Fiscal Reforms during Fiscal Consolidation: The Case of Italy - 10.1628/001522112X659574 - Mohr Siebeck

Giampaolo Arachi, Valeria Bucci, Ernesto Longobardi, Paolo M. Panteghini, Maria Laura Parisi, Simone Pellegrino, Alberto Zanardi

Fiscal Reforms during Fiscal Consolidation: The Case of Italy

Section: Articles
FinanzArchiv (FA)

Volume 68 () / Issue 4, pp. 445-465 (21)

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We discuss the strengths and weaknesses of the fiscal consolidation package adopted by Italy in 2011. Estimated at 3.3% of GDP, the tax measures were introduced to reduce public deficits without weakening the prospects of economic recovery or producing adverse redistributive outcomes. The tax reform mainly increases consumption and property taxes and gives relief for firms that recapitalize or hire young workers and women. To some extent, these measures are consistent with scholarly suggestions to foster short- and long-term economic growth by shifting the tax burden from capital and labor income towards consumption and property. Using microsimulation models, we evaluate the distributional and growth effects of the tax package. The indirect and property tax reforms are highly regressive, while the reform as a whole makes limited resources available for growth-enhancing policies, through a reduction in the effective corporate tax burden. We propose a revenue-neutral alternative reform that allows channeling more fiscal resources towards corporate tax relief, while at the same time producing less regressive distributional effects.

Giampaolo Arachi No current data available.

Valeria Bucci No current data available.

Ernesto Longobardi No current data available.

Paolo M. Panteghini No current data available.

Maria Laura Parisi No current data available.

Simone Pellegrino No current data available.

Alberto Zanardi No current data available.