Mirrlees’ and De Viti’S Fiscal Systems

The Mirrlees report is one of the numerous in depth interventions aimed at modifying the structure of the actual direct, indirect and wealth taxation. In this case the principal targets are the inclusion of social contributions into the structure of personal taxation, the deduction of a normal rate of return from savings and business taxation bases, the reduction to a single rate of the multiple rates of VAT, the taxation of carbon emissions and the modification of wealth taxes. The usual recommendations regard the international system, accepting the actual orientation towards CEN (capital export neutrality). Altogether the report proposals are very weak. An alternative route is explored, based on De Viti de Marco’s theory, first of all as regards direct taxation. This is real, i.e. based on magnitudes before their distribution; strikes the net GDP, with different rates on its components; its revenue is low and finances part of all public expenditures. To that a national progressive base is added as regards social contributions, which finance the majority of individual public expenses. At international level, it is the CIN (capital import neutrality) which dominates. As regards indirect taxation, following at distance De Viti, we suggest maintaining multiple rates, supplementing the system with a small rate on B to B commerce, and on amortization. It is also shown that the evasion of the entire system depends on the final stage of VAT, i.e. consumption, and a proposal is advanced to put it under scrutiny. This is done by comparing the VAT basis on consumption, at regional and sector levels, with their intermediate counterparts in the national accounts. As far as the environment is concerned, taxes on gas and electricity are advocated. Indirect taxes altogether finance the majority of collective public expenditures. Wealth can also contribute to the reform of the system. A national tax on wealth of persons and businesses, real but substantially progressive, is examined, together with special high rates regarding the interest rates and the profits which exceed certain percentages of the capital, which are fixed internationally. The taxation of wealth finances the majority of the distributive expenditure. The entire system is inspired by the benefit principle, instead of the ability to pay principle. Translation confirms the properties of the De Viti’s real system, by showing a greater possibility of absorbing the taxes with respect to the personal system. In the end it is shown that with rates on income averaged at 10% of GDP, with social contributions around 15% of GDP, with indirect and environment taxes around 20% of GDP, with distributive revenue on wealth at 5% of GDP, and considering evasion at more than 5%, the actual levels of taxation are reached by the real system.