Justifiably unpopular? The Italian property tax and inequality

ABSTRACT

This article simulates the distributional implications of a property tax reform for Italy that updates the cadastral valuation system to reflect market value. Simulations suggest that such a reform would significantly improve the progressivity of the tax, while correcting the unfairness of paying higher effective tax rates on properties with a lower market value. Updating the valuation system also makes the property tax less distortive, as the same revenue could be collected at about one-third of the current statutory tax rates.

KEYWORDS:

• Italy
• property tax
• microsimulations
• EUROMOD

JEL CLASSIFICATION:

• Numbers: D31
• C63
• R20
• H20

Acknowledgments

We are grateful to Philip Barrett, Ruud de Mooij, Rishi Goyal, Shafik Hebous, Cory Hillier, Davide Malacrino, and participants of seminars at the IMF and the Italian Ministry of Economy and Finance for many helpful suggestions. The views, arguments and opinions expressed herein are those of the authors, and should not be attributed to the OECD, the IMF, its executive board, or its management.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Version H1.0+ with software version V3.1.4 reproduces the 2018 Italian tax-benefit system. It is validated through comparison with aggregate statistics provided by fiscal authorities (Ceriani and others, 2015).

² Pellegrino, Piacenza, and Turati (2011) compute the average underestimation of cadastral values with market values and conclude that the resulting distribution of taxpayers is not affected. Intra-regional differences, therefore, appear to be of limited importance.