Fiscal Reforms during Fiscal Consolidation: The Case of Italy
AbstractIn this paper we aim to discuss the strengths and weaknesses of the fiscal consolidation package adopted recently by the Italian Government in order to achieve a balanced budget by 2013. Revenues are forecasted to increase by more than 3.3 GDP percentage points; these stem mostly from indirect and property taxation. The analysis of the Italian case is interesting since it seems to be consistent with a recent strand of the literature which, in order to foster both short and long-term economic growth, advocated a shift of the tax burden from capital and labour income to consumption and property. Through a set of micro simulation models, this paper evaluates the effects of the Italian fiscal package on households and firms. We show that, in respect of households’ income, indirect and property tax reforms are highly regressive, whilst the reform makes limited resources available for growth enhancing policies (reduction in the effective corporate tax burden). Then, we propose an alternative fiscal package. We show that a less regressive reform on households can be obtained by shifting taxation from personal and corporate income tax to indirect taxation. Our proposal allows the tax burden on firms to be reduced substantially and, in the meantime, offers lower personal income tax rates on households in the lowest deciles of income distribution since they are penalized most by the increase in indirect taxation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3753.
Date of creation: 2012
Date of revision:
tax reforms; fiscal consolidation; micro simulation models; Italy;
Other versions of this item:
- Giampaolo Arachi & Valeria Bucci & Ernesto Longobardi & Paolo M. Panteghini & Maria Laura Parisi & Simone Pellegrino & Alberto Zanardi, 2012. "Fiscal Reforms during Fiscal Consolidation: The Case of Italy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, TÃ¼bingen, Mohr Siebeck, TÃ¼bingen, vol. 68(4), pages 445-465, December.
- Giampaolo Arachi & Valeria Bucci & Ernesto Longobardi & Paolo Panteghini & Maria Laura Parisi & Simone Pellegrino & Alberto Zanardi, 2012. "Fiscal Reforms during Fiscal Consolidation: The Case of Italy," Working papers, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino 002, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-12-15 (Accounting & Auditing)
- NEP-ALL-2012-12-15 (All new papers)
- NEP-CMP-2012-12-15 (Computational Economics)
- NEP-PBE-2012-12-15 (Public Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mervyn A. King & Don Fullerton, 1984. "The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany," NBER Books, National Bureau of Economic Research, Inc, number king84-1, January.
- Doris Prammer, 2011. "Quality of taxation and the crisis: Tax shifts from a growth perspective," Taxation Papers 29, Directorate General Taxation and Customs Union, European Commission.
- Paolo M. Panteghini, 2001. "Dual income taxation : the choice of the imputed rate of return," Finnish Economic Papers, Finnish Economic Association, vol. 14(1), pages 5-13, Spring.
- Edyta Mazurek & Simone Pellegrino & Achille Vernizzi, 2010. "The Decomposition of the Redistributive Effect and the Issue of Close Equals Identification," Working papers, Former Department of Economics and Public Finance "G. Prato", University of Torino 16, Former Department of Economics and Public Finance "G. Prato", University of Torino.
- Calmfors, Lars, 1993. "Lessons from the macroeconomic experience of Sweden," European Journal of Political Economy, Elsevier, vol. 9(1), pages 25-72, March.
- Massimo Bordignon & Silvia Giannini & Paolo Panteghini, 2001. "Reforming Business Taxation: Lessons from Italy?," International Tax and Public Finance, Springer, vol. 8(2), pages 191-210, March.
- Francesca Gastaldi & Paolo Liberati & Elena Pisano & Simone Tedeschi, 2014. "Progressivity-Improving VAT Reforms in Italy," Working papers, SocietÃ Italiana di Economia Pubblica 6, SocietÃ Italiana di Economia Pubblica.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.