Italy: Selected Issues

February 6, 2019

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Format: Chicago

Italy: Selected Issues, (USA: International Monetary Fund, 2019) accessed June 25, 2025

Summary

This Selected Issues paper uses the tax-benefit microsimulation model for the European Union (EUROMOD) to evaluate possible reforms to modernize Italy’s social safety net as well as ways to lower the tax wedge on labor. With a social safety net centered on pensions and the elderly and an array of income support schemes as well as a heavy tax burden falling on labor income, there is significant scope to improve Italy’s system of taxes and transfers to promote growth and inclusion. The paper also simulates the cost of a modern safety net using EUROMOD. The paper also provides an overview of Italy’s personal income tax regime, simulates the cost of moving toward a flatter regime that has previously been proposed by the government coalition and discusses some key reform principles. It is concluded that Italy needs a modern social safety net and a lower tax wedge on labor as part of a growth-friendly and inclusive fiscal consolidation package.

Subject: Income tax systems, Labor, National accounts, Personal income, Personal income tax, Tax allowances, Taxes

Keywords: CR, Europe, GMI program, Inclusion income program, Income, Income support, Income tax systems, In-work tax credit, ISCR, Italy, Labor income, Means testing, Personal income, Personal income tax, Public debt decline, Redistribution consideration, Stability Law, Tax allowances, Tax neutrality, Tax rate, Tax system, Taxable income, Welfare system, Withdrawal rate

Publication Details

Pages:

19
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2019/041
Stock No:

1ITAEA2019002
ISBN:

9781484397787
ISSN:

1934-7685

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