Istalia

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The Government presents its new tax reform: "More fairness, more work, fewer complications"

The reform, a natural next step after the introduction of UBI, is designed to ensure its sustainability and reward work by integrating welfare and taxation into a unified system

Minister Stefano De Pedis presenting the reform to the press

October 5693

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ROMULA - The Cantalamessa Government today unveiled its long-awaited tax reform, designed to complement the Universal Basic Income (UBI) and considered crucial to the sustainability and fairness of the system, the new pillar of Istalian welfare, which, as anticipated by the already adopted plan for the UBI sustenaibility, now becomes part of a structural, fair and sustainable system.

Since the election campaign, the partners of the Coalition for Change, determined to progressively extend UBI nationwide during this legislature and complete the welfare revolution, had promised a tax reform capable of simplifying the system and, above all, rewarding those who work and contribute with their efforts to the country's growth. With this new law, the government intends to turn those promises into reality, making UBI and taxation two integrated tools within a single mechanism that protects citizens and incentivizes productivity.

The government has therefore presented the reform as "a necessary step to complete the architecture of the UBI system and truly transform it into a driver of fairness, employment and simplification". This reform, therefore, goes beyond simply updating tax rates and deductions, but stems from the idea that UBI and taxation should no longer coexist in parallel: they must become a single integrated mechanism, capable of ensuring economic security while simultaneously making work consistently profitable.

The Minister of Finance and Treasury, Stefano De Pedis, stated in a press conference:

With UBI, we have redefined welfare in Istalia. Today, we are redefining taxation, so that the two no longer operate on separate tracks. UBI guarantees protection, tax reform guarantees employment, together they will guarantee a fairer system.

It is within this framework that the reform was born, structured around four pillars that redesign the national tax system:

1. Tax credit for work and productivity
   
2. Abolition of old welfare deductions
   
3. Redesign of IRP tax brackets
   
4. Rationalization and simplification
   

The first pillar, the Credit for Work, is the cornerstone of the government's new tax philosophy and the main tool for incentivizing and rewarding work. It is a targeted tax credit that replaces the old "universal credit", which has become redundant in the UBI era. The new credit follows a proportional model: it increases in line with the worker’s earned income, up to a defined threshold, ensuring that every additional hour of work results in a higher net gain. Designed as an integrated component of the new UBI architecture, it strengthens the net return on employment compared to inactivity, making work systematically more rewarding across all income segments. It is aimed primarily at:

• Low and low-medium income earners;
  
• Young people in their first jobs;
  
• Women, particularly those returning after maternity leave;
  
• New entrants and workers with discontinuous career paths.
  

Through this mechanism, the government states, the Credit for Work reinforces the social function of UBI, providing a universal foundation of basic security, while simultaneously neutralizing the most debated potential side effect of the new welfare architecture, often invoked by opponents and, recently, by the opposition: the risk of marginal disincentives to work. By linking the credit directly to earned income and allowing it to grow progressively with employment effort, the system guarantees that, in Istalia, working more always means earning more, without exceptions.

Minister De Pedis was clear:

In Istalia, it must always be more profitable to work than not to work. UBI must not risk becoming a brake, but a springboard. And to achieve this, we are intervening by rewarding the work and commitment of Italian workers, combining social justice with a boost to productivity.

The second pillar focuses on the very structure of the old fiscal welfare system, which with the introduction of UBI becomes largely redundant: deductions for children, family dependents, ordinary healthcare costs, selective subsidies and several other bonuses that originated in the pre-UBI era will be gradually eliminated and incorporated into the new model.

Minister De Pedis was clear:

The system of deductions, tax credits and bonuses represented a fundamental part of the national welfare system in the old system, ensuring justice and fairness. However, at the same time, it created a patchwork whose management was complex and required significant resources. With the new, solid and progressive UBI system, all of this is no longer necessary and, indeed, risks only generating distortions.

The goal is therefore to radically simplify the system, freeing citizens and businesses from a regulatory jungle and concentrating all support in the UBI + Credit for Work combination.

The Third Pillar focuses on the complete redesign of the IRP brackets. Given that the UBI distributes the same amount to all citizens and decreases with increasing income, restructuring the current progressivity is another natural step towards the effective introduction of the new architecture, and a way to avoid the risk of the system crushing the middle class. The new system includes:

• A slight increase in the lowest tax rates, fully offset by the UBI;
  
• Targeted protection for the middle class, considered the fiscal and social cornerstone of the country;
  
• An increase in the highest tax rates, deemed sustainable in the new distributional balance.
  

In this way, the government argues, the UBI will not become an "additional income" but a structural component of the tax system, integrated with progressivity, not superimposed on it.

Finally, the fourth pillar of the reform envisages a large-scale rationalization effort, aimed at cutting obsolete benefits, fully digitizing procedures, reducing the tax wedge and introducing a simplified tax return system. The goal is to make the tax system clearer and more accessible, so that every citizen can easily understand how to navigate and benefit from the measures provided. According to various analyses, the complexity of the previous system resulted in a significant percentage of citizens being unable to fully utilize the tools available to them.

As Minister De Pedis explained:

Complexity had become a form of inequity: those who lacked the tools to navigate risked not only losing the benefits intended for them, but also their rights. With this reform, everything becomes clear and accessible.

The Alliance for Change coalition supported the reform with a unified enthusiasm unseen in years.
The Greens spoke of "a reform that rewards those who work and creates a fairer, cleaner, and more modern system".
The Democratic Socialists have repeatedly emphasized that it is "the natural complement to the UBI and definitively marks the beginning of a new era for welfare and social justice in the country".
The New Communists, traditionally skeptical of work-related tax supplements, have also expressed their full support, but emphasized that "tax equity should not be a goal, but rather a path, a tool, to ensure a more equitable and just system".

The opposition, which has been extremely harsh, united, and unanimous in its criticisms, as it was during the introduction of the UBI, takes a completely different view.

The Hosian Democratic Union has accused the government of having "underestimated the moral risk" inherent in the UBI and of now resorting to a tax reform "that taxes everyone more but, above all, penalizes some to support others". According to the UOD, the government has failed to "improve the quality of progressivity; have they really 'eliminated' inequities?"

The National Liberal Party took a more aggressive stance, denouncing the reform in alarmed tones through its congressional group leader, Lino Pancetta:

This risks jeopardizing years of policies designed to make the country a magnet for investment. The UBI has already introduced an element of economic rigidity that requires significant resources, and now comes a reform that increases the tax burden. The result? We risk a decline in competitiveness and the flight of productive capital.

From the right-wing liberal party Democracy & Freedom, a more ideological but still cutting and contemptuous criticism was expressed in the latest issue of Il Liberale, the party's press organ, which states:

This reform continues to push Istalia toward a model in which the state decides how citizens should behave. It is a paternalistic system that discourages individual autonomy and responsibility. And it also seems to follow the usual left-wing "dogmas" that demonize personal success. Lower taxes and more economic freedom would be a more courageous path.

The debate, however, has only just begun, but what is certain is that with this reform the Government is not only changing tax rates and bonuses but also reshaping the very philosophy of the relationship between citizens, labor and the state. UBI will be the cornerstone of fairness, while taxation will be the engine of economic participation: both, together, will form a unified system.