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Personal Income Tax Design for Italy: Lessons from the Theory

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  • Claudio DE VINCENTI

    ()
    (Sapienza Universita' di Roma)

  • Ruggero PALADINI

    ()
    (Sapienza Universita' di Roma)

Abstract

IRPEF - the Italian personal income tax - is the leading tax in terms of share of total government revenue in Italy. After a decade of reforms, the tax-benefit structure still exhibits several critical issues that need to be addressed. The paper presents a tax-benefit design proposal for Italy based on the more recent achievements of the theory. Firstly, it provides a brief overview of optimal taxation theory as it relates to personal income tax, particularly the latest critical developments which argue in favour of a schedule of increasing marginal rates. Secondly, the literature on optimal taxation is used to analyse, from the point of view of efficiency, the different possible ways of implementing transfers to low-income earners. Then the issue of the choice of tax unit is examined in terms of its efficiency as well as its (horizontal and vertical) equity implications. Lastly, the paper presents a proposal for a package of reforms concerning the structure of personal income tax and family benefits aimed at addressing the critical issues affecting the current system.

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Bibliographic Info

Article provided by SIE - Societa' Italiana degli Economisti (I) in its journal Rivista Italiana degli Economisti.

Volume (Year): 14 (2009)
Issue (Month): 1 (April)
Pages: 7-46

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Handle: RePEc:rie:review:v:14:y:2009:i:1:n:1

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Related research

Keywords: marginal tax rates; negative income tax; tax unit; tax-benefit design;

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Citations

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Cited by:
  1. Ugo Colombino, 2011. "Five issues in the design of income support mechanisms. The case of Italy," CHILD Working Papers, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY wp21_11, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  2. Colombino, Ugo & Narazani, Edlira, 2012. "What's Best for Women: Gender Based Taxation, Wage Subsidies or Basic Income?," IZA Discussion Papers 6828, Institute for the Study of Labor (IZA).
  3. Colombino Ugo, 2011. "Designing a universal income support mechanism for Italy.An exploratory tour," Department of Economics and Statistics Cognetti de Martiis. Working Papers, University of Turin 201112, University of Turin.
  4. Colombino, Ugo, 2012. "Equilibrium Simulation with Microeconometric Models: A New Procedure with an Application to Income Support Policies," IZA Discussion Papers 6679, Institute for the Study of Labor (IZA).
  5. Colombino, Ugo & Narazani, Edlira, 2013. "What’s best for women: gender based taxation, wage subsidies or basic income?," EUROMOD Working Papers EM10/13, EUROMOD at the Institute for Social and Economic Research.
  6. Bernardi, Luigi, 2009. "Le tasse in Europa dagli anni novanta
    [Taxation in Europe since the Years 1990s]
    ," MPRA Paper 23441, University Library of Munich, Germany.

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