The start by mid-March
The tax reform will kick off in mid-March. The Deputy Minister of the Economy, Maurizio Leo, confirmed the arrival in the Council of Ministers of the enabling law for next week: “We are in the final stages to then start a structural reform,” said the Deputy Minister, who believes the tax “a lever to accelerate the recovery”. The government’s intention is to “reorder the entire tax system”starting from making “our system consistent with the rules of the European Union and international ones”, explained Leo.
The next step will be «to intervene on individual taxes»: the Irpef rates will go from four to three, but adjustments are planned for Ires and VAT and on minor “taxes”, which in some cases “can even be eliminated” according to the minister.
There is also talk of intervention on assessment procedures, on the need to change the relationship between the tax authorities and the tax payerand on “simplifying and trying to reduce the tax gap that has existed since the 2000s and which has stood at between 75 and 100 billion”.
But, in a nutshell, what will be the first payroll effects if the reform is confirmed? Let’s try to figure it out.
(Here the article by Federico Fubini: the revision starts from corporate taxes, and so investments will be encouraged)
Payroll effects
Will we have more generous paychecks with the tax reform? To say so, we will have to wait for the draft of the text and thus understand the real impact on the checks. According to the hypotheses in circulation, however, the review of the number of tax rates (from 4 to 3)of their percentage, of the income brackets to which to apply them and a remodulation of tax deductions, can only bring about changes (positive or otherwise, we will know shortly) in the pockets of Italians. If confirmed, however, the government’s approach is to look above all at the lower-middle class (we are talking about incomes between 15 and 50 thousand euros) and there could be two paths: one provides for the unification of the second and third brackets of income, increasing the rate compared to the current one for these two brackets (23%, 27% and 43%, for a cost of approximately 10 billion); the other hypothesis always consists in reducing the brackets to three by spreading the adjustment on all income brackets. But with the third rate which would increase by 6 percentage points (23%, 33% and 43%) the impact on state coffers would be minor: about 6 billion euros.
Click here to read the hypotheses under study and the simulations on the effects on payroll.
The first hypothesis: for the second bracket the rate is raised to 28%
As Isidoro Trovato wrote in the Corriere a few days ago, the first hypothesis on the MEF table brings the rates down to three, leaving the first bracket untouched (the one up to 15 thousand euros of income and to which the 23% rate applies). . The second bracket, on the other hand, would rise up to 50 thousand euros compared to the current 28 thousand euros (bringing the rate from the current 25% to 28%). The third and last bracket of income (over 50,000 euros) would remain unchanged at the current 43%.
Second hypothesis
As mentioned, the second hypothesis also provides for the reformulation into three income brackets and three tax rates, but in this case we intervene on the first two brackets. The former would be brought from the ceiling of the current 15,000 euros to 28,000, leaving the rate at 23%. The second bracket would remain up to the ceiling of 50,000 euros, but the rate would be 33%. Also in this case, the third bracket would remain at 43% for incomes over 50,000 euros. According to this scenario, the lowest incomes (up to 34,000 euros) would see the tax rise and, therefore, the richest would benefit from the reform.
Interventions for businesses and the incremental flat tax
Deputy minister Lei also said that “incentives for companies for hiring” will be thought of as part of the reform. Even here, it is too early to say what it will be. «What we plan to do», however added Leo, «is to reduce taxation, for example of IRES, where the company hires those who have received the Citizenship Income, the over-50s, women. Or, if more innovative investments are made such as 4.0, the patent box, research and development». In short, the goal is “to reduce taxes to create new jobs and make investments,” assures Leo. A “two-year arrangement” is also being studied for small companies: the tax authorities will calculate the tax and if the company accepts it, it will not have checks for two years and if it invoices more, the excess will not be taxed. Larger companies, on the other hand, will have to negotiate with the tax authorities, as already envisaged by a 2015 law.
Then it will also be up to the Flat tax incrementalei.e. the flat tax (probably 15%) on the additional income declared compared to the previous year (or the year in which more was declared in the last three).
Where will the government recover the resources?
Funding is needed to reduce the income tax brackets and Deputy Minister Leo said the government intends recover resources from tax expendituresor the tax discounts that reduce the taxable amount (deductions on mortgages, health care, veterinary expenses, etc.). Leo calculated 600 of these discounts for a value of 156 billion. A lot of money which could therefore help the reduction of tax rates, but obviously if they are reduced or canceled those who now enjoy them will see a worsening of the tax burden. A hypothesis on the table of the ministry speaks of a cut that could not be made by the state, but by the taxpayer, called to choose which deductions to keep and which to say goodbye to, based on an established figure within which it will have to remain.