The Italian 2008 Reform of Corporate Taxation: The Effects On Non-Financial Firms

The 2008 Italian reform of corporate taxation broadened the tax base and lowered the tax rate of both the corporate income tax and the regional tax on business activities. The paper assesses the net impact of the reform on tax bases and taxes, with reference to a sample of 53,037 non-financial companies (differential effects across firms of different size/sectors/areas are also considered). The simulation of the impact of the reform is based on accounting data referring to 2006 and on a counterfactual approach (what if in 2006 the 2008 tax law were applied). In addition, the paper assesses the role played in 2008 by two other measures, more specifically two tax relieves. The analysis shows that the 2008 reform implies a reduction of taxes due by companies (although to different extent, the reduction concerns – on average – all firms’ types). Moreover, only one of the two tax relieves considered adds significantly to this reduction. Results can be interpreted in the light of both the corporate taxation reforms adopted by other countries in recent years and the way tax policy can reduce the companies’ tax burden in the current economic downturn.