Skip to main content
SpringerLink
Log in

Analysing the Redistributive Effects of the Italian PIT with Tax Files

  • Conference paper
  • First Online:
Yearning for Inclusive Growth and Development, Good Jobs and Sustainability

  • 288 Accesses

Abstract

This chapter studies the redistributive effects of the Italian personal income tax by using novel individual tax returns. The application of a decomposition of the reranking term shows that the set of personal income tax instruments can have different effects on vertical and horizontal equity. The distributional analysis is conducted for Italy as a whole and for the twenty Italian regions in order to add a new dimension of inquiry to the study of regional income disparities in this country. Results for the two main tax expenditures for the owner-occupied house, the deduction for the main residence and the mortgage interest tax credit, throw new light into the total redistributive consequences of such tax expenditures in Italy. It is found that, the mortgage interest tax credit, a tax measure often criticised at both national and international level, has a small, positive effect on vertical equity, but it has negative consequences on horizontal equity. A discussion of the pros and cons of using administrative tax data for studying redistribution is also provided

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 129.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 169.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 169.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    Elsewhere I have studied the redistributive effects of the proportional tax Cedolare Secca that is applied to particular rented property income (Di Caro 2017a).

  2. 2.

    In 2014, there were minor tax credits for housing in terms of average amount and number of beneficiaries, which are not considered here because they are not available in the data used in this chapter.

  3. 3.

    I follow the notation used in Di Caro (2019), wherever possible, where a full description of the methodology can be found.

References

  • Acciari, P. (2016). Collezione campionaria di dati estratti dalle dichiarazioni Irpef e analisi redistributive. 12° Conferenza Nazionale di Statistica ISTAT. Rome.

    Google Scholar 

  • Andrle, M., Hebous, S., Kangur, A., Raissi, M. (2018). Italy: Toward a growth-friendly fiscal reform (IMF working paper series WP/18/59). Washington.

    Google Scholar 

  • Atkinson, A. B., & Brandolini, A. (2001). Promise and pitfalls in the use of ‘secondary’ data-sets: Income inequality in OECD countries as a case study. Journal of Economic Literature, 39, 771–799.

    Article  Google Scholar 

  • Atkinson, A. B., Piketty, T., & Saez, E. (2011). Top incomes in the long run of history. Journal of Economic Literature, 49(1), 3–71.

    Article  Google Scholar 

  • Baldini M. (2008). L’IRPEF e la casa. Mimeo.

    Google Scholar 

  • Baldini, M., Giannini, S., & Santoro, A. (2017). IRPEF una riforma da fare. www.lavoce.info, April, 19.

  • Barbetta, G. P., Pellegrino, S., & Turati, G. (2018). What explains the redistribution achieved by the Italian Personal Income Tax? Evidence from administrative data. Public Finance Review, 46(1), 7–28.

    Article  Google Scholar 

  • Bonhomme, S., & Hospido, L. (2013). Earnings inequality in Spain: New evidence using tax data. Applied Economics, 45(30), 4212–4225.

    Article  Google Scholar 

  • Bourguignon, F., & Spadaro, A. (2006). Microsimulation as a tool for evaluating redistribution policies. Journal of Economic Inequality, 4(1), 77–106.

    Article  Google Scholar 

  • Brueckner, J. K. (2014). Eliminate the mortgage interest deduction or tax imputed rent? Leveling the real-estate playing field. Cityscape, 16(1), 215–217.

    Google Scholar 

  • Card, D., Chetty, R., Feldstein, M. S., & Saez, E. (2010). Expanding access to administrative data for research in the United States. Mimeo.

    Google Scholar 

  • CEPS. (2018). Income convergence in the EU: Within-country regional patterns, 5th February.

    Google Scholar 

  • Ceriani, L., & Verme, P. (2012). The origins of the Gini index: Extracts from Variabilità e Muta bilità (1912) by Corrado Gini. The Journal of Economic Inequality, 10(3), 421–443.

    Article  Google Scholar 

  • Ceriani L., Fiorio C.V. & Gigliarano C. (2013). The importance of choosing the data set for tax-benefit analysis (EUROMOD working paper No. 5/13).

    Google Scholar 

  • Cowell, F. (2011). Measuring inequality. Oxford University Press.

    Google Scholar 

  • Cowell, F. A., & Van Kerm, P. (2015). Wealth inequality: A survey. Journal of Economic Surveys, 29, 671–710.

    Article  Google Scholar 

  • Dardanoni, V., & Lambert, P. (2001). Horizontal inequity comparisons. SocCho&Welf, 18(4), 799–816.

    Google Scholar 

  • Di Caro, P. (2017a). A redistributive analysis of IRPEF using fiscal microdata. Economia Pubblica.

    Google Scholar 

  • Di Caro, P. (2017b). The contribution of tax statistics for analysing regional income disparities in Italy. Journal of Income Distribution, 25, 1–27.

    Google Scholar 

  • Di Caro, P. (2018). Redistribution in real-world PIT: Evidence from Italian tax records (MEF Department of Finance Working Paper, 2/2018).

    Google Scholar 

  • Di Caro, P. (2019). Decomposing personal income tax redistribution with application to Italy. The Journal of Economic Inequality, 1–17.

    Google Scholar 

  • Di Nicola, F., Boschi, M., & Mongelli, G. (2017). Effective marginal and average tax rates in the 2017 Italian tax-benefit system for individuals and households (DF Working Paper, n.1/2018).

    Google Scholar 

  • Di Nicola, F., Mongelli, G., & Pellegrino, S. (2015). The static microsimulation model of the Italian Department of Finance: Structure and first results regarding income and housing taxation. Economia pubblica, 2, 124–158.

    Google Scholar 

  • Duclos, J. Y. (1993). Progressivity, redistribution, and equity, with application to the British tax and benefit system. Public Finance, 48(3), 350–365.

    Google Scholar 

  • Figari, F., Paulus, A., Tsakoglou, P. & Verbist, G. (2012). Taxing house ownership: Distributional effects of including net imputed rent in taxable income (IZA working paper, n. 6493).

    Google Scholar 

  • Fiorio, C. V. (2011). Understanding Italian inequality trends. Oxford Bulletin of Economics and Statistics, 73(2), 255–275.

    Article  Google Scholar 

  • Gordon, R. H., & Kopczuk, W. (2014). The choice of the personal income tax base. Journal of Public Economics, 118, 97–110.

    Article  Google Scholar 

  • Longford, N. T., Pittau, M. G., Zelli, R., & Massari, R. (2012). Poverty and inequality in European regions. Journal of Applied Statistics., 39(7), 1557–1576.

    Article  Google Scholar 

  • MEF. (2017). Rapporto Annuale sulle Spese Fiscali 2017. Rome.

    Google Scholar 

  • MEF. (2018). Rapporto Entrate Tributarie.. Rome.

    Google Scholar 

  • Miyazaki, T., & Kitamura, Y. (2016). Decomposition of redistributive effects of Japanese Personal Income Tax, 1984–2009. FinanzArchiv: Public Finance Analysis, 72(3), 334–368.

    Article  Google Scholar 

  • Monti, M. G., Pellegrino, S., & Vernizzi, A. (2015). On measuring inequity in taxation among groups of income units. Review of Income and Wealth, 61(1), 43–58.

    Article  Google Scholar 

  • Mussida, C., & Parisi, M. L. (2018). Immigrant groups’ income inequality within and across Italian regions. The Journal of Economic Inequality, 16(4), 655–671.

    Article  Google Scholar 

  • OECD. (2018). Revenue statistics, Paris.

    Google Scholar 

  • Onrubia, J., Picos-Sanchez, F., & del Carmen Rodado, M. (2014). Rethinking the Pfahler–Lambert decomposition to analyse real-world personal income taxes. International Tax and Public Finance, 21, 796–812.

    Article  Google Scholar 

  • Pellegrino, S., & Vernizzi, A. (2018). Decomposing the redistributive effect of taxation to reveal axiom violations. Unito Department of Economics and Statistics WP Series No. 049.

    Google Scholar 

  • Pellegrino, S., Piacenza, M., & Turati, G. (2011). Developing a static microsimulation model for the analysis of housing taxation in Italy. International Journal of Microsimulation, 4(2), 73–85.

    Google Scholar 

  • Pellegrino, S., Piacenza, M., & Turati, G. (2012). Assessing the distributional effects of housing taxation in Italy: A microsimulation approach. CESifo Economic Studies, 58(3), 495–524.

    Article  Google Scholar 

  • Poterba, J. M. (2011). Introduction: Economic analysis of tax expenditures. National Tax Journal, 64(2), 451–458.

    Article  Google Scholar 

  • Poterba, J. M., & Sinai, T. (2008). Tax expenditures for owner-occupied housing: Deductions for property taxes and mortgage interest and the exclusion of imputed rental income. American Economic Review, 98(2), 84–89.

    Article  Google Scholar 

  • Schneider, F., Raczkowski, K., & Mróz, B. (2015). Shadow economy and tax evasion in the EU. Journal of Money Laundering Control, 18(1), 34–51.

    Article  Google Scholar 

  • Slemrod, J. (2018). Is this tax reform, or just confusion? Journal of Economic Perspectives, 32(4), 73–96.

    Article  Google Scholar 

  • Tyson, J. (2014). Reforming tax expenditures in Italy: What, why, and how? (IMF working paper series WP/14/7). Washington.

    Google Scholar 

  • Verbist, G., & Figari, F. (2014). The redistributive effect and progressivity of taxes revisited: An international comparison across the European Union. FinanzArchiv, 70, 405–429.

    Article  Google Scholar 

  • Viard A.D. (2013). Proposal 8: Replacing the home mortgage interest deduction. In 15 ways to rethink the Federal Budget. Greenstone M., Harris M., Li, Looney K. & Patashnik J. (eds.) Washington: Brookings Institution.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Finance, Ministry of Economy and Finance, Rome, Italy

    Paolo Di Caro

Authors
  1. Paolo Di Caro
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Paolo Di Caro .

Editor information

Editors and Affiliations

  1. FUET, Economics Foundation, University of Rome Tor Vergata, Rome, Italy

    Luigi Paganetto

Rights and permissions

Reprints and permissions

Copyright information

© 2019 Springer Nature Switzerland AG

About this paper

Check for updates. Verify currency and authenticity via CrossMark

Cite this paper

Di Caro, P. (2019). Analysing the Redistributive Effects of the Italian PIT with Tax Files. In: Paganetto, L. (eds) Yearning for Inclusive Growth and Development, Good Jobs and Sustainability. Springer, Cham. https://doi.org/10.1007/978-3-030-23053-1_11

Download citation

Publish with us

Policies and ethics

Search

Navigation