registered businesses and corporations.
This expansion isn’t merely procedural, the Ministry asserts. It fundamentally alters the mechanics of tax collection. Rather than awaiting annual filings, the tax administration will pre-construct a taxpayer’s liability by cross-referencing data from electronic invoicing and traceable payments – a system referred to as the “electronic transaction” record. The goal is a steady stream of revenue, allowing for more predictable government spending and aligning with the new European economic governance framework and commitments under the National Recovery and Resilience Plan (PNRR).
The Act of Guidance outlines a dual objective: increasing voluntary compliance and strengthening efforts to combat tax evasion. It builds on existing tax reform legislation concerning personal income tax (IRPEF), corporate income tax (IRES) and a restructuring of tax expenditures. The Ministry intends to enhance simplification tools, such as pre-filled returns and electronic payments, and promote preventative dialogue with taxpayers through biennial preventative agreements and collaborative compliance programs.
The fight against evasion will be intensified through risk analysis supported by Artificial Intelligence, targeting VAT fraud, international tax avoidance, and the illicit use of cryptocurrencies. Preliminary data indicates a significant reduction in the tax gap, reaching 17% in 2022, aligning with PNRR targets. A reform of the collection system is also planned to identify recoverable credits and improve the effectiveness of enforcement actions.
The Ministry’s approach contrasts with alternative strategies considered but ultimately rejected. One option, a pure self-assessment regime with stringent penalties, was deemed too costly for businesses and likely to create chronic uncertainty and litigation. Another, a generalized split payment system – segregating tax at the point of payment – was rejected due to concerns it would drain liquidity from the productive sector and overwhelm the banking system. Maintaining the current system without integrating digital data was also dismissed, as it would lead to a progressive erosion of the tax base due to the increasing digitalization of the global economy.
The shift towards automation is expected to have a differentiated impact on factors of production. Employees, already largely covered by the withholding tax system, will experience greater stability. But, mobile capital and self-employed individuals will bear the brunt of the change, as the elimination of discretionary declaration effectively increases their effective tax rate, even if the nominal rate remains unchanged.
The Ministry acknowledges the potential for behavioral responses, anticipating that taxpayers will seek new ways to optimize their tax positions. Demand for technical advice regarding tax credits for research and development (R&D) and energy transition projects is expected to increase, as the complexity of the regulations provides opportunities for interpretation. The risk of false positives generated by AI algorithms could also lead to “defensive compliance,” where businesses avoid investments or transactions that might trigger scrutiny.
Two systemic risks are identified: the increasing cost of technological compliance, particularly for small and medium-sized enterprises (SMEs), and the potential for instability arising from the “black box” nature of AI-driven selection criteria. If the criteria used for tax controls are not transparent, it could erode trust in the system and increase litigation. The Ministry stresses the demand to synchronize tax collection with the timely processing of refunds and the resolution of disputes.
Key performance indicators (KPIs) will be used to assess the system’s effectiveness, focusing not only on gross revenue but also on the dynamic efficiency of the system. The stability of revenue must be balanced by the elasticity of the tax base in response to economic cycles. The administrative and compliance costs must be measured in relation to the incremental revenue generated. The success of the reform will be measured by a reduction in the rate of disputes over pre-populated tax returns.
The Ministry of Economy and Finance has not yet announced a timeline for the full implementation of the automated system, but the Act of Guidance signals a commitment to a fundamentally altered approach to tax administration in Italy.
