The OECD report on Italy recalls how taxes on labor remain too high. The report recommends the implementation of comprehensive tax reform to reduce system complexity and labor taxes. This should be funded through better compliance, driven by increased use of technology and card payments.
In Italy, compared to the average of the OECD area, the revenue deriving from taxes on labor is higher, while the revenue deriving from inheritance taxes and the collection of VAT is lower also because there is a significant VAT exemption threshold. The tax wedge on labor is high, recalls the OECD, even if it has been reduced through income tax cuts, reforms of household allowances and temporary cuts in social contributions. The OECD then underlines how the high number of tax breaks contributes to the complexity of the situation in Italy.
A holistic tax reform should aim to mitigate the complexity of the regime and permanently reduce taxes on labor, financed through revenues from improved levels of compliance, lower tax expenses and higher taxes on real estate and inheritance.