The maneuver on corporate taxation envisaged by the budget law for 2019 is the exact opposite of what should be done if we wanted to encourage business growth.
Abolishing the ACE is a contradiction in itself: ACE means Aid to Economic Growth.
Abolish IRI even worse: the IRI, which was supposed to come into force in 2019, on 2018 income, is the real flat tax for sole proprietorships and partnerships, because it equates their taxation to those of joint stock companies, with a fixed rate equal to that of IRES (24 per cent). And in any case, the abolition has retroactive effect, because many companies started operating in 2018 trusting in its validity.
Strengthen the flat-rate scheme of small taxpayers, disproportionately raising the admission threshold means transforming this regime into the "natural" regime for about 60 percent of businesses and professionals subject to personal income tax, which would be subject to 15 percent. Without electronic invoicing obligation, without any request for other information (such as questionnaires for sector studies or for ISA) it will be determined a strong incentive to undeclared work.
The paradoxical aspect is that the world of small and medium-sized enterprises not incorporated in capital companies will be segmented: the small ones that fall under the flat-rate regime will be taxed at 15 percent; the less small ones, with the suppression of the IRI, will enter the ordinary personal income tax regime and will suffer the progressiveness in full (up to 43 per cent), instead of going to proportional Ires taxation (24 per cent) like the SRLs (ordinary or uninominal).
This structure of taxation is peculiar. GDP growth also depends on the fact that companies grow in size, create more value added and more income: it would therefore seem reasonable that the tax authorities accompanied the growth of companies, not hindered it. But the existing structure forces the start-up, as soon as it crosses the threshold of the flat-rate regime, to switch to ordinary taxation, and then eventually fall back to 24 percent of IRES if it decides, as it grows, to transform itself into a joint-stock company. The Irpef step between the flat-rate regime and the ordinary one is a major obstacle, and is accompanied by ordinary VAT taxation and electronic invoicing, with the associated greater administrative complexities. It is a real "wall" to climb for a start-up that wants to grow; derives largely, as mentioned, from the suppression of IRI, which would have taxed individual businesses in the same way as joint-stock companies. And it is also the wall that will push us to grow underground, that is, to remain under it. It is reasonable to predict that few will try to overcome it, going uphill, while many will be tempted to find refuge there, crossing it downhill. Those who, due to their large size or for fiscal correctness, will not or will not be able to go under the "wall", will be forced to transform themselves into limited liability companies, with greater complexity and administrative costs. All this certainly does not help growth, if anything it is a strong stimulus to evasion and undeclared work and an increase in costs for companies that will transform themselves into limited liability companies. It is a pity, because it is precisely in the basin of small and medium-sized enterprises that start-ups are found -up innovative, there is the melting pot of innovations, of new entrepreneurship, of investments, of growth.
As mentioned, the composition of the maneuver is quite generous with the little ones (with the strengthening of the flat-rate regime) while it "takes" income from the middle schools with the abolition of the IRI. The generality of companies, but in particular the large ones (Ltd or SPA), will suffer aggravations from the absence of the ACE; hyper-depreciation and incentives for the 4.0 economy will be extended but weakened for larger investments; super-depreciation will be abolished. The new subsidies for investments and new employment (so-called mini-IRES) introduce a complex regime, with aspects of excessive dirigisme, lend themselves to evasion, are in any case less effective. The negative effects for businesses of the repeal of ACE and super-depreciation are not offset by the relief deriving from the introduction of the mini-IRES: ISTAT estimates an average increase in the IRES levy of 2,1 percentage points.
The ACE provides for the deduction from the Ires taxable amount of the figurative return of equity capital contributions and reinvested profits made after 2010. ACE therefore has cumulative effects, progressively lowering the tax burden according to the accumulation of profits in reserve (self-financing) and risk capital contributions. The "incentivised" sources of financing (self-financing and new risk capital) could be used in various ways, but some are prevented or severely limited by the law, in particular the purchase of other equity investments or financial assets. Employment of fixed assets (both tangible and intangible) and debt reduction remain possible. Basically, the ACE wants to encourage investments, the capitalization of companies, the reduction of their debt. It is a measure that rewards companies that grow, invest and strengthen their assets, with cumulative effects year after year. More than one million businesses have benefited so far.
The mini-IRES tax at a reduced rate (15 per cent) on the portion of total income corresponding to the sum of the costs generated by incremental investments in new capital goods and by the incremental cost of new employees (hired on fixed-term or permanent contracts), provided that the company allocates profits of the previous year to reserves and does not proceed with distributions of its shareholders' equity.
The amount of depreciation of new tangible capital goods can be facilitated to the extent that it is incremental with respect to the depreciation of the previous year (ie to the extent that the total depreciation exceeds that of the previous year). Also for staff, the benefit is limited to "incremental" spending that is, to the extent to which the overall expenditure for personnel exceeds that in progress in the previous year. However, the benefit can only be accessed if profits produced in the previous year have been set aside and no shareholders' equity has been distributed. The procedure is somewhat complicated and requires carryovers of any unused surpluses.
Mostly the mini-IRES operates on a single year, it does not exert the cumulative effects of ACE. If the company wants to benefit from it over several years, it obliges a continuous acceleration of the investment rate, which must always exceed the quota of old divested capital. While the super-depreciation allowed the deduction of increased amounts for the entire life of the asset, the mini-IRES allows benefits only for the first year of depreciation. With the mini-IRES, similarly to investments, new hires must always exceed the number of employees leaving.
Compared to ACE and super-depreciation, the mini-IRES only encourages investments in tangible assets and excludes intangible assets, i.e. investments in trademarks, patents, intellectual property, including software. In essence, it does not really facilitate those investments that characterize the 4.0 company, i.e. the most innovative companies.
Furthermore, the mini-IRES penalizes reductions in equity, but does not reward equity contributions (as opposed to ACE). The asymmetry is evident, and not justified. For example, companies making a loss, or with profits to be set aside in insufficient reserves, will not be able to benefit from the mini-IRES, not even by financing investments with new venture capital contributions.
Basically, the mini-IRES has the media effect of being able to state that, in some circumstances, businesses pay 15 per cent, a prelude to the flat tax generalized promise in the electoral campaign, but has much less effective incentive effects than ACE and super-depreciation.
The prejudice that especially favors large companies and banks weighs on the ACE. Factually wrong: the Istat analysis shows that the effects of the ACE, in percentage points of tax relief, are higher for companies with a low number of employees (up to 10). Certainly in monetary terms, i.e. as the amount of the relief in euros, the greatest benefit is on the largest subjects, those with the greatest profit. But it is obvious: a percentage point drop in the rate results in a greater tax relief in euros for those who have more taxable income. It is also obvious that the banks, which have undergone major recapitalizations in recent years, necessary for their recovery, are beneficiaries of the ACE. But here the government needs to make peace with itself: on the one hand, authoritative exponents declare that with the level of the spread remaining close to 300 basis points, the banks will become non-performing and it will be necessary to recapitalize them; on the other hand, the ACE, which guarantees permanent tax relief to those who recapitalize, is abolished.
In conclusion, from all points of view the maneuver on corporate taxation goes against growth: it is completely inconsistent with the GDP growth forecast, or rather desired, by the government.
