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ROME No increase in tax burden, progressive system and fight against tax evasion. Around these three slogans, still to be filled with content, Mario Draghi was able to succeed in the company of agreeing parties that, even in terms of taxes, were until recently in opposite positions.
Naturally, the chairman in charge has his own ideas that throughout his career (especially when he headed the Bank of Italy) he was also able to express publicly. However, the method, particularly with regard to personal income tax, foresees a confrontation with political forces, in short, a table that must define the new rules in detail. The exact scope of the intervention will also be clarified, but it is very likely – in line with what is also indicated in the draft of the National Recovery and Resilience Plan – that it covers all aspects of the tax system in terms of simplification and therefore not only the personal income tax.
Review
In fact, the opportunity for a general reorganization would allow the new government to honor the commitment not to increase the rate and, if possible, to reduce it; and at the same time aligning with the demands of the European Union, which historically calls for a reduction in the tax burden on labor. A need more relevant than ever in a phase in which the pandemic crisis runs the risk of turning into a wave of unemployment. There will certainly not be new capital, but current taxes, including those on consumption and real estate, could be revised and rationalized.
The issue of reducing the so-called tax wedge (the difference between the company’s labor costs and the net compensation of the worker) resonated in yesterday’s meetings in the Chamber: the resigned executive had already advanced in this direction, in particular to the benefit of workers with an annual income of up to 40 thousand euros, now it could be the turn of the next tranche and also of companies, with the remodeling of positions and with forms of incentives for hiring.
Regarding progressivity, what Draghi has in mind should not necessarily be understood as a hardening of the maximum rate but refers to the inclusion in income tax, although with some distinctions, of some income taxed separately (those of the capital, for example). The current system of rates and parentheses could be simplified or replaced by a gradual mechanism such as the German one: but beyond the technical mechanisms, work will have to be less discouraged. There is no single tax in any case, while the revision of the current mass of concessions seems inevitable. And even in a context of opposition to amnesties, the issue of disposing of the number of files and notices will have to be addressed.
The link
On the fight against tax evasion, the former president of the ECB has always expressed himself extremely harshly, seeing in this phenomenon, on the one hand, a form of distortion of competition for the benefit of less correct companies, and on the other, a social injustice that the drainage resources are dedicated in the first instance to supporting the citizens most in difficulty. It remains to be seen to what extent the next government will want to adjust the game in a strategy that today is based on incentives for digital payments and the strengthening of technologies that favor the adherence of taxpayers but also administrative controls. Certainly, in the past Draghi has argued the need to make the link between the results of the fight against tax evasion and the general reduction of the rate evident in the eyes of the taxpayers.
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