Italy To Cut Corporate Tax

By Global Tax Weekly

At the bottom of the EU/EFTA league table is — not that surprisingly — Italy, with an eye-watering total tax rate of 64.8 percent. Therefore, the recent approval by the Government of a draft budget with a heavy emphasis on cutting corporate tax was probably greeted with a degree of relief by most of Italy’s businesses. However, as is the case with most of the countries towards the bottom end of the ranking, the bulk of this tax burden consists of labor taxes. 43.4 percent in Italy’s case. I can’t knock the Government for approving what is, in the context of Italy’s fiscal restraints, a fairly bold business tax improvement plan. But perhaps Prime Minister Matteo Renzi is looking in the wrong place in his attempts to improve Italy’s competitiveness. Or, more to the point, perhaps he should be looking in more places.

One of those places should be, metaphorically speaking, down the back of the couch. It’s surprising how much money can fall out of your furniture if you give it a good shake-down. And the parallel is, as has been well-documented, that Italy, with its highly inefficient tax system, lets far too many euros vanish into the cracks between the cushions.

Another place is under the mattress. Because it is also a well-known fact that Italy has had a long-standing problem with tax compliance, and Italian taxpayers, so it would appear, have become quite adept at – hmm, how do I put this diplomatically – let’s just say staying a step ahead of the tax man. Still, the latest set of “tax gap” figures seem to confirm that rates of tax avoidance and evasion remain high, despite several high-profile (and often amusing, from the outside) campaigns by the tax authorities, which have resulted in tax inspectors making appearances in the most unlikely of places – think you’re safe on your yacht or off-piste in the Dolomites, think again!

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