Italy

Abstract

Abstract After the enactment of the basic tax reform of 1973—4, and through the 1980s until the beginning of the 1990s, the Italian tax system underwent a process of rationalization, simplification, and, to some degree, of convergence towards something like a typical ‘European tax system’, whatever that may be. During this period direct taxes grew more than indirect ones and became the most important source of revenue. Among direct taxes the personal income tax consolidated its position as the pillar of the system (in 1989 revenue from direct taxes was for the first time higher than that of social security contributions). The number of personal income tax rates was reduced and to a level that now corresponds more to that of other European countries. The average tax burden reached that generally prevailing in Europe, while in the 1990s the increase in tax revenue was unusual in the context of OECD Europe, being around 4.5 percentage points over the period 1990-3, of which 3.5 percentage points were reached in the last two years. From the point of view of tax collection no one can deny (and no one does) the ‘success’ of the basic reform of the 1970s and of the subsequent adjustments. From the conventional equity and efficiency points of view, evaluations can diverge as indicated later in the presentation of specific topics.