Abstract

The paper presents the results of a microsimulation of the distributional impact of law no. 46/2021, which introduces a single universal child allowance replacing both personal income tax deductions for dependent children, and other monetary transfers for children, in the context of a wider reform of family policies (Family Act). Law no. 46/2021 lowers the age to be considered a dependent child from 24 to 21 years, and establishes that the new allowance can be reduced as income and wealth increase, as summarised by the Equivalent Financial Status Indicator (ISEE). In this paper, after a brief overview of child transfers in some European countries, a micro-simulation scenario of the reform is outlined based on the law already approved. The results show that the reform improves income distribution, and reduces the poverty risk especially among households with children.