Presentation prepared for the Conference held in Ferrara on March 12th and 13th 2021 under the auspices of ELI, Italian Branch and of the China University of Political Sciences and law.

1. Reshaping Income Taxation as to address Covid-19:
the Italian Policy
Ferrara, March 12th 2021
Marco Greggi, University of Ferrara

2. Outline of the Presentation
1. The European COVID-19 scenario as 2021 unfolds;
2. The Italian strategy so far: a Kennan doctrine revisited;
3. The medium and long-run possible fields of intervention;
4. Concluding remarks “Harder, Better, Faster, Stronger”.
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3. The Current Scenario
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1. Asymmetric impact in the
Continent;
2. No clear pattern of incidence (no
North-South
or East-West dichotomy);
3. Different policies in progress as to
address the situation in the different
States of the Union.
WHO data plotted by the Author

4. The Debt Adjustment
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1. Traditional pattern confirmed in absolute
terms;
2. Trajectory of convergence towards the
Southern model ?
3. Temporary suspension of the Eurocurrency
constraints in term of Deficit/GDP and Public
debt/GDP (to be back in 2023 according to
Dombrovskis’ address on March 3rd 2021):
• Italy non compliant on both.
• Covid-19 response essentially debt-
based.
Eurostat data plotted by the Author

5. GDP Variations in 2020
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1. Further evidence of the different
resilience levels by countries
across the European Union;
2. Economic data are essential con
conceive and deploy a proper tax
policy reaction to Covid-19;
3. Traditional measures arguably
inefficient, including:
• Income tax adjustments;
• VAT / Consumption tax
adjustments.
European Commission data plotted by Philipp Heimberger

6. 2022 Forecast
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Oecd Interim Report, March 2021 (data plotted by the Author)

7. The Asymmetric Response
Attention: Graph considers 2020 GDP denominator (!!!). Graph does not consider the Biden’s $ 1.9 trillion stimulus.
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8. Coming to Italy
1. Pandemic has delivered an impressive blow to the State budget,
bringing the Country out of the recovery path set before the
pandemic;
2. Italian Public debt has climbed up to approx. 160% of the national
GDP, which is shrinking down;
3. European recovery fund: too little, too late, too bad ?
1. Considering: the governance of the funds, the persistent asymmetry
between states in the Union which will be perpetuated.
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9. The Kennan Doctrine
as applied to Taxation ?
1. George Kennan (1905 – 2001): the containment doctrine in political
relations with USSR;
2. Italy has enacted four ”Restoration Decrees” (the fifth in the
pipeline) to grant subsidies during the lockdown periods and in the
aftermath of them;
3. No positive changes to the domestic system.
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10. The European Way
• The quest for new taxable bases as to grant resources to payback the
EU sponsored recovery funds include:
1. Carbon/Emission Tax (border adjusted);
2. Digital tax;
3. Extra-profits tax.
• Pros and Cons: asymmetric impact of taxation within the market plus
further distortion of the EU – China business relations in case of (1).
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11. The Policy Strategy
(not yet official)
• Reshape income taxation for individuals:
• Current proposal: to soften the progressivity of the system, adding a further
intermediary bracket for mid-income (around € 40.000 – € 55.000) with a rate
of 38% (32% would be charged on income from € 28.000 to € 40.000);
• Reduce Tax Expenditure:
• Unaccounted and distortive impact on individuals;
• Improve the judiciary and the tax administration.
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12. Is this Feasible ?
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SB 2021 SB 2022 SB 2023
REVENUES
Tax 478.778 499.851 513.733
Non Tax 56.748 59.999 54.569
Other 1.864 1.849 1.826
Overall Revenue 537.390 561.699 570.129
EXPENSES
Current (excluding interests) 596.015 571.183 565.886
Interests 81.507 82.406 85.692
Investments (capital) 135.299 114.670 114.741
Overall expenses 812.821 768.259 766.318
Loan Reimbursement 287.365 274.297 355.050
DIFFERENTIAL OUTCOME
Public Saving -141.996 -93.739 -83.275
Differential to be funded -275.432 -206.560 -196.190
Request for loans -562.797 -480.857 -551.240
Author’s edit of data provided by the State Accountancy Service (Ragioneria Generale dello Stato) on the State budget 2021 - 2023. Data in Billion Euro.

13. The Chinese Lesson
• China’s National People’s Congress (NPC) is just over in Beijing:
• Li Keqiang vision:
1. Job creation is a top economic priority;
2. China aims to create more than 11 million new urban jobs in 2021;
3. China is aiming for more than 6% economic growth in 2021.
• Strategy:
1. To rely on (an increased) domestic market consumption and …
2. To make China more independent from an export-led model.
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14. From Kennan to Daft Punk
• Fabio Panetta, Member of the Executive Board of the ECB, speech at
Bocconi University (March 2nd 2021):
• «The harder we push to close the output and inflation gaps (2%),
the better the outlook for the euro area economy.
• And the faster we get there, the stronger our growth potential will be».
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15. Concluding Remarks
• Designing a tax policy addressing wealth rather than income as to
redistribute wealth and act consistently with Panetta’s and Keqiang’s
vision:
1. More comprehensive Wealth Taxation;
2. New design for Inheritance Taxation;
3. Extension of the scope of a European Financial Transactions tax.
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16. Thanks for your Attention
marco.greggi@unife.it
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