La tax reform is without covers, the flat tax for everyone it is unrealistic and the fight against evasion must be done by strengthening controls to lighten the burden of taxes on taxpayers in good standing. This is in summary the judgment given by Bank of Italy to the House during the hearing in the Finance Committee. The head of Bankitalia's assistance and tax consultancy service, Giacomo Ricotti, spoke.
Fiscal delegation, Bank of Italy: "indicate the coverage"
Ricotti “recalls the need for the tax delegation to find the appropriate coverage. Many of the foreshadowed interventions will result revenue losses. At the moment coverage is provided only for the overcoming of the IRAP through the new surcharge on the IRES”.
For the head of the Via Nazionale tax assistance and consultancy service, "it is not clear which tax incentives will be the subject of the rationalization, nor therefore the entity of the resources that can be recovered", considering the high public debt, above 140% of the GDP Similar speech for the cadastral income, which should be updated, via Nazionale reiterates, according to which the tax burden should be shifted "from the factors of production (labour and capital) to rents and consumption". And "from the point of view of fairness this would mean reducing the levy on taxpayers in good standing by recovering resources with the fight against tax evasion".
Doubts about Bank of Italy's flat tax
Another sore point is the flat tax. According to Via Nazionale, the intention of gradually reaching a single personal income tax rate for all taxpayers (so dear to the Lega and Forza Italia) is "unrealistic for a country with a large welfare system" such as Italy "especially in light of the public finance constraints. In any case, “the redistributive effects will have to be carefully evaluated. Pending the introduction of the flat tax, the extension of the replacement regimes could reduce the fairness of the system."
To support its analysis, the Bank of Italy has attached an appendix to the report dedicated to examining the flat tax in the countries where it was introduced. Via Nazionale highlights that "the studies carried out do not lead to univocal and concordant conclusions", but they converge on one point: the negative consequences on income redistribution and budget balances. “Negative effects on these two aspects have been ascertained in some countries, such as Bulgaria”. While others, such as Estonia and Slovakia, have been forced to "significantly move away from the basic model of the flat tax" to avoid negative consequences on redistribution and inequality.
No to the incremental flat tax
The report by Via Nazionale also highlights its doubts regarding the extension of the incremental flat tax to employees. This is a tax relief aimed at self-employed persons and VAT numbers, who, when they file their tax return for 2023, will be able to choose to pay 15% more income tax than they had in 2023 compared to the three years previous. “It is not clear to what extent the extension of the incremental flat tax and the deductibility of income production costs to employees would be effective in limiting the current disparities in treatment between self-employed and employees. Instead, it is very probable that they increase the complexity of the system”.
Well the simplification
On the other hand, the judgment on the simplification of the tax system. This part "is to be evaluated overall in positive terms". Ricotti then underlines that “the delegation contemplates a large series of interventions on numerous aspects of the tax system, foreshadowing a profound reform. Many of the measures appear extremely punctual, as they are also aimed at resolving systematic inconsistencies, modernizing now obsolete institutes and making others compliant with consolidated jurisprudential guidelines or with principles shared at an international level”.
Tax evasion, controls on companies must be strengthened
With regard to the fight against evasion, for Ricotti, this must be done by strengthening controls to reduce the tax burden on correct taxpayers, who pay taxes regularly. Bank of Italy adds that "in a context marked by widespread and high tax evasion, especially among taxpayers who will be affected by the arrangement with creditors, the forms of control subsequent to the declaration must in any case be maintained, if not strengthened". And finally, he asks the government "not to frustrate the successes achieved so far on this front".
