Yesterday's interminable Council of Ministers kicked off a new decisive phase for the Government's action. After the final ok at liberalizations, Mario Monti's team is grappling with two other vital measures for its international credibility: labor reform e tax delegation.
The first intervention is certainly the most delicate and risks blowing up the precarious balance on which the parliamentary majority is based, creating dangerous fractures within the Democratic Party. The Executive approved a general text that will allow the Professor to travel to China with something concrete in hand. At the same time, the provision has not been armored and some changes remain possible in the Chamber, where it will arrive as an ordinary bill. On the most controversial issue – the modification of article 18 – the Premier however reiterated together with Minister Fornero that he does not intend to back down.
As for the draft enabling law for tax reform, yesterday the CDM postponed its approval, limiting itself to a preliminary examination. In this case, the agreement on the contents is much less problematic, but large areas of uncertainty remain on the modalities and times of implementation. To speed up the green light, the idea is gaining ground among Bocconians not to write a new text, but simply to amend the delegation issued by the previous government, still stalled in Parliament.
However, there should be a single point in common between the two powers: the reorganization of tax breaks. On the other hand, far more important chapters envisaged by the Berluscones are missing, such as the cancellation of Irap and the reduction of personal income tax rates from five to three.
Now let's see what are the fundamental measures contained in the two provisions discussed yesterday in the CDM.
LABOR REFORM
- Article 18. Reinstatement is provided only for discriminatory dismissals. For dismissals dictated by economic reasons, if the judge deems the reason given by the company invalid, only compensation will arrive, ranging from a minimum of 15 to a maximum of 27 months. In cases of disciplinary dismissals, if the worker is able to prove his innocence, the judge will be able to choose between two options: reinstatement or simple compensation, which also in this case cannot exceed 27 months. The fear of the unions is that companies could take advantage of the new regulation by firing for "falsely economic" reasons, given that in any case they could not be forced to reinstate employees. To reassure the social partners, the Executive has established that if the economic dismissal is deemed "instrumental" by the judge, reinstatement will also be possible. "Particular attention is paid to the intention to avoid abuses", reads the press release from the Government, which also intends to introduce an "abbreviated procedural procedure for disputes regarding dismissals".
- Contracts: from apprenticeship to hiring. The "permanent subordinate contract becomes the one that dominates over the others," explained Fornero. With a rate of 1,4% on fixed-term contracts, the precariousness of workers will become more expensive for companies, which, however, in the event of stabilisation, will be able to recover part of these costs. To enter the world of work, the main viaticum will be the apprenticeship contract. At the end of the terms, the crossroads: the company will be able to choose whether to end the relationship with the apprentice or hire him for an indefinite period. In the event of non-confirmation, “we want that period to be worth something to him – Fornero said again -. One could think of a certification of professional skills”. Furthermore, companies will no longer be allowed to offer unpaid internship contracts to young people.
- Social shock absorbers, the novelty is ASPI. Social insurance for employment will gradually replace all forms of mobility and will become fully operational in 2017. It will apply to all employees with fixed-term contracts, but to be eligible you will probably need to have at least two years of insurance seniority and 52 working weeks in the last two years. The maximum allowance will be 1.119 euros gross per month, with a 15% cut after the first six months. The standard duration of treatment will be 12 months: only for those over 55 it will reach 18 months. The contribution rate should be 1,3% (2,7% for precarious workers).
- Exodus agreements. The reform “creates a legal framework for exodus” of older workers, “with costs borne by the employers – continues the press release from Palazzo Chigi – To this end, companies are entitled to enter into agreements with the most representative trade unions, aimed at encouraging the exodus of older workers”.
- Solidarity Fund. A solidarity fund is set up for the protection of workers in sectors not covered by the extraordinary redundancy fund. “The reform provides for the safeguarding and extension of the redundancy fund – explains the Government – which offers a wage subsidy in the event of a reduction in working hours during an unfavorable economic situation”.
TAX DELEGATION
– Personal income tax fund. The proceeds deriving from the fight against evasion and from the reorganization of the concessions will flow into a fund destined for possible tax relief.
- Review of cadastral income. An increase in the general levy is not foreseen (the rate will drop as the income increases), however the criteria on the basis of which to calculate the cadastral income will be reviewed, in particular by replacing the square meters with the number of rooms as the fundamental unit of measurement. To establish the new rents, however, other aspects that are more difficult to determine will also be taken into account, such as the different quality of the areas in which the buildings are located. The operation could therefore require a total of a few years of work.
- From IRES to IRI. The corporate income tax will be replaced by the new corporate income tax. Basically, the incomes of professionals and small entrepreneurs will be subject to Irpef, which is a progressive tax, ie it grows as income increases. Ires, on the other hand, had a fixed rate of 27,5%.
- Cutting benefits. It is probably the most delicate and complex question among those that the Government will have to face after the approval of the delegation. The technical report states that, "having opportunely decided to renounce linear cuts, it is necessary to selectively identify the measures that can be intervened". Some are considered "intangible", such as those provided for by our Constitution or by the Community legal system. The aim is therefore to reduce "the most obsolete tax expenditures, less consistent with the structure of the tax system, those aimed at a small number of beneficiaries, those of modest unitary amounts".
- Contentious. The use of out-of-court procedures for settling small disputes is envisaged to speed up the disputes falling within the competence of the tax commissions. Judicial conciliation could also be extended to the appeal phase and the revocation judgment.
- Carbon Tax. Incoming heavier excise duties on producers of fossil fuels to finance the development of renewable sources.
- More severe criminal penalties. Tax avoidance will not have criminal relevance, but for the evaders the penalties will be reviewed according to criteria of "predetermination and proportionality" of the conduct.
