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.
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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, Tübingen, 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 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.:
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