Flat tax, inequality under scrutiny: savings of up to 23,000 euros for VAT-registered individuals
The hearings have highlighted differences in treatment, but the League is on the defensive
Key points
The hearings on the budget have highlighted several issues regarding the increase in the revenue or remuneration threshold to 100,000 euros for the flat-rate tax scheme for VAT-registered individuals. Yesterday, too, there were repeated references to the potential distortions caused by the flat-rate scheme. According to the figures provided by the UPB, remaining in the preferential income tax regime rather than switching to the standard IRPEF regime could lead to savings of up to 23,000 euros.
Reports from Upb and Bankitalia
With a further point for consideration put to MPs and senators: ‘The tax disparity,’ notes the UPB, ‘may also encourage the conversion of employment relationships into self-employed contracts with VAT registration, resulting in lower costs for the client and reduced protection and social security cover for the worker.’
The Bank of Italia has also highlighted these potential areas of concern. Andrea Brandolini, head of the Economics and Statistics Department at Via Nazionale, pointed out that the preferential tax regime for VAT-registered individuals results in ‘disparities in the tax burden of taxpayers with the same ability to pay’.
The widening gap amid high inflation
However, there are a number of specific aspects that emerge from the Bank of Italia’s analysis: ‘In the context of relatively high inflation, the difference in treatment between taxpayers who opt into this scheme and those subject to the progressive IRPEF tax system tends to become more pronounced as a result of fiscal drag, which affects the latter but not the former.’
Disincentive to growth in size
The other factor highlighted concerns the disincentive to scaling up: ‘Tax and regulatory regimes that differ according to company size aim to reduce the burdens on smaller firms: whilst they may encourage their establishment and survival in the early stages, they may also discourage their growth beyond certain size thresholds’. According to Palazzo Koch, this effect is consistent with ‘the concentration of sole traders observed near the threshold for application’ of the flat-rate scheme.
