Further Call To Reduce Italian Taxes

by Ulrika Lomas, Tax-News.com, Brussels

22 November 2010

Following the publication of statistics demonstrating that the tax burden on companies in Italy is more than 50% above the European Union (EU) average, Emma Marcegaglia, the president of Confindustria, the Italian business federation, repeated her call for the government to reduce corporate taxes.

A study, published jointly by the World Bank and PricewaterhouseCoopers, has calculated that total Italian corporate taxes - including central and local corporate income taxes, and so-called “labour taxes”, largely social security contributions and mandatory redundancy payments - currently absorb 68.6% of company profits before those taxes.

The total Italian corporate tax burden is shown in the study to compare with an EU average of only 44.2% and the world average of 47.8%; the Italian result being due to higher-than-average levels of revenue collected from both income and labour taxes.

In addition, due to the problems posed by Italian bureaucracy, the study found that the payment of taxes costs Italian companies 285 hours per year – 60 hours more than the EU average. The record for tax simplification lies with Luxembourg at only 59 hours a year.

At a conference in Modena, Marcegaglia used the above figures to repeat her call for urgent tax reforms to lessen the weight of taxes on both individuals and companies. She said that it is now impossible to refute the claim that, if direct taxes are not reduced, Italy’s competitiveness will remain low, with a depressing effect on economic growth.

She pointed out that Italy’s economic growth is already slower than previously predicted, at not more than 1% this year and only 1.2% in 2011; well below the EU average. This will lead to fewer jobs in the economy as “there is a problem of productivity, and of too many commitments placed on companies, together with little investment in research and development.”

While also regretting that this year’s draft finance bill does not contain tax credits for corporate research expenditure, she repeated her call for tax reforms that would take some of the tax burden off those “at the coalface”, namely employees and employers, using the revenues obtained from the current actions against tax evasion and reductions to public expenditure.

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