Useful tips for a pro-growth tax reform
The speech by Raffaele Lauro, general secretary of Unimpresa, not only on the tax reform in the pipeline
This week marks the beginning of a month (coming September!) That is truly crucial for the future of our country, due to a competing series of very delicate events, which could become the harbingers of a political-institutional chaos: the exponential resumption of infections. epidemics, due to the contradictory provisions of the executive and the institutional anarchy always in place between the central government and the regions, denounced several times, and never resolved; the reopening of a Parliament now reduced to servitude by a government "unnecessarily centralizing", with the discussion of the fourth economic decree, which appears even more useless and ineffective than the previous three; the attempts of a parliamentary pseudo-majority M5S / PD to enact a reform of the electoral law, which avoids its explosion and which reconciles the desperate attempts to avoid an electoral debacle, with the fall of the Conte II government; the contrasted resumption of didactic activity in schools of all levels, decided in the most total confusion, which also thwarted the experienced patience of school directors and trade unions in the sector; the results of the partial regional elections of 20/21 September which could, on the government front, in spite of the tame polls, determine the end of the dreams of power of the new ruling caste of the Grillino-Democratic Brahmins, the further undoing of the parliamentary swamp of the CinqueStelle , the defeat of the Zingaretti secretariat and, on the front of the so-called center-right parliamentary opposition, the eclipse of the Northern League leadership of Matteo Salvini, the confirmation of the emerging one of Giorgia Meloni and the agony of the party-company of Silvio Berlusconi; the guillotine of the electoral referendum on the purely propaganda and irrational cuts in parliamentary seats, which, with the feared victory of the yes, would determine the definitive decline of our parliamentary republic and the violation of the constitutional principle of popular representation; the explosion of the economic and social crisis.
THE UNIMPRESA CONFERENCE ON 4 SEPTEMBER. A PROOF OF GOOD WILL, RESPONSIBILITY AND RESISTANCE OF SMEs TO DOMINANT INCOMPETENCE. THE FISCO: AN ALL ITALIAN PARADOX
In this general chaos, the Unimpresa conference, organized in Rome, at the Palazzo della Minerva of the Senate of the Republic, on Friday 4 September, on the theme of structural reforms (taxation, civil justice, bank credit and digitalization of the public administration), essential for recovery, represent further proof of SMEs' goodwill, responsibility and resistance to dominant incompetence. It is therefore useful, on the eve of the conference, to investigate the controversial issues of the key reform, the tax one, deriving from the partial advances of the government, direct and indirect, starting from the interview of 25 August 2020, released to La Repubblica , by the Director of the Revenue Agency, Ernesto Maria Ruffini. He announced a structural, radical and comprehensive tax reform, with respect to the chaotic tax system in force. Also following the incessant proposals, and some criticism, by Unimpresa and other trade associations, to ask the government to reform the current tangle of tax rules, Ruffini has made it clear that he wants to proceed with a reform that includes, on the one hand , a hypothetical taxation of income, of self-employed workers and businesses, with the “cash” method, and, on the other hand, of wanting to recreate five single texts between direct and indirect taxes. A positive fact appears to be the official acknowledgment (finally!), By the top managerial manager of the national tax, that the Italian tax system is composed of a multiform tangle of rules, comparable to a ball of silk, of which can find neither the beginning nor the end. The resulting application complexity, in the interpretation of tax laws, is so wide that even the institute of the interrogation has been modified by Legislative Decree 156/2015 – Revision of the rules of the rulings – on which the Revenue Agency was forced to provide clarifications, with circular 9 / E of 1 April 2016. The 2015 decree was written to give the opportunity to the unfortunate taxpayers to "ask for explanations" to the Revenue Agency, in all those cases (many, alas!) of objective interpretative uncertainty of a tax rule. An all-Italian paradox!
OUR MYSTERIOUS AND UNKNOWN FISCAL JUNGLE. FIVE CODES AND MONTHLY “PER CASH” COLLECTION ENOUGH TO EXIT?
It is therefore equally undeniable, as acknowledged by Ruffini, that even the most expert connoisseur of the Italian tax system does not really know all the tax legislation fully. The number of tax laws and their cumbersome nature, in fact, make it impossible to acquire certainty about the rules that an entrepreneur of any size must face regarding the investments to be made on the national or international territory. Therefore, the investment planning is never clear, much less secure in the contents, because our mysterious and unknown fiscal jungle, in addition to being confused and incomprehensible, is modified over the course of the year, over and over again. The taxman, therefore, a mysterious object and weak link in entrepreneurial forecasts! Another joke, because entrepreneurs, in planning their expansion plans and evaluating the dynamics of costs and revenues, cannot count on complete and reliable data. Furthermore, the proposal to launch five codes that include direct and indirect taxes is interesting. The advantage would undoubtedly be a complete overhaul and simplification of the rules as a whole. In this regard, a company hopes that the Anglo-Saxon tax system will be taken as an example: a simple, short and extremely linear system that leaves no room for doubt for the taxpayer's interpretation. Ruffini, however, does not clarify how it will be intended to proceed, in the technical sphere, at the government and parliamentary level, nor what are the foreseeable times for a work so impressive as to shake the wrists of even a new Justinian! Certainly the great reform will require the help not only of recognized tax experts, but also professionals who live and face the uncertainties of these rules on behalf of their desperate clients on a daily basis. The challenge, therefore, is certainly that of the timing required to review tax rules, as a whole, and make them, at a macroeconomic level, suitable for providing the necessary revenues for annual spending, in compliance with the European budget pact. The path traced is undoubtedly the right one, but urgent government intervention is now needed to define, in a clear and precise way, the principles, contents and timing of this key reform. A not secondary aspect of the framework to be reformed, also announced by Ruffini, concerns the timing and methods of collecting taxes: the transition from a method that provides for the annual calculation of income taxes to a "cash" method on a monthly basis or quarterly. It is worthwhile, here, to explore the advantages, disadvantages and numerous criticalities of this hypothesized change.
ADVANTAGES AND DISADVANTAGES OF A "FOR CASH" SYSTEM
First of all, it should be clarified that, in order to work on a cash system or, in any case, quarterly / periodic settlement system, it is necessary to eliminate the practice of fiscal recoveries for the determination of taxes. In fact, to date, the civil profit, which is obtained by subtracting costs from revenues, must be re-added, as if they were revenues, all those costs that are not considered deductible for the purposes of direct taxes and IRAP (for example, cars are deductible only 20%, telephone utilities at 80%, etc.). So, if you make a profit of 1,000, and the costs of the cars are 100 and the costs of the telephone are 100, to these 1,000 euros of profit you have to add 100, that is, 80 euros for the costs of cars and 20 euros for the costs of the telephone. The tax base would thus become 1,100 and on this it would be necessary to apply 24% of IRES: a procedure impossible to carry out, for companies, on a monthly or quarterly basis. From this it is easy to deduce how the archaic system of tax recovery should be definitively eliminated. As for the advantages, they would be enormous for the state coffers, because having liquidity, on a monthly or quarterly basis, would give the possibility of making a budget planning much more certain (thus avoiding, every year, the European reprimands about not achievement of what was promised in monetary terms!). For companies, the advantage would be to avoid a large outlay at the end of the year, often omitted due to evident liquidity crises. In a pandemic phase, such as the one we are experiencing, if a cash system were already in place, companies would have already paid a large part of the previous year's taxes and had less problems in dealing with the drama of payments, which will be staged by this September to December 2020. Another advantage for companies would consist in the elimination of the system of tax advances that faint companies, forced to pay sums on a hypothetical "unpredictable" income, to be produced the following year. Furthermore, the higher the balance of the previous year, the more the advances increase (which are nothing more than 100% of the balance divided into two tranches). In this way, since the State has made cash on time, during the year, in fieri, it can no longer ask for advances, relieving companies of this heavy burden. With the sums of the advances canceled, companies could make additional investments and grow in terms of turnover and know-how, making their company more solid.
POSSIBLE CRITICALITIES
It is also advisable to examine, as a preventive measure, any critical issues and abuses by taxpayers, in order to prevent possible rethinking of the legislator with a justified restoration of the old system, with damage to the correct companies that would see the tax calculation system changed again. What criticalities and abuses? Businesses may be tempted to “inflate costs” related to entertainment expenses, car costs, telephone expenses, travel and business stays, to pay less taxes. The solution, as envisaged for the deductible expenses of individuals, should be the application of very severe penalties. There are no other deterrents, other than the application of very heavy penalties that discourage taxpayers from committing illegal activities, consisting in the artificial increase in costs to reduce taxes. Another problematic aspect would concern the postponement of the issue of invoices, on a monthly or quarterly basis, in order not to pay taxes or in any case postpone them to the end of the year. Also in this case, there should be a timely check that raises the alarm, if 60% or 70% of the turnover were concentrated in the last quarter of the year, leaving the possible justification for this anomaly to the taxpayer. With regard to VAT, the mechanism of quarterly communication to the tax authorities already exists to indicate whether businesses and self-employed workers are in debt, and must pay, or if they are in credit (for this reason the Director AE has anticipated the application of this mechanism also to direct taxes, something which accountants have been debating for decades). All VAT numbers, in fact, must process the LIPE (Quarterly Periodic Settlements) and the taxman records in real time whether the taxpayers have paid the VAT due or, if on credit, have compensated it correctly. Otherwise, the taxman recovers it immediately without having to wait for the submission of the VAT return the following year. In fact, therefore, they have already returned the VAT "for cash". However, the principle of raising the penalties also applies to VAT, because an unhealthy practice, as for direct taxes, tends to postpone the issue of invoices to avoid paying it or "filing" the turnover, referring it to next year to pay less tax. There are penalties for VAT and for direct taxes, dictated by Legislative Decree 74/2000, but this decree provides for thresholds that are too “loose”, so they must be modified if the announced cash system is to be applied with seriousness and prevention.
WILL THE SMALL CRY OF PAIN BE HEARD?
In the upcoming conference, an enterprise will be committed to providing the government, parliament, political forces and public opinion, with humility, with respectful attention and with due determination, further and more in-depth reflections on the issues of reforms to be approved with urgency, starting from the fiscal one, without further delay, postponements, downward mediation and hesitation, if you really intend to give a signal of positive reaction, even psychological, to the business world and, in particular, to that of micro, small and medium companies, which are experiencing the most difficult moment of their glorious history and will face an autumn full of unknowns, also due to the obvious lack of direction and political management of our country. These are not academic reflections, perhaps matured in the enclosure of private lounges, but suggestions and proposals that a company, like other representative associations, collects from the base, from the daily life of companies and from the daily travails of entrepreneurs, that is, from the "living flesh" of the national economic-productive fabric. Will this cry of pain, purposeful and not an end in itself, be picked up?
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/consigli-utili-per-una-riforma-fiscale-pro-crescita/ on Mon, 31 Aug 2020 07:35:14 +0000.