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Tuesday, March 28, 2023

Italy to present bill cutting income tax, lowering penalties for tax evaders

Italy’s government will approve a bill on Thursday to cut income and corporate taxes, a draft seen by journalists showed, while reducing fines for tax evaders who come clean and agree to pay what they owe.

Tax evasion is a chronic problem in Italy, costing state coffers around 90 billion euros ($95.54 billion) a year, according to the latest figures from the finance ministry.

The bill shows the government intends to eliminate the risk of criminal convictions for those who deal with the authorities and catch up on missed payments, and has committed to a co-operative approach with taxpayers.

It also offers small companies and self-employed people the opportunity to agree in advance how much they have to pay in taxes to the state in the next two years, without fear of inspections.


Italy has promised the European Commission in its EU-funded COVID recovery plan to reduce the so-called “tax gap” – the difference between potential tax liabilities and the amount of taxes actually paid – to 15.7% in 2024 from 18.5. % in 2019.

This means that around €7-8 billion will be returned over the period.

In Rome’s 2023 budget, Prime Minister Giorgio Meloni, who took office in October last year, raised the limit on cash payments to 5,000 euros from the previous limit of 1,000, drawing criticism from some economists who warned of fueling tax evasion.

The cabinet is due to meet at 15:30 GMT to discuss and approve the bill, Meloni’s office said in a statement.


Aiming to overhaul the fiscal system, Meloni wants to reduce the current income tax bands from four to three within two years, with the ultimate goal of achieving a single tax rate before the 2027 national election.

The cabinet will consider setting the three bands at 23%, 33% and 43% in the short term, government officials said, adding that a more expensive solution being studied would reduce the second band to 27%.

The current income tax, called IRPEF, is based on rates from a minimum of 23% on annual income up to €15,000 to a top rate of 43% on income above €50,000.

In addition, Meloni wants to split the current 24% corporate tax rate in two by introducing a second lower bracket at 15% to reward entrepreneurs who create jobs and invest in innovation to increase productivity.


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