Reforming Business Taxation: Lessons from Italy?

Posted: 4 Sep 2001

See all articles by Massimo Bordignon

Massimo Bordignon

Universita Cattolica; CESifo (Center for Economic Studies and Ifo Institute)

Silvia Giannini

University of Bologna - Department of Economics

Paolo M. Panteghini

Department of Economics and Management; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Abstract

We carefully review the recent Italian reform of business taxation, compare it with other international experiences and theoretical proposals, and calculate its effects on the cost of capital and on the effective average corporate tax rate. We argue that the Italian reform is an original attempt to find a compromise between two conflicting aims, both of which are unavoidable in an open economy: the first is to reduce the average rate of taxation on profits, and the second is to reduce the financial and real distortions produced by corporate taxation. In assessing the initial evidence in the Italian case, we argue that too much weight has been given to the latter objective, and that further reductions in average taxation on profits may be needed.

Keywords: Cost of capital, dual income system

Suggested Citation

Bordignon, Massimo and Giannini, Silvia and Panteghini, Paolo M., Reforming Business Taxation: Lessons from Italy?. Available at SSRN: https://ssrn.com/abstract=274331

Massimo Bordignon (Contact Author)

Universita Cattolica ( email )

20123 Milano
Italy
+39-2-5836-3300/1 (Phone)
+39-2-5836-3302 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Silvia Giannini

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Paolo M. Panteghini

Department of Economics and Management ( email )

Contrada Santa Chiara 50
BRESCIA, BS 25122
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

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