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Italy: Toward a Growth-Friendly Fiscal Reform

Michal Andrle, Shafik Hebous, Alvar Kangur and Mehdi Raissi

No 2018/059, IMF Working Papers from International Monetary Fund

Abstract: Published in late 2017, the Italian medium-term fiscal plan aims to achieve structural balance by 2020, although concrete, high-quality measures to meet the target are yet to be specified. This paper seeks to contribute to the discussion by (i) assessing spending patterns to identify areas for savings; (ii) evaluating the pension system; (iii) analyzing the scope for revenue rebalancing; and (iv) putting forward a package of spending cuts and tax rebalancing that is growth friendly and inclusive, could have limited near-term output costs, and would achieve a notable reduction in public debt over the medium term. Such a package could help the authorities balance the need to bring down public debt and, thus, reduce vulnerabilities while supporting the economic recovery.

Keywords: WP; tax credit; internal rate of return; public spending; tax burden; Growth-friendly fiscal policy; public pensions; dynamic stochastic general equilibrium models; Italy; early retirement; low income; stability law; nominal wage; IP regime; retirement age; potential GDP; rationalizing tax expenditure; public education expenditure gap; local government; replacement rate; Pension spending; Pensions; Retirement; Tax allowances; Wages; Global (search for similar items in EconPapers)
Pages: 38
Date: 2018-03-16
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Citations: View citations in EconPapers (7)

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Handle: RePEc:imf:imfwpa:2018/059