_ Jacopo Ugolini, advisor, FdI parliamentary group, researcher, Nazione Futura. Machiavelli Center, 18 March 2023.*
In March 2023 the Council of Ministers of Italy approved the tax reform, in one of the most important moments of these five months of government. The timetable is certainly not short: it will take twenty-four months and numerous delegated decrees before it fully goes into action. Finally, however, Italy will get a shake-up, a major shake-up. The tax system is basically the main cog in the Italian economy, which needs a real change of pace, not least to stay in line with European regulations.
In addition to review of the measure in the Council of Ministers, the timing of the enabling act is that it will land in Parliament and the law will be passed by early summer 2023, then there will be twenty-four months to adopt all the various decrees implementing the changes. The enabling act, approved by the government, consists of four parts and twenty-one articles. The intention, according to the words of Maurizio Leo, Deputy Minister of the Economy, is to take a first step in the direction of a complete change of the entire Italian tax system. The ultimate goal, in addition to applying a gradual and substantial reduction in taxes, is to relieve the middle class of the economic burden to which it is subjected.
A middle class that, while serving as a pillar of the Italian economy, has suffered dramatic moments in recent years, so much so that the threshold of difference between the indigent and the well-off is increasingly thin. It is no coincidence that the first step is to reduce the rates, thus merging the second – that ranging from 15 thousand to 28 thousand, for which there is now a 25% tax rate – and the third income bracket – from 28 thousand to 50 thousand, on which there is a 35% tax rate – thus reducing the tax burden on the middle class.
Those who were in pole position to criticize the center-right, claiming it would endanger the state’s accounts, will have to change their leitmotif. In fact, there are no drastic cuts in the various rates on the horizon. However, the amalgamation is synonymous with an ultimate goal: flat tax for all. The approach taken is clear: gradual steps in the direction of modernizing the tax system, such that it is finally family-friendly and open to investment, Italian and foreign.
In addition to the intervention on rates, action will be taken on the corporate tax, IRES. According to what is written in the proxy, the government plans to maintain the ordinary tax rate of 24 percent, which will be flanked by a subsidized taxation, based on the amount of income that in the following two years is allocated to hiring or investment. This is where the sound principle of “the more you invest and hire, the less you pay” is realized. Especially in the face of the global minimum tax that will take effect Jan. 1 next year, our economy must make itself attractive.
The chapter on enterprises will then find room for a simplification of the rules on the deductibility of interest expenses and the reorganization of the tax loss offsetting regime based on European standards. Interventions are also planned on the rules intervening in cases of business crisis, shell companies (a discipline it wants outdated), the reconciliation of tax and statutory values, and the revision of so-called “deductible costs.”
Finally, there is also a plan to permanently eliminate IRAP – the Regional Business Tax – prioritizing its abolition first for partnerships, then associated firms and companies among professionals, turning it into an IRES super-tax in the meantime.
Worth mentioning, finally, is the procedure with regard to the entire collection sector. There are 1.153 billion euros of debt that the tax authorities have in them, amounting to 174 million files. So much of this money will never be seen again and, often, it is cheaper to scrap some installments than to collect them. To address this problem permanently, taking into account the desire to overcome this control/collection system (alternatively, scrapping), access to 120 installment systems and a simplification operation will be introduced to eliminate costs related to organizational inefficiencies.
Those who thought of a government that would lower taxes overnight were living in fantasy worlds. At the same time, those who assumed – even before the oath of office – that the center-right government would wreck the public accounts must think again. This enabling act is nothing more than a first step toward a new tax system that will enable the Italian economy to emerge from the stagnation it has been in for decades.
* Republished from the original publication with the Machiavelli Center.