IMF Staff Country Reports

Italy : Selected Issues

Author/Editor:

International Monetary Fund. European Dept.

Publication Date:

February 6, 2019

Electronic Access:

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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 programs, 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 simulates the cost of a modern safety net using EUROMOD. It also provides an overview of Italy’s personal income tax regime, simulates the cost of moving toward a flatter regime, which was previously 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.

Series:

Country Report No. 19/41

Subject:

Europe Italy Tax evasion Tax incentives Tax rates Tax reforms Tax revenue