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Personal Income Tax Design for Italy: Lessons from the Theory

Author

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  • Claudio De Vincenti
  • Ruggero Paladini

Abstract

IRPEF - the Italian personal income tax - is the leading tax in terms of share of total government revenue in Italy. After a decade of reforms, the tax-benefit structure still exhibits several critical issues that need to be addressed. The paper presents a tax-benefit design proposal for Italy based on the more recent achievements of the theory. Firstly, it provides a brief overview of optimal taxation theory as it relates to personal income tax, particularly the latest critical developments which argue in favour of a schedule of increasing marginal rates. Secondly, the literature on optimal taxation is used to analyse, from the point of view of effi ciency, the different possible ways of implementing transfers to low-income earners. Then the issue of the choice of tax unit is examined in terms of its efficiency as well as its (horizontal and vertical) equity implications. Lastly, the paper presents a proposal for a package of reforms concerning the structure of personal income tax and family benefits aimed at addressing the critical issues affecting the current system.

Suggested Citation

  • Claudio De Vincenti & Ruggero Paladini, 2009. "Personal Income Tax Design for Italy: Lessons from the Theory," Rivista italiana degli economisti, Società editrice il Mulino, issue 1, pages 7-46.
    • Handle: RePEc:mul:jqat1f:doi:10.1427/30382:y:2009:i:1:p:7-46
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    Citations

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    Cited by:

    1. Colombino Ugo & Narazani Edlira, 2013. "Designing a Universal Income Support Mechanism for Italy: An Exploratory Tour," Basic Income Studies, De Gruyter, vol. 8(1), pages 1-17, July.
    2. Ugo Colombino, 2011. "Five issues in the design of income support mechanisms. The case of Italy," CHILD Working Papers wp21_11, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    3. Ugo Colombino, 2015. "Five Crossroads on the Way to Basic Income. An Italian Tour," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 1(3), pages 353-389, November.
    4. Ruggero Paladini, 2014. "Da Bentham alla tassazione ottimale," Public Finance Research Papers 2, Istituto di Economia e Finanza, DSGE, Sapienza University of Rome.
    5. Colombino, Ugo & Narazani, Edlira, 2014. "Closing the Gender Gap: Gender Based Taxation, Wage Subsidies or Basic Income?," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201412, University of Turin.
    6. Paolo Brunori & Maria Concetta Chiuri & Vito Peragine, 2010. "The Economic effects of a Local Minimum Income Support Program," SERIES 0029, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Mar 2010.
    7. Colombino Ugo, 2012. "Equilibrium simulation with microeconometric models. A new procedure with an application to income support policies," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201209, University of Turin.
    8. Fernando Di Nicola & Melisso Boschi & Giorgio Mongelli, 2017. "Effective marginal and average tax rates in the 2017 Italian tax-benefit system," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2017(3), pages 67-90.
    9. Fernando Di Nicola & Melisso Boschi & Giorgio Mongelli, 2017. "Effective marginal and average tax rates in the 2017 Italian tax-benefit system," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2017(3), pages 67-90.
    10. Colombino Ugo & Narazani Edlira, 2012. "What’s Best for Women: Gender Based Taxation, Wage Subsidies or Basic Income?"," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201212, University of Turin.
    11. Colombino, Ugo & Narazani, Edlira, 2013. "What’s best for women: gender based taxation, wage subsidies or basic income?," EUROMOD Working Papers EM10/13, EUROMOD at the Institute for Social and Economic Research.
    12. Bernardi, Luigi, 2009. "Le tasse in Europa dagli anni novanta [Taxation in Europe since the Years 1990s]," MPRA Paper 23441, University Library of Munich, Germany.

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