The tax burden on labour is very high in Italy. As a result, Italy has been recommended to shift some of the burden from labour to consumption, recurrent property and environmental taxes. Recent tax reforms, however, have had varying effects. While labour taxes were reduced through a refundable in-work tax credit in 2014, this year, main residences were granted a full exemption for the payment of the general service tax. To estimate the first-round budgetary impact of these reforms on labour market incentives and distributional effects, we ran a simulation exercise on EUROMOD, the European Union’s tax and benefits micro-simulation model. A further simulation was also performed to examine the impact of a hypothetical reform reducing employer social security contributions financed by removing the exemption of the services tax for primary residences. Overall, the simulations indicate that the ‘80 euro bonus’ is expected to have a positive impact on the distribution of incomes and on the tax wedge, while the benefits of abolishing the property tax on first residences is more debatable, especially when assessed against alternative uses of the same resources.

ASTARITA Caterina;  MAESTRI Virginia;  SCHMITZ Marie-Luise; 

2016-12-30

Publications Office of the European Union

JRC105324

978-92-79-54493-4,   

2443-8030,   

http://ec.europa.eu/economy_finance/publications/eeeb/pdf/eb020_en.pdf,    https://publications.jrc.ec.europa.eu/repository/handle/JRC105324,   

10.2765/36817,