Times would be tight. According to the calendar written in the National Recovery and Resilience Plan, the Italian Recovery Plan delivered to the European Commission, the government should give the green light to the enabling law on tax reform by the end of July. In reality, however, it may take a few more days. “I would exclude” that it is on the table of the Council of Ministers next week, the Prime Minister Mario Draghi clarified at the press conference on the new anti Covid decree.
Organic reform objective
More likely, however, that the competition law will arrive within this month (also in this case the deadline indicated in the Recovery Plan is 31 July). There will therefore be a few more days to close the tax delegation. Leveraging on the work already done by the Finance Committees of the House and Senate, the goal is to achieve an “organic reform” of the system because – as also indicated by Draghi – it is not “a good idea” to change taxes one at a time, and that lasts over time.
According to the indications provided by the Minister of the Economy Daniele Franco during the recent hearing before the Budget Committees of the Chamber and Senate, a gradual “step-by-step” reform is outlined, to be developed as the necessary financial coverage is identified. And therefore: first the interventions at no cost and priorities such as overcoming IRAP. Then, once the resources have been identified, a cut also in Irpef. At the moment the picture of available resources remains uncertain: it is difficult to predict what the evolution of the coronavirus pandemic will be, with the spread of variants, starting with the Delta, which can put the target of + 5% of GDP at risk. At present, the 2-3 billion allocated with the latest budget law remain on the table for 2022.
Revision of VAT with the same revenue
After the intervention of the minister in parliament, it is possible to outline the solutions that could enter into this delegation. Franco recalled that the Finance committees in the document they drafted suggested redefining “the regulation for simplifying” VAT and “a possible reduction in the ordinary rate: I would say – continued the Minister of Economy – that simplification and above all, the increase in the efficiency of the tax through reduction of tax evasion and avoidance may also suggest broadening this perspective, not excluding that the delegated legislator can act on the level of the reduced rates and the distribution of the tax bases among the different rates, interventions that can also take place with the same VAT revenue “.
Priority Irap and tax wedge
Franco has identified two priorities. The first: after many tweaks and revisions, which have changed the original structure, the maintenance of IRAP, he said, “no longer appears justified, there is a need for simplification.” IRES, one of the hypotheses, would need about 3 billion to cover the payments of those subjects who do not pay corporate tax. The second priority: “the question of the tax wedge (labor taxation, in particular in some parts of the curve where marginal but also average rates for some workers are particularly high): I believe – Franco said – that this is a question particularly important “. Again: “The wedge is particularly high, as are the labor tax rates”, therefore the reform “must facilitate the increase in the employment rate which in our country is too low, especially for young people, women and the South”.