by Francesca Gastaldi, Maria Grazia Pazienza and Corrado Pollastri
The Paper provides a qualitative and quantitative analysis of the impact on corporate taxation of tax incentives for investment introduced with the 2016 Stability Act, namely the increase in allowable depreciation and the tax credit for the South. For the former, the paper assesses the tax savings for firms and therefore the reduction in revenue for the State, extending the quantification conducted in the Technical Report of the Stability Act to the sectoral level. The authors then present a microeconomic analysis of both tax relief measures, using the financial statements of a sample of corporations. They first illustrate the theoretical impact of the measures on the cost of capital and the capacity for self-financing, the two channels through which the measures influence investment decisions. They then review the results of an empirical exercise quantifying, in terms of changes in implicit tax rates, the change in the tax burden and thus the greater liquidity available to firms, delineating differences in distribution by firm size, sector and geographical area.
The analysis produced the following main findings. First, using sectoral national accounts data, the tax savings from the tax relief measures were not proportional to the size of the investments carried out by firms. They instead depend on the characteristics of the firms’ production function and the use of specific assets. The tax savings are affected by differences in depreciation rates and, therefore, the composition of eligible assets within firms and industries. Second, the timing of a given overall loss of revenue differs from that indicated in the Technical Report of the Stability Act as a result of the diversity noted above, which is not considered in the official calculations. Finally, the effect of the incentives in terms of annual tax savings (and thus greater liquidity for firms) for a sample of corporations with turnover of more than €800 thousand differs depending on firm size, industry and geographical location. The exercise also underscores the different roles played by the specific investment component and the fiscal component, with the latter being influenced by the duration of the depreciation period and the taxable income available to make use of the incentives.
Text of document (in Italian)