Flat Tax

News on the possible reform of the Flat Tax which could change the face of Italian taxation

by Federico Valenza

The flat tax

Flat tax within the legislature

Maurizio Leo, deputy minister of Economy, declared, in an interview with the newspaper La Stampa on May 30, that "there is a project, shared by all the political forces that won the elections, which aims toreduce the tax burden

As reported by Sole24Oreprofessionals, self-employed workers and entrepreneurs who join the flat-rate regimeprevious article on the topic

Over the years, in fact, the replacement tax regimes have gradually increased, undermining, according to the Court of Auditors, the principle of all-inclusiveness of the tax baseincremental flat tax

The delegation for tax reform thinks about the flat tax, not only in terms of income outside the Irpef to be taxed with a fixed or proportional tax but also in terms of redefinition of the Irpefreduction in the number of rates2024 Budget Law

Reform in the summer?

The enabling law on the 2023 tax reform, for which the government hopes to have the green light in the summer, provides for the extension of the flat tax to professional associations, companies between professionals, partnerships and family businesses made up of a maximum of three professionals under 35 years of age, with a revenue ceiling set at 85 thousand euros and a tax rate of 15%.

Among the proposals shared between the majority forces and the executive, the main one concerns reduction of IRPEF rates to threefour income brackets

The first concrete step of the reform should be the transition to a three-rate system. However, the long-term objective is a "transition of the system towards thesingle tax rate, through the reorganization of deductions from the tax base, income brackets, tax rates, deductions from gross tax and tax credits, taking into account their purposes

The gradual reduction of the rates would not ensure that the income currently taxed with the replacement rates is included under the Irpef. In fact, as reported by the Parliamentary Budget Office, "it is not clear whether the taxable baseof the Irpef will include sources of income that over time have been excluded from its application and subjected to replacement regimes, generating problems of horizontal equity

There is therefore a tendency towards greater "copay" taxation

Comments on the flat tax from Italy and Europe

The flagship of the League, which has become the objective of the legislature, has recently received new rejections from the Bank of Italy

In the analysis presented by the Bank of Italy, at a hearing at the Finance Commission of the Chamber on 18 May, it is underlined that the central consequence of this model would be the increase in disparity and inequality

The document drawn up by the European Commissionpreserving progressivityand improving its fairness, in particular by rationalizing and reducing tax breaks, including VAT and subsidies harmful to the environment

Finally, according to the findings of the Parliamentary Budget Office, the transition from the current Irpef brackets to a single rate progressivity scheme "determines redistributive effects thatpenalize subjects with average incomes and favor those with higher incomesunless a high share of revenue is renounced

The word goes to Parliament

The Council of Ministers of 16 March 2023 approved, with an emergency procedure, the bill authorizing the Government to reform the tax system and now has 24 months

After the go-ahead from the Council of Ministers, the parliamentary approval process was officially set in motion, starting with the discussion of over 600 amendments

It therefore remains to be seen whether and what changes will be made to the reform idea presented and whether there will also be interventions to reorganize the current replacement regimes.

Given that tax reform appears to be extremely necessary today, however, a question remains: is the flat tax really the best solution?hours that we can imagine in this country?