Italian Regional Tax on Productive Activities and Household Consumption. A SVIMEZ Proposal

In this paper it is argued that current Italian situation needs urgently, also onthe revenue side, some tough measures. In fact, there is the need to defend theconditions of the weakest people, it is necessary to retrieve resources useful to producea real benefit in terms of increased employment, investment, exports. Theseactions will be financed being aware of the constraints: the marginal tax rate, thatoverall burdens on productive activities, will no longer increase; it is necessary thatthe system is actually progressive; it is necessary that taxes do not further hinderinvestments and exports. In this context, one of the possible measures is the abolitionof private IRAP (Italian regional tax on productive activities) compensated, asit is assumed in the Document approved by Southern institutions, by consumptiontaxes. Since it is claimed that this solution would result in an additional burden onhouseholds, mostly on the less affluent ones, in this paper the effect the abolitionof IRAP has on consumption is estimated, showing that it largely compensates theeffect of higher tax rates which directly affect consumption.