Unsolicited advice for insightful tax reform
Gianfranco Polillo's analysis
Having been among the first to doubt the magnificent progressive fate of the fiscal (?) Reform, we can only share the recent findings of Carlo Cottarelli . "Gradual steps, there is no fiscal revolution": as he rightly stated. But Italy needs this: above all to combat a shameful tax evasion and reduce the burden of an excessive and unbalanced levy. It would take, adds Cottarelli, about 35 billion, against the 8 allocated by the government, to reduce the tax burden by at least 2 points. In this case, we add, to drop slightly below the Eurozone average. As far as we are concerned, we would be content with an even less ambitious goal: reaching the average one with a 1.4 point cut in the tax burden. It would already be a huge step forward, destined to restart the internal market which, for some time, has been holding back the country's greatest development opportunities.
The recipe suggested by Cottarelli is the fight against tax evasion and spending review. The great absent from the Italian public debate on the policies to follow. It's hard not to agree. The waste of resources remains so even when the resources are there, but they are frozen. As happens in the Italian reality. We would like to remind you that, according to the forecasts of the European Commission, by 2023 the credits that Italy will grant abroad, without expecting anything (given the current levels of interest rates) will amount to over 220 billion euros. Much more than what Europe has granted us with the Next generation EU. Resources that could be used to bring those reforms that are needed (including the fiscal one) to the condition of spending them well to increase the pace of development of our economy. If this were to occur, the return would obviously be higher than the sums used.
But why doesn't this happen? Because the Italian political forces are prisoners of their schemes. On the one hand, they accept, without uttering a word, European recipes; on the other hand, they curse Brussels without having the ability to stand up to a true confrontation and demonstrate the need for "unconventional policies", as Mario Draghi would have repeated after his experience at the ECB. In addition there is the convenience of the party, which prevents any reasoning that goes beyond those Pillars of Hercules. That convenience that has so far prevented us from thinking about the Italian tax model: too simplistically equated with that of other European countries, with completely different structural characteristics.
From this point of view, Italy is not Germany, whose production structure sees the dominance of large companies. It is not even France and, in many ways, not even Spain. Unlike those countries, its Fordist apparatus is restricted. Its social structure is more "liquid": made up of a myriad of very small companies, of personal services that often have an artisanal dimension, of professions that find their reason to be more in the relationship with the individual citizen (think of lawyers, doctors and so on) than with those production structures, which require them to comply with precise accounting rules. In these conditions, tax evasion becomes the almost usual way of dealing with the taxman. Especially, then, if the rates of the levy are justified excessive. Thus the only certainty for the taxman is given by the "withholding agent". The employer who becomes a tax collector on behalf of the state. But if this prerogative is exercised only by a handful of subjects, then the area of the possible escape becomes an ocean.
The continuous union denunciation on the excessive concentration of the tax burden on employees therefore has this reason of a structural nature. Justified criticism? Absolutely yes, albeit with some necessary reservations. Employees are the main harassed, but they are not all to the same extent. Once again the model followed was the one that prevailed at the European level, even if with respect to France, but Germany itself, the differences are profound, due to the existence of a sort of "family quotient". The different rates, in fact, more or less follow those equivalences.
In Germany, for example, there is a "no tax area" of up to 9,000 euros a year, therefore progressively increasing rates from 14 to 42 percent for incomes ranging from 9,001 to 54,949 euros. From € 54,950 to € 260,532, the rate remains fixed at 42 percent. To rise to 45 percent for even higher incomes. As can be seen, apart from the continuous progression, rather than the brackets, as is the case in Italy, the structure of the levy is not so dissimilar. The real difference is elsewhere: it is in the system of tax breaks for the benefit of the lowest incomes. Which profoundly alters the relationships between the various classes of taxpayers. Concessions that involve substantial discounts in the payment up to a third of the effective rate for incomes of less than 15 thousand euros and by half that for incomes between 15 and 29 thousand euros. It follows that, in the end, as we have written on other occasions, the tax burden, for Irpef purposes, is concentrated on incomes exceeding 50 thousand euros a year. They are just over 7 percent of taxpayers, but over 30 percent of the levy weighs on them.
And here is why the inaction of all these years is explained. The great compromise achieved was that between the protection afforded to the lowest incomes, albeit surreptitiously, and the great tax evasion. Because the usual suspects were paying over the odds: those wealthy classes, made up of executives, executives, high-end freelancers, forced to pay up to the last cent. The same thing that happens in Germany? No: in that case the “family factor” comes into play which involves, for everyone and not just for some, the magic of tax expenditures. Which makes the necessary bloodletting less salty.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/consigli-non-richiesti-per-una-ficcante-riforma-fiscale/ on Mon, 29 Nov 2021 10:37:44 +0000.