Tax cut for nights and holidays: this is how the government raises wages

After the (temporary) cut in the tax wedge, the government is working on new measures to leave a little more money in the pockets of workers, especially in the tourism sector. The industry has suffered for years from a “progressive discontent” of historical workers, as well as a lesser capacity to attract new generations who boast stable jobs that allow better management of leisure time. All this leads to a strong staff shortage: 50,000 places remember Santanchè this year alone (250,000 in 2022). The lack of personnel in the tourism and food and beverage sector is a problem that needs to be addressed from various perspectives (education, employment policies, motivation), but it must go hand in hand with another important issue, the very low wages. What will be the future moves of the Meloni government regarding the fees involved in the tax delegation?

Tax-free work to raise wages

Let’s start with tourism, which has boomed in the last two years but has suffered from a structural staff shortage. Since night and public holiday work is difficult to reconcile with private life, fewer and fewer people prefer to work in sectors that require shift work, 24 hours a day, 7 days a week. We already knew that but with the pandemic something has changed, leisure has become a priority. And so you can no longer find cooks and waiters, especially in the hotel industry. Confindustria hotels argues that “not being able to change the nature of the activity, resorting to corrective interventions aimed at strengthening this component of the business with a targeted tax cut or contributions to holidays and night work increases”. supports Santanchè’s proposal. According to the Tourism Minister, “working in hotels and restaurants should become more attractive, wages should be higher for those working at night and on holidays. But we can’t put companies in trouble, the way is through tax cuts”.

Meloni: “Cuting the tax wedge is better than the minimum wage”

Just today, Prime Minister Giorgia Meloni reiterated, in connection with the Trento Economic Festival, that “reducing labor taxes should be a priority”. The government’s first problem is to make the cut in the tax wedge structural, and the second is to expand it further. “I believe it is very beneficial to cut contributions and put money in workers’ pockets instead of the legal minimum wage, which can be a boomerang, because in Italy we have a very high level of collective bargaining”.

That’s why the government wants a salary increase but doesn’t want companies to pay for it. Exactly for this reason, it has chosen the path of tax amnesty and cutting the contribution margin, starting with the temporary cut-off of the tax wedge. Then there’s the personal income tax and the deduction in brackets, but according to the Parliamentary Budget Office (UPB), “a measure that determines redistribution effects that penalizes middle-income people and favors those with higher incomes unless they have a high share of income”. From their tax returns, it turns out that “the average rate for all personal income taxpayers is about 20%, with just under 14% of taxpayers paying almost 60% of income concentrated on it.”

EU economic agenda for Italy

The realignment of personal income tax brackets is just one of the two cornerstones of tax reform in the pipeline, the other being the flat tax, a measure that worries Brussels a lot. In its recommendations to Italy, the EU Commission alleges that “the extension of the flat rate system to the self-employed raises concerns about the fairness and efficiency of the tax system” and also “the introduction of a new flat rate scheme”. Wage increases for 2023 have increased the complexity of the Italian tax system. Europe specifically urges the Meloni government to pursue tax reform, but this must “maintain the progressiveness of the tax system and improve its fairness, especially by rationalizing and reducing tax cuts”, always keeping in mind the debt.

Are public accounts at risk?

Upb notes that the bill that allows it has no indication of how to recover new resources that would be lost with the new tax reform, other than the abolition of Irap. “For the rest, it refers to the results of anti-tax evasion activity and the rationalization and reduction of tax expenditures, as well as new resources to be identified over time”. The Parliamentary Budget Office is concerned above all that the application of net borrowing is not explicitly excluded in the draft law.

But Brussels said the new measures should in no way jeopardize the soundness of public finances and the sustainability of debt, reminding Meloni that they can “increase income from other sources, less detrimental to growth, to reduce the tax burden on labor property, VAT and using state-owned coastal assets. referred to as “authority”. Then there is another “long-standing challenge” to be overcome, namely the largely outdated cadastral values ​​that serve as the basis for calculating property tax. But the government doesn’t want to know about assets and title reform, at least for now.

Meloni: “Let’s not throw in the towel on tax evasion”

However, a note came from Brussels on the fight against tax evasion, which Meloni did not seem to like very much. “Dozens of rules have been introduced over the years in the fight against tax evasion, but the approach has not worked – the prime minister explained – we don’t want to throw in the towel”, he later assured, stating he didn’t want to. hunting for revenue but wanting to “tackle massive tax evasion”: I think of VAT corruption, I think of the State bargaining for billions of euros, which, not wanting to show it, wants the refund of millions, for example, with small traders”.

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