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The changes to the Italian tax and welfare system implemented in 2022: fairness and efficiency profiles

Author

Listed:
  • Emanuele Dicarlo

    (Bank of Italy)

  • Pasquale Recchia

    (Bank of Italy)

  • Antonella Tomasi

    (Bank of Italy)

Abstract

The paper presents the effects of two revision interventions of the Italian tax and benefits system implemented in 2022: (i) the introduction of the single and universal allowance for children (AUU); (ii) changes to the structure of personal income tax (IRPEF). Using BIMic, the static microsimulation model of the Bank of Italy, the analysis shows how the combined effect of the two interventions increases the progressivity of the system and reduces inequality (these effects are mainly attributable to the introduction of the AUU). The two changes - and in particular the intervention on personal income tax - also contribute to reducing the monetary disincentives to the supply of labour both at the extensive margin and at the intensive margin and contribute to mitigating the irregular trend of the effective marginal rates.

Suggested Citation

  • Emanuele Dicarlo & Pasquale Recchia & Antonella Tomasi, 2023. "The changes to the Italian tax and welfare system implemented in 2022: fairness and efficiency profiles," Questioni di Economia e Finanza (Occasional Papers) 748, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_748_23
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2023-0748/QEF_748_23.pdf
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    More about this item

    Keywords

    family policies; personal income tax; redistribution; efficiency; microsimulation;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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