03/08/23

REGULATION: Italy's parliament poised to approve fiscal reform plan

As published on: zawya.com, Thursday 3 August, 2023.

Italy's government is poised to clear the final major legislative hurdle in plans to introduce contested fiscal reforms that include tax cuts and will give authorities more leeway to cut deals with corporate and individual tax-dodgers.

The Senate will adopt the reform on Wednesday, leaving the lower parliamentary house to rubber-stamp it in a final vote by early next week. Prime Minister Giorgia Meloni's right-wing coalition - which holds a majority in both houses - will then have two years to implement it.

Tax evasion deprived the state of 90 billion euros in 2020, according to the latest Treasury data, but while Meloni's predecessor Mario Draghi sought to clamp down on the practice, she is taking a more flexible approach.

Her government has adopted 13 tax amnesties since it took office in October, and last week signalled it could lower tax evasion reduction targets as part of a planned revamp of Italy's post-COVID economic recovery plan.

Among the reforms, Meloni wants to scrap penalties against firms that come clean about how they have avoided taxes and agree, in cooperation with fiscal authorities, to pay what they owe.

She plans a similar arrangement for wealthy individuals who transfer their fiscal residence to Italy or have an income of at least 1 million euros there.

The government also aims to reduce the current income tax bands from four to three and then introduce a "flat tax" model before national elections due in 2027.

Opposition parties have criticised the reform as protecting evaders against the risk of fines or criminal convictions, while unions argue it would mostly benefit the rich.

Italy's central bank said in May that a single income tax band might prove unrealistic because of fiscal restraints and the amount the state has to spend on welfare.

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Regulation Italy