Cut in deductions, so the government is preparing to reduce the IRS

A new tax regime that will change from 4 to 3 IRS rates, the fight against tax evasion thanks to new technologies, an increase in the tax-free area and deductions. These are just some of the innovations contained in the tax reform presented by the Deputy Minister of Economy and Finance, Maurizio Leo, during the hearing of the mixed committees: the House Finance Committee and the Senate Tax Reform Committee. The reform project is developed in four parts: general principles, taxes, procedures and materials. “As a first step, we will tackle the personal income tax, a tax that has critical problems and gaps,” said Leo.

We went from four to three. Today, up to 15,000 euros pays 23%, between 15,001 and 28,000 25%, between 28,001 and 50,000 35%, while over 50,000 euros pays 43%. With the reform, the two central scales are merged so: for incomes up to 28,000 euros, 23% is paid, between 28,000 and 50,000, 27% and for incomes above 50,000 euros, 43% is paid. The reform would also increase the tax-free area to 10,000 euros annually, while today it is set at 8,174 euros for employees and 7,500 euros for pensioners.

To these measures, the government would like to add further reductions in the income tax of individuals with resources that can come from reducing the number of deductions. “There are more than 47 – highlighted the deputy minister – the most relevant item is represented by tax credits, there are between 227 and 36 billion Cubans: in these it is possible to carry out a cleaning intervention to guarantee that the resources saved for in order to reduce personal income tax’.

Leo also spoke of reducing the tax burden for workers: «I think we can reach the 80-100 euros that were mentioned» in the paycheck but «we haven’t seen the text yet. The reservoir is 3 billion for 2023 and a part of the 4 billion for 2024, I think we can reach that figure, let’s check with Accounting », he added.

A chapter was devoted to combating tax evasion. “We want to combat tax evasion, we will do this through databases, technological tools, we want to deal with international tax issues”, said Leo. Before waging war against tax evaders, however, an attempt was made to create a “friendly” tax office. For small and medium-sized enterprises “we are going to introduce the so-called two-year agreement with creditors. The inspector has many tools at his disposal such as databases, pre-compiled forms, electronic invoice, telematic fees, we will also work with artificial intelligence and predictive analysis» recalled the deputy minister. Based on these tools, the Treasury will be able to know “down to the millimeter what a taxpayer’s income is and propose an agreement with creditors so that for two years there are no hassles on the side of direct taxes”, he explained.

With regard to larger companies, the intention is to establish a “cooperative compliance”, that is, a system of rewards that recognizes collaborative and deserving taxpayers a set of advantages of a substantive and procedural nature. “Today, a very significant amount is expected. We are going to try to bring it down to 750 million euros and then to 100 million by introducing a mechanism that looks at the evaluation activity ex ante and not ex post”, highlighted Leo. Not only that, among the measures, it is foreseen the reduction of criminal penalties for the so-called evasion by necessity.