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Fiscal Reforms During Fiscal Consolidation: The Case of Italy


Giampaolo Arachi


Econpubblica - Università Bocconi; Università di Lecce - Dpto. di Scienze Economiche e Matematico-Statistiche

Valeria Bucci


University of Salento - The Group of Lecce

Ernesto Longobardi


Università degli Studi di Bari “Aldo Moro”

Paolo M. Panteghini


University of Brescia; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Maria Laura Parisi


University of Brescia - Department of Economics

Simone Pellegrino


Department of Economics and Statistics

Alberto Zanardi


Bocconi University - Department of Economics

February 29, 2012

ECONPUBBLICA Working Paper No. 160

Abstract:     
In this paper we aim to discuss the strengths and weaknesses of the fiscal consolidation package adopted recently by the Italian Government in order to achieve a balanced budget by 2013. Revenues are forecasted to increase by more than 3.3 GDP percentage points; these stem mostly from indirect and property taxation. The analysis of the Italian case is interesting since it seems to be consistent with a recent strand of the literature which, in order to foster both short and long-term economic growth, advocated a shift of the tax burden from capital and labour income to consumption and property.

Through a set of micro simulation models, this paper evaluates the effects of the Italian fiscal package on households and firms. We show that, in respect of households’ income, indirect and property tax reforms are highly regressive, whilst the reform makes limited resources available for growth enhancing policies (reduction in the effective corporate tax burden). Then, we propose an alternative fiscal package. We show that a less regressive reform on households can be obtained by shifting taxation from personal and corporate income tax to indirect taxation. Our proposal allows the tax burden on firms to be reduced substantially and, in the meantime, offers lower personal income tax rates on households in the lowest deciles of income distribution since they are penalized most by the increase in indirect taxation.

Number of Pages in PDF File: 28

Keywords: Tax reforms, Fiscal consolidation, Micro simulation models, Italy

JEL Classification: H2, D22, D31

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Date posted: March 1, 2012  

Suggested Citation

Arachi, Giampaolo and Bucci, Valeria and Longobardi, Ernesto and Panteghini, Paolo M. and Parisi, Maria Laura and Pellegrino, Simone and Zanardi, Alberto, Fiscal Reforms During Fiscal Consolidation: The Case of Italy (February 29, 2012). ECONPUBBLICA Working Paper No. 160. Available at SSRN: http://ssrn.com/abstract=2013240 or http://dx.doi.org/10.2139/ssrn.2013240

Contact Information

Giampaolo Arachi (Contact Author)
Econpubblica - Università Bocconi ( email )
Via Gobbi 5
Milan, 20136
Italy
++390258365316 (Phone)
++390270036419 (Fax)
Università di Lecce - Dpto. di Scienze Economiche e Matematico-Statistiche ( email )
Ecotekne, Strada per Monteroni
Lecce 73100
Italy
++390836298775 (Phone)
++0270036419 (Fax)
HOME PAGE: economia.unile.it
Valeria Bucci
University of Salento - The Group of Lecce ( email )
Lecce, 73100
Italy
Ernesto Longobardi
Università degli Studi di Bari “Aldo Moro” ( email )
Piazza Umberto I, 1
Bari, 70121
Italy
+390805049103 (Phone)
Paolo M. Panteghini
University of Brescia ( email )
Piazza del Mercato, 15
25122 Brescia
Italy
CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.cesifo.de
Maria Laura Parisi
University of Brescia - Department of Economics ( email )
Via San Faustino 74B
Brescia, 25122
Italy
+39 030 2988826 (Phone)
+39 030 2988837 (Fax)
Simone Pellegrino
Department of Economics and Statistics
C. so Unione Sovietica, 218 Bis
Torino, 10134
Italy
0116706060 (Phone)
0116706062 (Fax)
Alberto Zanardi
Bocconi University - Department of Economics ( email )
Via Gobbi 5
Milan, 20136
Italy
+39 02 58365337 (Phone)
+39 02 58365318 (Fax)
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