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IMF Proposes Growth-Friendly Tax Reforms For Italy

by Ulrika Lomas, Tax-News.com, Brussels

23 March 2018


Italy should shift the tax burden from labor towards consumption and property, in particular by lowering social security contributions and broadening the value-added tax base, a new International Monetary Fund working paper says.

The report suggests that Italy's economic potential is being hampered by a high tax burden on labor, a relatively narrow tax base, and poor tax collection mechanisms for tax debts. It proposed that Italy should reduce the value-added tax gap – the amount that goes uncollected due to policy choices, avoidance, errors, and evasion – by limiting reduced rates and tackling non-compliance. The headline VAT rate should also be hiked, it said.

More broadly, the report recommended that Italy should rein in tax breaks, including by reintroducing the property tax on primary residences. It said Italy should legislate to ensure that it can tax capital gains from offshore indirect transfers of assets.

Finally, to improve Italy's competitiveness, the country should enhance the Allowance for Corporate Equity (ACE) regime and make the relief more attractive for start-ups, the paper said, adding that Italy should abolish the intellectual property box regime and make the research and development tax credit permanent.

TAGS: compliance | VAT rates | tax | investment | property tax | tax incentives | mining | law | intellectual property | offshore | social security | Italy | tax breaks | research and development

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