ROME. After years of announcements, expectations and unfulfilled promises, this could really be the right time. The government, with the forthcoming budget law – the Minister of Economy said yesterday without too many words, seems to be really willing to start the IRPEF reform and to introduce a first tax cut. The executive’s goal is very ambitious because it is a question of raising at least 10 billion euros. To merge the rates, reducing them from 5 to 4 (and then maybe to 3), take off the single allowance for children already approved in recent months and adjust other pieces of our too cumbersome and heavy tax system.
The plan of the Mef
Reduce the tax burden, in particular to the advantage of medium-low incomes, prune the forest of deductions, simplify the tax rules, reform the VAT system: these are the cornerstones of the reform on which the Mef are working in view of 2021.
The starting point is resources. There are two levers available to the government: the reduction of tax expenditures and the proceeds from the fight against tax evasion. In fact, the aim is to clear the forest of the over 500 tax discounts currently in force, which according to the latest census of the commission chaired by Mauro Marè are worth a total of 62.5 billion, and to further capitalize the effects of the entry into force of the invoice and receipt. and additional incentive measures for the use of electronic money.
Tax discounts to be pruned
On the front of tax expenditures, a politically delicate terrain for the protests that could be triggered, the most accredited hypothesis envisages maintaining more significant tax deductions and deductions, such as those on health expenses, social security contributions and home loans, while possible cuts would primarily concern the 19 billion euros of environmentally harmful subsidies. Environment Minister Costa, for example, in recent weeks has already mentioned the possibility of progressively aligning the excise duties on diesel and petrol. The diesel could cost as much as the super and only at the idea the transporters have already protested vehemently.
However, a first taste of cuts and simplifications in recent months has already been introduced with the single allowance for children which will come into force in 2021, merging 8 existing bonuses and deductions into a single measure. But in this case it will not produce savings and indeed to go to full capacity it is expected that it will be necessary to find approximately 6-7 billion.
The minister and allies
If it were up to the Minister of Economy Gualtieri to overcome the current IRPEF mechanism, the German model would have to be adopted which provides for a continuous rate such as to ensure a total progressivity of the levy. A complex mechanism that is not appreciated by all within the majority, starting with Italia Viva which, claiming the primogeniture of the proposal to intervene on the income tax (“a clean sweep must be made, not just an adjustment”, argue the Renzians) now asks the head of Mef to open a table to discuss a shared solution with the whole majority.
For this reason, an operation focused on the amalgamation of rates is certainly more within reach, a solution well received by both the Democratic Party and the 5 Stars. It could in fact go from the current 5 brackets to 4 (the M5S pushes for three) combining that of 27% with that of 38% (for incomes between 15 and 55 thousand euros) by setting the new bar between 33 and 36 %. Another hypothesis, on the other hand, provides for the unification of the two central rates of 38 and 41% (for incomes up to 75 thousand euros), probably at 36%.
The third leg of the tax reform concerns VAT numbers. For them, after the messes of the past months, linked to the payments of advances and adjustments, as is known, we are thinking of introducing a “cash flow tax” by providing automatic payments on a monthly or quarterly basis based on the data obtained from electronic invoices without therefore having to make more predictions on possible future entries.
Maneuver with zero balance
Obviously, given the situation of our accounts, it is a question of financing the entire operation without creating a new deficit, which is particularly close to Gualtieri’s heart. A great challenge for the Minister of Economy and the majority, although thanks to the Recovery Fund (and perhaps also to Mes) the resources for all other types of interventions will be obtained.