The plans by Italy's government to lower current income tax bands from four to three in two years was met with criticism from trade unions on Tuesday.
According to government officials, the government is planning a tax system overhaul, aiming to reach a single tax rate before the national elections in 2027. Also, it plans to offer investment incentives for businesses.
However, following a meeting with the government, Italy's three main unions, the CGIL, CISL and UIL, said they were contemplating a joint protest.
"We do not agree with the three-rate scheme as it favours high and very high incomes, while 85% of Italian employees and pensioners have an income of less than €35,000 per year," said CGIL representative Gianna Fracassi.
The government is proposing to set the three bands at 23%, 33% and 43% over the short term, the officials stated, going on to add that a costlier option being considered would reduce the second band to 27%, Reuters news agency reports.
The income tax levy, IRPEF, is based on rates from a minimum of 23% on annual income up to €15,000 up to a top rate of 43% on income over €50,000.
In part, the Treasury is planning to finance the plans by reducing the present 600 ways individuals and businesses can deduct several types of spending from their taxes.
The Reuters report adds that these "tax expenditures" deny Italy €165 billion in revenues each year.
Commenting on the flat tax model, finance professor Alessandro Santoro said: "The incentive effects on employment and investment theoretically linked to the reduction of income tax have rarely materialised, and have in any case been less than the negative impact on revenue of the lower rates," he stated.
Within the reforms, the current 25% income tax rate would be divided in two by creating a second lower band at 15% for entrepreneurs who generate employment and invest in innovation.
"The more they hire and invest, the less they pay," said the Treasury document.
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