ITALY is currently
undertaking a series of critically important reforms to improve its long-term
growth prospects. The current Government has set out its ambitious reform
agenda across many policy areas including taxation. Expectations of effective
and decisive government actions are high, in particular regarding the tax
system. The review, requested by the Ministry of the Economy and Finance,
took place in this context. At the moment, Italy has a relatively high
and stable tax-to-GDP ratio but levels of compliance with tax laws are
low. The focus of efforts to reduce non-compliance has historically been
on audits and control, which result in assessments that reportedly are
often uncollectable, with no comprehensive strategy across the entities
involved in tax administration to address this issue in a holistic manner.
There is a significant opportunity to reform tax administration in a way
that rationalises resources, provides increasingly high-quality services
to taxpayers and secures improved voluntary compliance by taxpayers at large.
More specifically, the review contains the following recommendations:
++ In line with recent actions such as the preventive communications on taxpayers
which did not file their VAT return, reforms should aim at generating significant
behavioural change, by both taxpayers and tax administration.
++ Institutional and governance arrangements should be revised to ensure
a more strategic political oversight of the tax administration, which should
go along with restoring the autonomy of the tax and customs agencies.
++ A more holistic approach should be introduced to support and enhance voluntary
compliance by taxpayers while ensuring that those that do not comply are
promptly identified and sanctioned.
The collection of tax debt needs to be modernised, building on the positive
results achieved since the function was brought into the public sphere. Information
technology, data analytics and related administrative simplifications can
and should be at the centre of these reform efforts.
What is needed is a structural reform which results in behavioural changes
of all players rather than purely institutional changes. More coherence will
be achieved with increased strategic oversight at ministerial level and with
more autonomy of the agencies in the implementation of this strategy. Priority
should be given to developing a strategy to tackle non-compliance, coordinating
the agencies, the Guardia di Finanza, and Equitalia. This strategy should
combine a tougher approach on non-compliant taxpayers with a co-operative
compliance approach with generally compliant taxpayers, in particular MNEs.
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