Is the Italian Corporate Tax Reform Going to Reduce Firms’ Tax Burden? a Microsimulation Analysis

This paper analyses the impact of the corporate tax reform introduced in Italy at the beginning of 2004 on firms’ tax burden. For this purpose we develop a microsimulation model reproducing the Italian corporate tax system. The model is based on an integrated dataset combining ISTAT (Italian National Statistical Office) survey data and published accounts data for corporations, for the year 2000. The empirical analysis consider two scenarios. The base-case scenario is represented by the corporate tax legislation existing in 2001 before the previously existing Dual Income Tax system was practically abolished, while the reformed scenario examines the full corporate tax reform passed in 2004. Simulation results show that the mean ex-post implicit tax rate after the reform increases by 0.26 percentage points. However, in spite of this overall result, we show that for firms belonging to groups, for which the reform introduces an optional consolidated tax statement, the new regime lowers the mean ex-post implicit tax rate by 1.08 percentage points. JEL classification: H25, H32