Within the EU Italy is a high tax/Gdp ratio country, following only Denmark, Sweden and Belgium. Its tax structure is largely based on direct taxes, while it ranks only 22nd for indirect tax revenues. The three
main categories of revenue sources for the total Public Administration budget in Italy are direct taxes, indirect taxes and social contributions. The total fiscal burden, which was 40.5% in 2002, has risen to 42.5 in ten years. The behaviour of these three groups of taxes is shown in Figure 1, where it appears that the rate of growth is quite similar. In 2011, out of the total current revenues of 725.7 billion euros, income taxes accounted for 226.0 billion, indirect taxes 223.3 and social contributions 212.1.
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As Figure 1 shows, during recent years revenue from social contributions has remained practically constant, that from income taxes has diminished, and that from indirect taxes has rapidly increased. The increase in indirect taxes is due mainly to the revenue flowing from the Vat on goods imported from countries outside the EU27, and this increase could be explained with the rise in oil prices. Domestic Vat revenue has slightly diminished following the economic crisis, notwithstanding the increase of one point in the rate. The revenue from the excises on mineral oils has risen due to the increase in the rates decided in 2011.
The Italian fiscal system relies largely on labour income taxes, to a higher extent than any other State within the European Union. In particular, the receipts deriving from social security contributions paid by employers and
employees are huge, and they put a brake on the creation of new permanent jobs and promote the existence of a large shadow economy. Side by side, the tax rate on consumption is lower than the European average, and this can be traced back to the reduced weight of the value added tax and excises duties.
The most distinguishing feature of the Italian tax system seems to be the role played by labour income taxes together with a more limited role assigned to taxes on consumption. Given this structure, environmental taxation, especially energy-related taxes and duties, represents a promising area of intervention to promote sustainable growth (curbing carbon dioxide emissions, supporting a reduced use of natural resources, less atmospheric and water pollution, soft mobility, less congestion), while at the same time favouring the attainment of other goals of economic policy (increase in employment, control of tax evasion, reduction of the shadow economy and the black labour market).
In the same period the degree of fiscal autonomy of the local authorities has been growing at quite a rapid rate: from 15.7% in 1990 it has reached 42.8% in 2011. The process towards some form of fiscal federalism is still not completed, but this trend could lead to a larger role for greater environmental taxation.
When considering environmental taxes, Italy ranks 11th in the EU27. Energy taxes, including petrol and diesel taxation, represent the greater part – about 80% – while transport taxes account for 19%.
Over the last two decades the amount of environmental taxes collected in Italy has increased at current prices (Fig. 2): total revenue from this category, which was 22.3 billion in 1990 and 37.8 in 2000, has reached
40.5 in 2010 (Appendix Table 1). But as a percentage of Gdp the revenue from these environmental taxes – as defined in the national accounting system276– has remained practically stable from 1990 (3.17%) to 2000
(3.16%), while it has decreased rapidly in successive years to a level of
2.60% in 2010 (Fig. 2)277. This decrease should be imputed almost exclusively to energy taxes278, one of the three categories (Appendix, Table 4) of environmental taxes accounted for by Istat, the Italian National Institute of Statistics (the other two being «Transport»279and «Pollution and Resources»280, named in this way even if no tax on resources is in place in Italy). The share of energy tax revenue in Gdp has diminished over the last twenty years, from 2.74% to 2.01%, and the ratio of energy tax revenue to total revenues from taxes and social contributions, which was
7.48% in 1990, was only 4.77% in 2010. Due to this evolution, while in 1995 the share of environmental tax revenue to Gdp was higher than the EU27 average (3.5% and 2.8%, respectively), in 2008 the share has been practically the same.
The largest part (39.9 billion) of the total revenue from environmental taxes in 2010 (40.5 billion) are included in the category called «Protection of ambient air and climate»; this basically includes the revenue from energy taxes (31.2 billion) and from transport taxes (8.7 billion).
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The taxes raised for pure environmental purposes (pollution taxes) are a meagre 0.5 billion. They included in 2010 revenues from the regional special tax on landfill dumping (186 million), the SO2 and NOx pollution tax (15 million), and the provincial tax for environmental protection (289 million).
Among energy taxes, the most important as a revenue source is the excise duty on mineral oils (in 2010, 22.7 billion), followed by the excise duty on methane (4.8 billion) and the excise duty on electricity, whose revenue from 2012 includes the local surcharge on electricity duty as well
(2.9 billion). Among the transport taxes, the revenue from the motor vehicle duty paid by households was 4.3 billion in 2010, but there are other important revenues from the other taxes levied on motor vehicles.
It must be remarked that Istat databases on environmental taxation generally assume an aggregate approach, largely ignoring the territorial distribution of tax bases and revenues. For instance, the aggregate national revenues include the revenue sharing on the national fuel and diesel excise duties, the regional surtax on the fuel excise duty, and the natural gas consumption tax. Fuel taxes are mainly shared by regional governments according to rates predefined by the state authority, even if there is the possibility of adopting a small surtax on gasoline consumption. For
final gas and electricity consumption, the tax rates can be set between a minimum and a maximum fixed by national law.
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Many environmental levies are largely related to the territorial context and consequently represent a useful tool for making citizens and city users pay for the services they benefit from or for the external effects they generate. But many of these levies are not included in the Istat databases: at the regional level, water abstraction fees, regional licensing taxes, and the regional land grant tax are not included, while the provincial/municipal level does not consider the land grant tax/fee, advertising tax/ fee, parking pricing, urban road pricing, fines and penalties related to the road code, and construction and development fees. These environmentally-related levies play a considerable role in the field of municipal revenues. In 2008 they represented 17.7% of total current own resources, excluding intergovernmental grants281. This means that a relevant share
of the fiscal autonomy of local governments is made up of levies which have an influence on the territorial and environmental development of the municipalities.
Protection of the environment is only one, and not the most important, of the purposes for taxing energy. The main goal of this kind of taxation is revenue raising (even if receipts from the taxes on petrol and diesel have declined in real terms over many years). However, due to the characteristics of the tax bases, it also has an incentive effect on behaviour. In this taxation area, budget needs normally steer the design of the levy, but it can also be used for purposes of income redistribution and industrial policy, which could be considered in designing the tax.
Recently, one important target of energy policy has been the promotion of renewable energy sources, implemented mainly through a tax-expenditure system that partially deducts the investment expenditures from the tax base of the income tax.
The taxation of energy in Italy is realized through an excise on mineral oils levied as a fixed monetary quantity per unit of product, and through a consumption tax on coal, methane and electricity. The revenue from these sources is very high since the tax base is large and characterized by great rigidity. Furthermore, the energy sector is deeply concentrated, and this makes it easy to collect the taxes, while evasion possibilities are limited. In addition to the excise or the consumption tax, energy products are subject to the value added tax.
According to DL 201/2011 (the so-called Save Italy Decree), from January 1, 2013, the rate for motor use should be € 704.40/1000litres of petrol and € 593.70 for diesel. The current higher rates for petrol and diesel (Table 1) should in principle be temporary and devoted uniquely to covering the expenditures deriving from the damages from the earthquake in
Abruzzo. Thus, the new rates should be applied only up to December 31, 2012. But in the past, temporary increases of the excise rates for special purposes have never been eliminated.
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DLgs282 398/1990 established the right of the regions to introduce a surtax on the excise duty on mineral oils, with a maximum rate equal to 2.58 cents. Subsequently DL 59/2012 gave the regions the...