Abstract

The government proposal for the wide ranging tax reduction program ("Enabling statute to reform the central government tax system") was not complying with constitutional provisions that require budget policy programs expected to affect budget deficits to provide alternative means of financing, be they in the form of reducing public spending or increasing other sources of revenue. The legislative proposal of tax reductions in personal and corporate income tax rates and of the repeal of the tax on corporate value added have now been transformed, in the bill approved by the Chamber of Deputies, in a reform that only changes the legal structures of the personal and corporate income tax, but it does not set any tax rate reductions. The paper discusses the constitutional reasons that lie behind the Parliament induced changes and the unlikely prospect, for Italy, of a supply side induced growth of GDP capable to generate the tax revenue that would make the reform "to pay for itself".