Toward a Comprehensive Tax Reform for Italy

Author/Editor:

Emile Cammeraat ; Ernesto Crivelli

Publication Date:

February 21, 2020

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper evaluates elements of a comprehensive reform of the Italian tax system. Reform options are guided by the principles of reducing complexity, broadening the tax base, and lowering marginal tax rates, especially the tax burden on labor income. The revenue and distributional implications of personal income and property tax reforms are assessed with EUROMOD, while a microsimulation model is developed to evaluate VAT reform options. Simulations suggest that a substantial reduction in the tax burden on labor income can be obtained with a revenue-neutral base-broadening reform that streamlines tax expenditures and updates the property valuation system. In addition, a comprehensive reform would benefit low- and middle-income households the most, by lowering significantly their overall current tax liability, which results in increased progressivity of the tax system.

Series:

Working Paper No. 20/37

Subject:

English

Publication Date:

February 21, 2020

ISBN/ISSN:

9781513529226/1018-5941

Stock No:

WPIEA2020037

Format:

Paper

Pages:

38

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