Skip to main content

Would a “flat tax” give Italy’s economy a boost?

Two of the leading contenders to form a government after Italy’s general election on 4th March advocate a radical overhaul of the country’s tax code. Their plans would result in a substantial reduction in taxes that they claim would provide a big boost to GDP. A representative of Silvio Berlusconi’s Forza Italia has suggested that it would increase GDP growth from 1.5% last year to as much as 3%. We are much more sceptical, for several reasons. First, the tax cuts would probably be accompanied by large spending cuts. Second, most of the gains would probably accrue to those on higher incomes, who would be likely to spend a smaller proportion of the windfall. And third, it is not clear that the high level of taxes is a major constraint on Italy’s economy. More important for supporting the economic recovery would be strengthening the banks and improving the business environment.

Become a client to read more

This is premium content that requires an active Capital Economics subscription to view.

Already have an account?

You may already have access to this premium content as part of a paid subscription.

Sign in to read the content in full or get details of how you can access it

Register for free

Sign up for a free account to gain:

  • Unlock additional content
  • Register for Capital Economics events
  • Receive email updates and economist-curated newsletters
  • Request a free trial of our services


Get access