Doing business in Italy is not easy. And we are all aware of that. We are so aware that talking about it might seem a banal issue. True, but in my opinion we should stop talking about an issue when this issue has been solved not when it’s just become banal or too popular to be considered interesting. And entrepreneurship (and more in general the job issue) in Italy has not been solved at all. In Europe the average cost to start-up a private limited company is 372€, in Italy is 2.100 € (80€ in Denmark and France, 50€ in Ireland and 30€ in UK). According to the website DoingBusiness.Org, Italy is ranked 65/189 on the ease of doing business, 138° on the paying taxes and 90° for starting a business (just closed to Botswana and Nepal). The Italian Venture Capital funds can be counted on the fingers of one hand and they only fund a few businesses each year. When (and if) the International Business Angels come to Europe, they look at London, maybe spend a day or two in the Northern Europe, or in Paris or Berlin but they certainly do not visit Italy (but for a good pizza or a suit). Italy is ranked 86th (out of 178) in the 2014 Economic Freedom ranking, at the edge of the “Mostly unfree” countries, close to economies like Uganda, Burkina Faso and Zambia and even below countries such as Guatemala and the Azerbaijan. Over the last decades, Italy is the country that has experienced the greatest decline in what is considered one of the key indicator of productivity: GDP per hour worked. In July 2013, the revenues from direct taxation decreased by 7%, the deficit/GDP ratio is plus 3% and public debt more than 130%. VAT is now 22%. Over the last 15 years, 15% of the manufacturing sector in Italy, once (before the financial crisis) the largest in Europe after Germany , has been destroyed and about 32,000 companies have failed. Italy has the highest level of corporate taxation in the EU and one of the highest in the world. The entrepreneurs are leaving the country. The brains are leaving the country. Every year the number of graduates who leave our country exceeds the number of graduates who comes to Italy. Between 1990 and 2000 the number of the Italian graduates who have left Italy has quadrupled. According to a recent (April 2014) survey published by TIME, 96% of Italians regarded the state as an obstacle in doing business. As the Economist put it, «workers’ productivity depends on their skills, the amount of capital invested in helping them to do their jobs and the pace of “innovation”—the process of generating ideas that lead to new products and more efficient business practices». In 2014, 46% of the italian youth are unemployed and the number of young inactive is 4.4 million.
For the sake of the argument, we might wrap up all these data in three macro-issues: The Green Issue, The Red Issue and The White Issue.
1) Green Issue: Taxation.
Doing business in Italy is very expensive. More than 50% of profit are taxes. The Corporate income Tax (IRES) in Italy is currently 27.50%, in addition to INPS (from 18% to 27.72% on annual income), IRAP, VAT (22%) and all the costs linked to bureaucracy (lawyers, employment consultants, accountants and so on…).
2) Red Issue: Complexity.
Doing business in Italy is very expensive and very complicated. Everything must be checked and approved by a long bureaucratic system that slow down every process. And complexity always turns into more costs.
3) White Issue: Risk.
Doing business in Italy is expensive, complicated and risky. Customers may not pay. Or if they do, they might pay in 120 days or more. Hiring people is expensive and risky. The banks do not grant credit and so all the risk is on the entrepreneur. You might work for months (with no payment or refund) on projects that will not be approved. Wasting time and money. Apart from political instability, high spread, default risk and corruption (according to the transparency international world corruption index, Italy is ranked 72° (the worst in Europe after Greece).