When we stop working for the tax officer

As every year, the long-awaited “financial liberation” day, the date when we stop working to pay taxes and contributions, is about to arrive. It was the last weekend I just finished, working for the tax authorities: Wednesday, June 7th, to pay Italian taxpayers schools, hospitals, transport, civil servants’ salaries, pensions, in purely theoretical terms. Thursday, June 8th, therefore, we celebrate the day of tax exemption; in other words, as the CGIA explains, if we work to meet the tax authorities’ requests from the beginning of January until June 7th, we’ll be doing it for ourselves and our families the next day until December 31st. . From this school case developed by the Cgia Research Office, all tax payments foreseen for this year (Irpef , Imu, Iva, Irap, Ires, various additional taxes, social security/insurance contributions, etc.). Compared to 2022, this year’s tax liberal day “falls” one day earlier. How was June 8 determined to be the “tax liberation day” of 2023? The estimated national GDP expected this year (€2,018,045 million) was divided by 365 days, yielding an average daily figure (€5,528.9 million). Next, estimates of income from taxes, taxes and social security contributions (€874,132 million) that income earners will pay this year were “recovered” and compared to daily GDP. The association explains that the result of this operation allows the CGIA Research Office to calculate the 2023 tax liberalization day 158 days after the start of the year, that is, next June 8th.

Tax Liberation Day

Regarding the tax burden, the “tax liberation day”, which has been the furthest from the calendar since 1995, coincides with 2005. Leaving behind the economic commitment mandated by the tax authorities on May 23 (142 business days). Still, looking at the calendar, the most “delayed” was recorded as the year 2022, when the tax burden reached a historical record level of 43.5 percent, and therefore June 9, the “tax liberalization day”. The CGIA emphasizes that it is fair to point out that the record peak of the tax burden reached last year can be attributed to a number of other factors intensifying in 2022, not the increase in taxes on households and businesses. in particular: the rising cost of imported energy products and the decisive increase in inflation, which increases revenue from VAT; with employment growth contributing to the increase in direct taxes and social security contributions. At the same time, resources used to finance building bonuses and tax credits to alleviate higher utility bills were classified as higher public expenditure, not lower revenue – in line with European dictates on public accounting.

The CGIA continues that the “day of financial liberation” is not an absolute principle, but a theoretical practice that shows empirically, if there is still a need, how excessive the tax burden on Italians is. A uniqueness that is equally evident when we compare our tax burden with EU countries. In 2022, only France and Belgium actually registered a higher tax burden than ours. While the tax burden is 47.7 percent of GDP in Paris, it is 45.1 percent in Brussels. Here, it reached the record threshold with 43.5 percent. Italy ranked third among 27 countries in the EU. Germany, on the other hand, ranks 9th with a tax burden of 41.9 percent, while Spain ranks 12th with 38.5 percent. The average of Euro Area countries was 41.9 percent.

Appointments with tax authorities in June

If the work done by the CGIA represents a real school case, the truth unfortunately still presents a very high level of complexity/difficulty. For example, in this month of June, 115 tax “appointments” are “expected” from Italian taxpayers, with an average of 4 per day. The calendar includes: 50 deadlines until June 16 (substitution tax, VAT, withholding taxes, Tobin tax, entertainment tax, etc.); Delivery of 1 TV license fee by 20 June; 55 payments (IRPEF, additional taxes, dry coupon, withholding, VAT, IRES, IRAP, substitute taxes etc.), 4 declarations (IRPEF, substitutes, Intra etc.), 4 communications (lease agreements, financial information for tax purposes between EU countries) etc.) and a TV license request by 30 June. CGIA analysts make it clear that these won’t affect all taxpayers, but they give an idea of ​​the cumbersomeness and complexity of our tax authorities. Also, according to the CGIA report, citizens of the Autonomous Region of Bolzano are the ones who pay the most taxes to the tax authorities. In 20194 each resident of this area paid an average of 13,158 euros in taxes, duties and levies. It was followed by the Lombards with 12,579 Euros, Aosta Valley with 12,033 Euros, Emilia-Romagna with 11,537 Euros and Lazio with 11,231 Euros. Calabria, on the other hand, is the region where the “burden” of the tax authorities is less: each resident of this region paid an average of 5,892 euros to the treasury. The national average is equivalent to 9,581 euros.

Gap between North and South

The strong gulf between the north and south of the country should not surprise us. Our tax system is, in fact, based on the criterion of progressive proportionality. Therefore, due to the better economic and social conditions in regions with high income levels, tax revenues are also higher than in other places. In geographic areas where the primary sector has a significant impact on the overall economy, the benefits provided by the legislator (particularly tax reductions) significantly reduce the tax base of taxpayers engaged in these activities and therefore also the total revenue of taxes paid by that region to the Treasury. Finally, in calculating the regional per capita income, the total amount of taxes paid to the tax authorities by each region is taken into account, so the figure will be higher, especially in geographical realities where the presence of economic activity is more widespread. Since the tax burden is calculated on the ratio between the total amount of taxes and contributions paid to the government and GDP, it has always measured the taxpayer’s “burden” on the taxpayer. But over the years, the tax burden has changed its “face”; In accordance with EU public accounting regulations, many measures that contribute to reducing the tax burden on taxpayers are no longer classified as lower tax or social security revenues, but as higher expenditures for the State. Document of Economy and Finance (Def) In 2022, technicians of the Ministry of Economy and Finance calculated the resources described as the largest expense, exceeding 35.5 billion, which contributed to reducing the tax burden of citizens.

This includes tax breaks and allowances for households and businesses that are used beyond the capacity limit on the return for a variety of reasons, and where tax relief is added for the benefit of certain taxpayer categories or geographic areas. If we had taken these features into account, we would have assumed that the “tax release day” of 2022 would have “happened” a few days before the data reported in Table 1 of this document. Also, in Def 2023, after cuts on the 110% Superbonus and front bonus, the new national reclassified under accounting guidelines. Second, they were converted from lower income during the period in which they were used, to more expenditure, starting from the time the subsidy was introduced. For example, in the three-year period from 2020-2022, this reclassification affected about 4.6% of GDP. This innovation led to an upward revision in tax revenues. With respect to 2023, however, there is no official measurement of the real tax burden of the DEF, but it can easily be assumed that the situation is not much different from 2022, given that most of the interventions are aimed at reducing the tax burden. for citizens and businesses. In this context, measures for high energy costs, tax reductions for businesses (electricity and gas), reduction of natural gas rate and reduction of overall system costs; interventions against the tax wedge that leads to a reduction in employee social security contributions; expansion of flat tax to small businesses and introduction of increased flat tax.