Flat tax, why Europe rejected it and what its requests are

Proper use of European funds, starting with those of the Recovery Fund, and above all less spending and debt. The recommendations that the European Commission draws up for Italy and its government are not many. There are just three, but far-reaching. Because they represent a concentration of reforms and actions that will have to be implemented if you don’t want to run into unpleasant surprises. With the stability pact still suspended and undergoing reform, there will be no procedures for debt or for excessive imbalances, such a decision is postponed to spring 2024, when the common fiscal rules will come back into force, and Italy still remains under surveillance special. Because the reference thresholds of deficit and debt in relation to GDP, at 3% and 60% respectively, will not disappear in any case. They are enshrined in the treaties on the functioning of the EU, and the country will breach both of them next year (3.7% and 140.3% respectively). With the proposal of new rules it would mean fines.

The European Commission makes concessions when it comes to accounts. The country must “ensure a prudent fiscal policy, in particular by limiting the nominal increase in nationally financed net primary expenditure in 2024 to no more than 1.3%”. The government is given a margin of maneuver of 0.5%, given that two weeks ago, on the occasion of the spring economic forecasts, the increase in net primary expenditure was set at 0.8%. For the horizon beyond 2024, however, a “consolidation” budget policy is called for. An action that passes from the right mix of less spending, debt reduction, correct use of funds, and implementation of the National Recovery Plan (Pnrr).

The latter remains «fundamental» for competitiveness. For this reason, insists the Commissioner for the Economy, Paolo Gentiloni, all Member States “should give priority to the correct implementation of the national recovery and resilience plans, our most powerful tool for achieving lasting and shared prosperity”. It is valid for everyone, but for Italy more. Because the need to put new agendas into practice relaunches old recommendations, which Brussels has been asking for for years. The public administration reform is back, in a green sauce. “Ensure effective governance and strengthen administrative capacity, especially at the sub-national level, to enable continuous, rapid and sustained implementation of the recovery and resilience plan”. This is what is being asked of the Meloni government.

But other old reforms that have been being asked for for years and for which, for years, little progress has been seen are also making a comeback: the cut in the tax wedge, first of all. It is necessary to “further reduce taxes on labor and make the tax system more efficient”. Here it is recommended to adopt and implement the enabling law on tax reform, “preserving the progressivity of the tax system and improving its fairness, in particular by rationalizing and reducing tax concessions”. This is a substantial no to the “flat tax”. And then, the land registry reform. It is necessary, today more than ever, “to align the cadastral values ​​with the current market values”. A request that is linked to the broader commitment to sustainable construction.

Because the country is being asked to accelerate the green and digital transitions. Which means more energy from renewable sources and leaner procedures for their installation. It means better transmission network and gas interconnection, as well as “sustainable mobility, including by eliminating subsidies harmful to the environment and accelerating the installation of charging stations”. And then again, in more general terms, “continue and, where necessary, accelerate the transition from Russian fossil fuels”. This, Gentiloni articulates, “is both an environmental and a geopolitical imperative”. We also need labor market reform. Because there is no Pnrr and transition that hold without the right skills and qualifications required. We need “strong and targeted employment and social policies that go hand in hand with industrial, economic and budgetary policies”, articulates Nicolas Schmit, Commissioner for Labor and Social Affairs. This is what appears in the recommendations as an invitation to “intensify political efforts aimed at providing and acquiring the necessary skills for the green transition”.