“No gifts to tax evaders. The flat tax? It will arrive at the end of the term»- Corriere.it
The Deputy Minister of Economy Maurizio Leo
The government has just approved the enabling law for tax reform. If you were to name its single main objective, which one would it be? “There are many of course. But I would choose the reorganization of Irpef. Because it is a path that is aimed at restoring a clear identity to the main tax of our system. It is an intervention that focuses heavily on simplification. And it is betting on horizontal equity, to eliminate the thousands of differences that now exist between the various categories of taxpayers, and which the arrival in the future of the flat tax for all should concretely achieve. Then I would like to recall that the delegation provides for the reorganization of all categories of individual income: from agricultural to real estate to savings, where only one category of income of a financial nature will be defined, taxed on a cash basis and with the possibility of deducting any capital losses. And I would also like to underline the provisions of the delegation relating to the adaptation of our tax system to the principles of international and European taxation in order to give greater legal certainty also to attract new foreign investments".
The delegation indicates the goal of achieving a flat tax on personal income tax. Do you really believe it? If it's not realistic, how many echelons should there be?
«I believe in a system with a single rate - replies the Deputy Minister of the Economy Maurizio Leo - in which progressivity is guaranteed by a system that combines no-tax area and deductions based on income. It has the advantage of clarity and simplicity. Such an approach brings with it the idea that taxes must go down for everyone. It is a prospective project, without leaps forward or financial forcing. The first phase will be the passage of Irpef to three rates. A step at a time".
For the CGIL, progressivity decreases with the flat tax…
«We have to apply the flat tax to everyone, on a tendential basis. By applying deductions and no-tax area, we respect the constitutional principle of progressiveness. But here we are talking about things that we will do at the end of the term. And if we were to arrive at the generalized flat tax, progressiveness is not in question in any case".
Article 22 of the delegation provides for the reform to be with unchanged balances. Where do covers come from?
«It is too early to say, they will have to be identified gradually. There is the reordering of tax expenditures, for example. But compatibility can also be assessed by seeing how the accounts are going, in the light of the budget documents".
What are the costs to be covered?
«In the delegation of the previous government we started from the three billion from the fight against tax evasion. Let's see how this year's accounts go and then the assessments will be made».
How many savings can be found on tax expenses? And how?
“There are hundreds of tax expenditures, which cost more than 125 billion a year. No one argues that everything should be reset. We preserve the necessary items: home, family, health, education, supplementary pensions. Then let's see what's left. There is an excessive use of tax credits where clarity is needed: can anyone deny that there are things to do urgently? And that significant savings cannot be made from it, without even bothering about the abuses of building bonuses? I would also like to remind you that a mechanism is already envisaged which links the right to benefit from income rebates. We can think about it."
Are you thinking of merging VAT on lower rates? Should it produce additional revenue?
«The rates of 5 and 10% may be subject to review, as well as that on some goods, for example the one applied to water at 22%. We need to standardize the taxation of similar goods and services. And we can take advantage of the European rules which allow for the application of a zero rate on some essential products, such as those for children. There is time to evaluate the revenue and coverage, but I believe that a reorganization can offer the resources to make the taxation on indispensable consumption more equitable and lighter: they weigh more on the less well-off segments».
Instead of the incremental flat tax, wasn't it better to put more incentives on productivity bonuses?
«Productivity bonuses and agreements already have concessions and, if the resources are there, more can be done. The project of the incremental flat tax also wants to push taxpayers to bring out taxable income, in exchange for a more favorable taxation on incremental shares. We will see the result in the test of facts. We will need it to calibrate the intervention also on other incomes, in addition to those of the company and the self-employed ».
The self-employed, according to the latest government report on evasion, tend to evade a lot on average. Doesn't making two-year preventive agreements with them on the basis of slight increases in revenue risk producing "preventive two-year amnesties"?
“Nobody here wants to give presents. We want to pay taxes in a context in which it is not only the exorbitant level that weighs, but also the complication, the uncertainty, the risk in the tax relationship. It's not about making discounts, but about giving certainties. We have a database system with a lot of information that the administration will be able to work with to define agreements with taxpayers. In exchange, the taxpayer will have certainty of the rules, simplifications, a non-conflictual relationship. Even the OECD tells us that reward systems are more effective than punitive ones to bring out evasion».
But with the cash threshold at 5,000 much data to determine living standards and the revenue owed will be missing.
«Today we have a mechanism that determines the fiscal reliability indexes (Isa) and awards bonuses accordingly. If we know that a subject is worthy because he has a high ISA, we can make a concordat ».
What if the taxpayer is deemed unreliable?
«So, in addition to the interoperability of databases, we can work with artificial intelligence and predictive analytics».
What are the qualified investments that make it possible to reduce the IRES rate?
«It is a part of the reform that I hold dear. The reorganization will be done in close connection with what is happening internationally, with the global minimum tax. With the launch of this mechanism, from 2024, it will be necessary to lower the Ires rate and at the same time implement a pruning of some tax credits and various concessions that will no longer be compatible. For companies, therefore, there will in fact be a new IRES, which will have a broader tax base and will be modulated on two rates to make those who hire and invest more pay less. The resulting new taxable income will be taxed at a basic rate – and we'll see what the appropriate level will be, certainly lower than the current 24% – and at a reduced rate for the portion of income that will be destined to increase the employment and investments in innovative capital goods: I am thinking of Industry 4.0, research and development, expenditure on intangible assets. I would add that in the part of the reform that concerns business income there are two other provisions which, together with the system I have just described above, will help make our country more attractive for those who want to invest here: it is a more favorable and in line with the best international practices on the deductibility of interest expense (a topic destined to become central in this phase of rising rates) and on the carry-over of losses».
And with the disappearance of Irap, will companies making a loss or breaking even see their tax burden reduced to the detriment of those making a profit?
«We aim to gradually overcome Irap with priority for less structured subjects, therefore natural persons with business income and self-employment, together with partnerships, associated studios and professional companies. For Ires subjects, the overcoming of the Irap will lead to the establishment of a surcharge of a measure such as to guarantee an equivalent tax revenue destined to finance health care (as now occurs with the Irap). It is only apparently a 'zero balance' game, because companies will instead have the great advantage of a simplification that they have always asked for. And that is to overcome the double accounting (and related costs) which they are forced to use to determine the taxable Irap, which is different from the fiscal one. Certainly, there will be time to carefully evaluate the real effects of this replacement, adopting the appropriate corrections where necessary".
The government is very critical of the latest rate hike by the ECB. But it led to a drop in yields and the spread…
«It seems to me that the criticisms have come from many quarters, even the governor Ignazio Visco had suggested caution. Rising rates are not good news, neither for consumers nor for the cost of debt. But it's good that Christine Lagarde has been cautious about possible future hikes."
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The Economy Opinions and the Economy 6 pm
Mar 19, 2023
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