Toward a Comprehensive Tax Reform for Italy

Emile Cammeraat and Ernesto Crivelli ()

No 2020/037, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; reform option; VAT reform; property tax reform; Revenue neutral; tax liability; compliance gap; VAT liability; market value; tax expenditure; VAT rate; Disposable income; Personal income tax; Property tax; Personal income; Value-added tax; Italy; VAT; microsimulations; EUROMOD; taxable income; VAT system; VAT simulation; VAT compliance gap; base-broadening revenue-neutral VAT reform; revenue loss (search for similar items in EconPapers)
Pages: 38
Date: 2020-02-21
New Economics Papers: this item is included in nep-acc, nep-cmp and nep-pbe
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