After tax wedge cut which will enter into force in July, the Government is working on a tax reform that will radically change the current system.
A few days ago, the Minister of Economy, Roberto Gualtieri, spoke of a reform that "could have different forms, we'll see if it starts all together or in modules". The "stages and times" have yet to be established, but above all the resources capable of financing the promised changes have yet to be found. We are still at the starting line: there are many unknown factors, which could also be affected by the ongoing coronavirus emergency.
It is in this context that Assonime, the association of joint stock companies, presented a series of proposals concerning a "reorganization of the tax system”. The starting point is difficult to dispute: “in recent years the Italian tax authorities have suffered a significant erosion of the taxable bases of the various taxes. Continuous and asystematic regulatory interventions have produced a porous, distortive and unstable tax system, which has lost competitiveness and efficiency”.
It therefore appears necessary, according to the body chaired by Innocenzo Cipolletta, to implement a rebalancing that favors business and work through a "review of the bonuses and the recent increases in current spending (one-hundred share and basic income) and the VAT increase".
VAT PROPOSALS
Let's start from the last point. As far as the Value Added Tax is concerned, Italy is characterized by a lower revenue, in relation to tax revenues, compared to other countries: as a percentage we are talking about 14,9% of tax revenues in our country compared to a EU average of 18,1%. At the basis of these numbers there is certainly the widespread tax evasion that characterizes Italy. However, according to Assonime, there is also another problem. Which? “The extensive use of preferential rates”, also in this case higher than the EU average.
The association therefore proposes to increase some rates and reallocate goods and services between the different rates with the goal of raising VAT revenue by 10 billion euros. Giving a practical example: “a rationalization of VAT rates – reads the text – could be achieved by bringing the current super-reduced rate of 5% to 4% (allowed only as an exception to the current European legislation). At this point, there would be only three VAT rates: 5%, 10% and 22%”. “These interventions – explains the report – would also serve to simplify and rationalize the VAT application system”. The greater resources deriving from the new mechanism could thus be destined to reduce the tax and social security burden on companies.
PROPOSALS ON IRPEF
Speaking of personal income tax, Assonime's judgment is peremptory: the tax has lost “its original characteristics of a progressive tax on total income and today presents elements of inequity due to the existence of many different treatments”. Suffice it to say that at present more than 80% of Irpef revenue derives from employment income and pensions.
For this reason “the reorganization of Irpef inevitably passes through a review of tax expenditures which would allow for a simplification and rationalization of the rates”. The introduction of the so-called is also proposed negative income tax, that is to say a personal income tax which, below a taxable minimum, is transformed into a subsidy in favor of less well-off citizens.
IRES
On IRES, Assonime's proposal is that of intervene on tax deductions and credits, limiting them to research and development, innovation and environmental efficiency. Furthermore, the introduction of a single ceiling of deductible expenses is proposed, determined as a percentage of income, "in relation to which each company could choose the expenses to be deducted from among those envisaged on the basis of predetermined regulatory objectives". “In perspective – continues Assonime – we can reflect on the possibility of making the system evolve towards more immediate ways of measuring the wealth produced by businesses compared to the balance sheet profit: a solution in this sense could be to tax companies directly on the cash flows, which are easier to trace and more difficult to manipulate than the profit”.
Lastly, Assonime proposes to use the same rate, the identified level of which is equal to 20%, on all capital gains i.e. on financial assets, real estate, dividends, corporate income, government bonds, etc.
IRAP
Finally the Irap. Also in this case, according to Assonime, the tax has lost its original characteristics, becoming "the subject of multiple interventions over time that have reduced its revenue, especially following the recognition of the complete deduction of costs for permanent employment" .
“The crisis facing Irap poses the delicate question of whether to keep it or replace it with a contribution to finance the national health system to be levied at a moderate rate, but on a broader tax base, ideally made up of all income”, concludes the association.
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