Former Italian Prime Minister Silvio Berlusconi presented its flat tax plan at the base of his economic platform for the general election in March, raising concern over the potential impact on the country’s finances.
“The flat tax is simple and fair and it will not be convenient to avoid taxes”, said Berlusconi in a radio interview. “Less taxes on families, less taxes on companies, less taxes on labor, more household consumption, more business production, more employment and more money in state funds to help citizens”, added he.
Berlusconi’s party Forza Italia and his Eurosceptic coalition partner, the Northern League, are heading to the elections optimistically. Most polls show that if they are together, they will be able to defeat the ruling center-left Democratic Party led by Matteo Renzi and the Five Stars Movement.
Berlusconi hosted a meeting with North Leader Leader Matteo Salvini and Giorgia Meloni, leader of the right-wing Italian Brothers at the weekend to present the terms of his alliance before the March vote. The politicians from the three parties are expected soon to meet to develop a detailed platform.
The parties have a disagreement over the euro, as Silvio Berlusconi consider that Italy must remain in the currency union, while Salvini advocates leaving the Eurozone. But they have similar positions on other topics, including the abolition of pension reforms introduced in 2012, as well as widespread fiscal changes that will involve the introduction of a flat tax.
“We believe the time has come for a flat tax – the fiscal shock will cause Italy to get out of the trap that has been swept over in recent decades”, said Renato Brunetta, Berlusconi’s ally in the lower house of the parliament. “This will lead us to an increase of about 3%”, added he.
The flat tax – a general tax rate levied on all citizens, as opposed to the progressive system that charges higher rates to higher-income people, has been part of conservative economic thinking for decades. But it is seldom applied, with the main examples being Central and Eastern European countries.
This may be particularly attractive for Italy, whose citizens are burdened with one of the world’s worst tax systems – tax revenues are 42.9% of gross domestic product in 2016, well above the average of 34.3% for the Organization for Economic Cooperation and Development (OECD).
Moreover, there is a relatively high degree of tax evasion in Italy, which is being fought by several consecutive governments.
Berlusconi, a media tycoon who was Prime Minister of Italy, resigned during the sovereign debt crisis in 2011 and was later was sentenced for tax evasion. He has been a fan of flat tax since his first political campaign in 1994, but has never been able to legalize it.
“They run out of their ideas and rely on the Italian electorate’s short memory”, said professor at SAIS-Europe in Bologna and former economic counselor of the center-right Democratic Party, Filipo Taddei. “But the Italians remember that Berlusconi has been at the head of the country for many years and has never reached the tax cuts he is talking about”, added he.