The European Commission will urge Italy to adopt an industrial strategy aimed at reducing territorial disparities, reform its tax system, and strengthen its capital market, according to a document seen by Euronews.
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The recommendations are set to be published on 3 June and present a strong push by the EU institution to enhance Italian competitiveness, a priority for European Commission president Ursula von der Leyen.
Since the beginning of her mandate, Ursula von der Leyen has placed Europe’s competitiveness on a global scale amid geopolitical uncertainties at the center of her political agenda.
To do so, the Commission is pushing member states to accelerate reforms.
A ‘weak’ industrial strategy
The document, which might still be subject to last-minute changes, sharply criticizes the absence of a strong industrial strategy and disparities between the North and the South.
It identifies the causes among excessive fragmentation of incentives, lack of priority of strategic sectors and weak coordination among industrial, infrastructure and research policies.
“Stagnant productivity continues to characterize Italy, while also reflecting wide gaps between the northern and southern regions,” the document reads, adding that infrastructural deficits are among the main factors limiting competitiveness.
Despite the government presenting a White Book “Made in Italy 2030” where an industrial strategy was defined, there is no “clear policy actions and a governance structure for industrial policy,” the document says.
An industry plan can benefit from a more prosperous capital market; for this reason, the Commission recommends to “promote the mobilization of savings, capital markets’ expansion, and firms’ growth and aggregation,” the document says.
A sharp criticism on taxation
The European Commission sharply criticizes Italy’s tax regime, described as too heavily reliant on labor.
“Further shifting the tax burden from labor to other underused sources of revenue, which are less detrimental to growth, would help to increase economic potential,” the Commission recommends.
It also criticizes the flat-tax regime for the self-employed, arguing it makes the tax system “highly complex” as it “weakens progressivity and erodes the tax base, resulting in significant revenue loss.”
The Commission recommends “making the tax system more conducive to sustainable growth, while ensuring fairness, including by further fighting tax evasion and reducing remaining tax expenditures, including those related to value added tax and environmentally harmful subsidies.”