On Tuesday, April 11, Giorgia Meloni’s government approved the Def in the Cabinet, an economics and finance document that outlines what the executive plans to do in terms of spending and public debt, and includes forecasts for the country’s growth. economy, labor market and inflation. Def, which was put into use in the last hours, also foresees a reduction of approximately 3 billion euros in the tax wedge in favor of middle-low income workers. Faced with a deficit trend of 4.35% of GDP estimated for the current year, maintaining the “current deficit target (4.5%) will be achieved through a measure to be implemented soon, with a medium-low income of over 3 billion for the current year. . This will support families’ purchasing power and contribute to moderate wage growth.”
After only partial effects of the measures included in the last maneuver, the intervention is scheduled for a period ranging from May to December 2023 and is aimed at workers with a gross annual income of up to 25,000 euros. Let’s try to understand practically how this cut affects payroll. But first an explanation. In essence, the tax wedge is the difference between how much a company “gross” pays an employee and how much that worker later finds out net in his paycheck. The contribution tax wedge measures the weight of taxes on labor, i.e. employee contributions, employer-paid, and income taxes. The standard employee weight in our country is 46.5%, which is one of the highest figures among OECD countries (economic cooperation and development organization). This means that for every 100 euros the company pays to the employee, almost half, or 46.50 euros, goes to tax.
Over the past few years, wedge-related interventions have predominantly concerned workers. This year, along with the 2023 maneuver, the cut cost about 5 billion euros. as you remember sun 24 hours, legislation expanded gross salaries to 25,000 euros, extending the 3% exemption in the social security contribution due to employees (public and private), which the first version of the maneuver initially provided for up to 20,000 euros. taxable fees. For the salary range of 25,000 to 35,000 euros, a 2% contribution exemption was approved instead. Reflections of the cut, which came with the last maneuver, on salaries have been moderate so far. We are talking about savings of 41.15 euros per month and 493.85 euros per year for incomes up to 25,000 euros gross. If the income of 27,500 to 35,000 euros is about thirty euros per month on the payroll, then 360-390 euros per year more.
With the new 3 billion euros announced by the Meloni government, these figures are bound to increase slightly if, as it turns out, the intervention takes place in the period between May and December this year. Workers in income groups up to 25,000 euros gross per year should receive an increase in their paychecks of 25-30 euros per month, or from 300 to 360 euros per year. Confindustria’s goal is still a long way off. In fact, the trade union had called for a structural cut in labor costs of around 16 billion euros, which would give workers in the income bracket an additional monthly salary of up to almost 35,000 euros (around 1,223 euros) over their entire working life. Currently, two-thirds of the Italian contribution tax wedge is paid by companies and one-third by workers.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
