In an international scenario of geopolitical, economic and social uncertainty, theEuropean industry risk survival. The obstacles come from the energy crisis and skyrocketing gas prices. The growing gap in competitiveness with the US should not be underestimated, which risks translating into a push for the relocation of EU companies and into a new war between the two economies through nationalistic and protectionist measures. With these premises, 2023 is gloomy for European industry, will it be the collapse? This question is answered by the latest analysis of theObservatory on public accounts directed by professor Giampaolo Galli.
In view of the go-ahead from the Chamber of Deputies for the Budget Maneuver, which has now passed to the Senate, many of the measures envisaged, especially on the subject of taxation and employment, are widely contested by the opposition and others. The Observatory on public accounts has also analyzed the provision on flat tax extended to all flat-rates with revenues up to 85.000 euros, clarifying some points, but highlighting the more controversial ones: the discrepancy in tax treatment between employees and self-employed workers, and among these those subject to a flat-rate regime, has increased. The existence of excessively differentiated tax regimes between different types of workers creates equity issues, both towards other self-employed workers and towards employees who continue to be subject to the ordinary personal income tax regime, with the risk of treating individuals with the same ability to pay differently in an unjustified way.
Energy crisis and risk of crowding out European industry
The survival of European industry is at risk: there are signs of relocation of production and it is feared that in the future thousands of businesses will close, especially SMEs. It is yet another alarm raised by the federation of industrialists BusinessEurope. “European companies urgently need emergency measures to deal with the energy crisis and regulatory space,” warn European industrialists.
According l 'analysis of Cpi, it is possible that European industry will be able to avoid the collapse feared by Business Europe, but there are sectors in which it is almost impossible to reduce the gas consumption and who are therefore destined to die or emigrate, with consequences for employment, territories and above all public finances. Furthermore, European industry cannot fail to suffer even in the medium term in the face of such significant differentials in the gas cost and therefore of electricity, compared to the USA. The idea that the higher cost of energy can be met with the development of less energy-intensive sectors is not convincing because they too depend on energy and that in many of them (especially in high technology) the United States they have already developed a competitive advantage. The weight of the energy component on the added value of the various sectors is essential for understanding what risks European industrial sectors are exposed to (in particular the iron and steel and petrochemical industries). Sectors most dependent on energy may not be able to withstand the impact of price increases. Europe cannot become only services (such as finance and tourism) and will hardly be able to beat the United States in high-tech sectors. The concerns of European industrialists therefore do not appear to be groundless.
In detail, the soaring cost of gas could push production towards the United States, also thanks to the big floor of stimuli from the US administration, theInflation Reduction Act. These measures – according to the 40 members of the Business Europe's Council – are incompatible with the rules of the WTO, as they discriminate against the exports of foreign companies”.
European industrialists are calling on the Commission to take urgent action to mitigate the effects of high temperatures energy prices: as many European companies have energy supply contracts expiring in the coming months, if immediate measures are not taken, there is a risk of plant closures with serious job losses and relocation of entire production chains to places, such as the United States, where the cost of energy is lower and the supply of sources more secure. In particular, it is emphasized that the price wholesale of gas in Europe it is between 5 and 7 times higher than in the United States.
The EU “must continue to be a symbol of global trade based on rules, and, at the same time, make sure that its trading partners also respect international laws. A level playing field is essential to ensure the competitiveness of European companies”.
The expansion of the flat rate and the tax regimes of the self-employed and employees
In line with the trend that has been going on for years of increasingly stealing income from progressive taxation of the personal income tax to submit them to more advantageous coupon rates, one of reforms contained in the maneuver budget for 2023 concerns the extension of the flat-rate scheme to VAT matches with turnover up to 85.000 euros. Cpi, with the use of some concrete examples, discusses both the equity effects of the proposal, comparing the total tax burden of a flat-rate self-employed worker compared to one subject to the ordinary regime and an employee, both efficiency effects, due to the distortions that the flat-rate regime can induce on the convenience for businesses to maintain collaborative relationships rather than dependencies. Finally, he also discusses the distorting effects on competition and the incentives for evasion that can derive from the exemption from paying VAT for flat rates.
With regard to personal income tax, the expansion of the flat rate introduces elements of inequity both in the tax treatment of employees and self-employed workers and within the world of self-employed workers themselves, especially benefiting the wealthiest taxpayers. It can also induce distortions in productive organization, pushing towards simpler but also more inefficient forms of organization and stimulating phenomenon of fake VAT numbers. Due to the exemption from the VAT regime, the flat rate can ultimately lead to distortions in the competitive mechanism and encourage evasion of consent.
Here are the conclusions of the Observatory. The expansion of the preferential tax regime is scarcely justifiable in the light of two considerations. The category of self-employment, as mentioned, is characterized by a very strong tendency towards tax evasion, with approximately 69% of income not declared to the tax authorities according to official estimates. There is no category that requires preferential treatment compared to the others. Nor does the argument according to which reducing thetax rate fiscal obedience is encouraged; the same argument had been used to justify the introduction of the dry coupon on rents, another subtraction from the progressive income tax system, but the final result was a loss of revenue against a limited emergence of taxable income. In all likelihood, the effect of moving the threshold to 85.000 euros (instead of 65.000) for accessing the facilitated treatment will only be to increase the concentration of taxpayers under the new threshold (as was observed for the previous threshold). as taxpayers adopt all possible strategies to keep their turnover below €85.000. Second, the expansion comes at a time of strong recovery in theinflation. This in itself introduces an inequity between employees and the self-employed, as the latter are better able to protect themselves from rising prices. For the Observatory, the usefulness of imposing another one by further distorting the tax system is not understood.
