From deductions to tax rates, the hypothesis of restyling of the personal income tax

From deductions to tax rates, the hypothesis of restyling of the personal income tax
From deductions to tax rates, the hypothesis of restyling of the personal income tax

The game for the tax reform is underway. And the road to reaching an agreement within the majority is already shaping up to be uphill. At present the distances are in fact more numerous than the potential meeting points. In the evening, the joint Finance Committees of the Chamber and Senate will begin examining the parties’ proposals on the reform of personal income tax and other aspects of the tax system.

Unified document objective by 30 June

The goal is to draw up a unitary document, a parliamentary proposal which in the intentions should be unitary and which must be produced by June 30th. The document will serve as the basis for the proposed law on tax reform which must be approved by the Council of Ministers by 31 July. The game is not easy. Apart from personal income tax, the positions are currently very distant on several points. Prime Minister Mario Draghi and Economy Minister Daniele Franco clarified that the proposal will take into account the document issued by the committees gathered.


Everyone is asking to reduce the tax burden on the middle class

From a first analysis of the documents deposited in the committee by the parliamentary groups, it emerges that on one point the positions coincide, and that is the need to reduce the tax burden on the middle class. From the League to the LeU, the focus is on the third bracket of income subject to personal income tax, the one between 28,000 and 55,000 euros, on which the rate, i.e. the weight of taxes on the taxpayer, leaps by 11 percentage points, from 27% to 38%. The proposal is to revise the rate.

The proposals (and the distances) in the majority

But if a political convergence could be outlined on the alleviation of the tax burden on the income of the third income tax bracket, the “recipe” for making this variation changes according to the party. With a fairly clear division between right and left. Lega, Forza Italia, but also M5S tend to reduce the five rates from the current five to three, while Pd and LeU prefer the German model. The model provides for a “no tax area” (an income threshold, 9,000 euros, exempt from paying taxes). From € 9001.00 up to € 54.949 the rate applied is variable (from a minimum of 14% up to 42%). The system is completed by two fixed rates: 42% for incomes between € 54,950 and € 260,532; 45% for all incomes exceeding 260,532 euros.

Alloy and Fi: three rates are a compromise, optimal flat fee solution

Lega and Forza Italia point out that the three rates are a “compromise” with respect to their real objective, which always remains that of a flat tax on all income. As for the German model, which LeU would like to extend also to VAT numbers, this instead better guarantees progressivity, because, with an algorithm, the tax burden increases in mathematical harmony with increasing income.

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