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Flat tax, don't joke about coverage: word from Mr Spending Review

Carlo Cottarelli, the former Mister Spending Review, does not demonize the Flat Tax proposed by the centre-right but debunks the assumption heralded by Berlusconi: it is not true that it finances itself and therefore it is necessary to find serious covers for a reform which, depending on the rate, it can cost between 30 and 40 billion euros

Flat tax, don't joke about coverage: word from Mr Spending Review

Carlo Cottarelli, former Mister Spending Review and executive director of the International Monetary Fund, does not demonize the Flat tax, which has become the banner of the centre-right, but, in an in-depth article in "La Stampa", puts his hands forward and debunks its assumption heralded by Silvio Berlusconi in his recent interview with "Corriere della Sera": it is not true that the flat tax finances itself by itself. And so, for a tax reform which, depending on the single rate adopted (15 or 25%), could cost between 30 and 40 billion euros, one cannot joke about its financial coverage, which must be found without accounting gimmicks.

Reasoning on the objective of reducing the tax burden at which the Flat tax aims, according to Cottarelli "it is too risky a priori to think that the problem can resolve itself, that lower taxes lead to less tax evasion and greater growth and therefore more revenue (hypothesis which is at the basis of the League's proposal” and to which Berlusconi also referred.

"Tax cuts - Cottarelli argues - to have an effect on growth must be perceived as credible and permanent and for this reason it is necessary to find serious coverage" because the flat tax does not finance itself. But finding "serious hedges" means cutting public spending elsewhere and avoiding the extremely dangerous shortcuts of increasing the deficit and public debt.

In short, thinking of a single tax rate as the Flat Tax promises may make sense, but then you have to deal with the innkeeper, both for covering its huge costs and for its redistributive effects on the reduction of fiscal progressiveness that it risks benefiting the wealthiest over the middle class, who everyone says they want to protect. But only in words.

Read also – Flat tax, Galli (Pd): "It's out of this world"

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