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POLITICS

What is Italy’s flat tax and who would it benefit?

The Italian government is putting forward a flat tax proposal which will cost the state some €30 billion. So what is it and who's it for?

Published: 29 May 2019 13:04 CEST
What is Italy's flat tax and who would it benefit?
Banknotes being printed at Bankitalia. Photo: Vincenzo Pinto/AFP

The League party, which rules Italy in coalition with the Five Star movement, made the flat tax a flagship policy in its 2018 election campaign.

Almost a year after taking power, and emboldened by EU election results, the League is now pushing ahead with the proposal.

READ ALSO: European stocks drop as trouble brews between Rome and Brussels

Deputy Premier and Interior Minister Matteo Salvini said on Tuesday that his League party is proposing a flat tax that would strain the Italian budget by another €30 billion.

“Thirty billion euros, this is the proposal studied by the League's economist, documented cent by cent, that we are ready to take to the cabinet and parliament,” Salvini wrote as he announced his plan on Facebook.


Italian deputy prime minister, interior minister and League leader Matteo Salvini. Photo: AFP

At a time when Italy is already facing sanctions from Brussels over its budget and growing public debt – which is currently at 132.2 percent of GDP and set to reach a new record high in 2019  – it seems ike a big ask to find an extra €30 billion to fund the policy.

And that's just the League's own estimate. Other sources believe the real cost could be €60 billion or more.

Salvini said the proposal would bring down taxes for companies and families earning up to €50,000 a year. 

So who benefits?

After initally proposing a flat tax of 15 percent, the party now proposes a two-tier flat tax of 15 percent on annual earnings of up to €80,000, and 20 percent for incomes above this threshold.

The 2019 budget law introduced a 15 percent rate for self-employed people on up to €65,000 a year.

Forza Italia politician Renato Brunetta said that the idea of the flat tax is to cause a “fiscal shock that will enable the country to escape the trap it's stuck in”, and increase growth levels to “more than three percent”.

READ ALSO: The little-known tax rule that's got the super-rich flocking to Italy

Capital Economics analyst Jack Allen told AFP he doubts the proponents' growth claims and believes that the wealthiest will benefit the most from the reform.

“A 2015 study by the Bank of Italy estimated that households with low wealth would respond to a one euro increase in disposable income resulting from a tax cut by raising their spending by 60 cents,” he says.

“High-wealth households … would increase spending by just 40 cents,” he said.The Italian economy is forecast to grow by just 0.1 percent this year, while Italy's own finance minister said growth will be “zero”.

The government is also working on a separate “growth decree” set to cut taxes for Italian companies, at a cost of 1.9 billion.

READ ALSO: 

Member comments

  1. Many expats here are retired on a drawdown basis. That means they have considerable discretion on how much to draw in any one year. Italy’s current tax rates make drawing down a last resort so the Italian state sees little of that money. Under the new proposals, many would draw down a great deal more. As a magazine for expats, shouldn’t you have thought of this and attempted to quantify it?

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POLITICS

‘Worrying developments’: NGOs warn of growing pressure on Italian media freedom

Media freedom in Italy has come increasingly under pressure since Giorgia Meloni's hard-right government took office, a group of European NGOs warned on Friday following an urgent fact-finding summit.

Published: 17 May 2024 17:40 CEST
‘Worrying developments’: NGOs warn of growing pressure on Italian media freedom

They highlighted among their concerns the continued criminalisation of defamation – a law Meloni herself has used against a high-profile journalist – and the proposed takeover of a major news agency by a right-wing MP.

The two-day mission, led by the European Federation of Journalists (EFJ), was planned for the autumn but brought forward due to “worrying developments”, Andreas Lamm of the European Centre for Press and Media Freedom (ECPMF) told a press conference.

The ECPMF’s monitoring project, which records incidents affecting media freedom such as legal action, editorial interference and physical attacks, recorded a spike in Italy’s numbers from 46 in 2022 to 80 in 2023.

There have been 49 so far this year.

Meloni, the leader of the far-right Brothers of Italy party, took office as head of a hard-right coalition government in October 2022.

A key concern of the NGOs is the increased political influence over the RAI public broadcaster, which triggered a strike by its journalists this month.

READ ALSO: Italy’s press freedom ranking drops amid fears of government ‘censorship’

“We know RAI was always politicised…but now we are at another level,” said Renate Schroeder, director of the Brussels-based EFJ.

The NGO representatives – who will write up a formal report in the coming weeks – recommended the appointment of fully independent directors to RAI, among other measures.

They also raised concerns about the failure of repeated Italian governments to decriminalise defamation, despite calls for reform by the country’s Constitutional Court.

Meloni herself successfully sued journalist Roberto Saviano last year for criticising her attitude to migrants.

“In a European democracy a prime minister does not respond to criticism by legally intimidating writers like Saviano,” said David Diaz-Jogeix of London-based Article 19.

He said that a proposed reform being debated in parliament, which would replace imprisonment with fines of up to 50,000 euros, “does not meet the bare minimum of international and European standards of freedom of expression”.

The experts also warned about the mooted takeover of the AGI news agency by a group owned by a member of parliament with Deputy Prime Minister Matteo Salvini’s far-right League party – a proposal that also triggered journalist strikes.

READ ALSO: How much control does Giorgia Meloni’s government have over Italian media?

Beatrice Chioccioli of the International Press Institute said it posed a “significant risk for the editorial independence” of the agency.

The so-called Media Freedom Rapid Response (MFRR) consortium expressed disappointment that no member of Meloni’s coalition responded to requests to meet with them.

They said that, as things stand, Italy is likely to be in breach of a new EU media freedom law, introduced partly because of fears of deteriorating standards in countries such as Hungary and Poland.

Schroeder said next month’s European Parliament elections could be a “turning point”, warning that an increase in power of the far-right across the bloc “will have an influence also on media freedom”.

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