Further Call For Indirect Tax Switch In Italy
Monday, October 17, 2011
With the government’s own proposals in danger of being overshadowed
by political events, the President of Assonime (the association of Italian limited
companies), Luigi Abete, has suggested a revenue-neutral tax reform package
to encourage growth back into the Italian economy.
In essence, he proposed to a Senate committee that tax revenue to cover the
necessary reductions to the currently high Italian direct tax burden on individuals
and companies, which will rise to almost 45% of gross domestic product (GDP)
in 2013-14 after the recent ‘anti-crisis’ measures, and is said
to be stifling economic growth, could be found by raising value-added tax (VAT)
collections and from the increased taxation of individual assets.
In the opinion of Assonime, to encourage economic growth back to the Italian
economy, it will be necessary to make a significant shift – of around
2% of GDP – away from the tax burden on the “productive sector”
(business and their employees) and towards indirect and asset-based taxes, over
a five-year span.
The proposed increase to VAT revenue, with the application of the normal tax
rate to all goods and services, with very few exceptions (such as housing and
absolute necessities), could raise up to EUR25bn (USD34.3bn), and would be utilized
to provide direct benefits to the less affluent (to compensate for the increased
VAT they would pay) and for a reduction in the bottom rate of individual income
tax to 20% (from 23%).
Abete also proposed that, to reduce the corporate income tax to 20% (from 27.5%)
and, at the same time, eliminate all of the tax differentials across various
industrial sectors, a small wealth tax should be introduced on individuals’
He suggested that the new tax should be imposed at a rate between 0.1% and 0.2% on all assets, including first homes, government bonds, cash
deposits and all forms of “companies” (funds, property companies
and trusts). With a minimum threshold before payment, he said that it would
not be unrealistic to expect some EUR12bn in annual revenue from such a new
Finally, he pointed out that any increased tax revenue deriving from the further
measures that are being taken, and are to be taken, against the high level of
tax evasion within the Italian economy should be used primarily to reduce the
tax burden on those taxpayers who regularly pay their taxes, and not on reducing
the country’s fiscal deficit or public debt.