The Focus Paper conducts an assessment of the elimination of the municipal services tax (Tasi) on primary residences, examining: 1) the consequences for municipal finances; 2) the redistributive effects for taxpayers; 3) the impact on consumption of the consequent increase in disposable income; and 4) the possible repercussions for the real estate market and the construction industry.
1) The cancellation of the Tasi on primary residences and the freezing of local tax rates at their 2015 levels subtract a large portion of local government fiscal flexibility. The procedures for offsetting the revenue loss ensure that local authorities that had levied the highest rates on their citizens will receive an equivalent level of resources in the future, with the burden falling on all taxpayers, however.
2) The Tasi is in itself essentially proportional if we consider disposable monetary income, with the exception of the first decile, where households with low incomes that own their homes incur an especially large tax burden. If monetary income is supplemented by imputed rental income, however, the tax is slightly progressive.
The elimination of the tax would most benefit households with older heads of household (who generally have a higher ratio of assets to income compared with those of working age), households with one or two members, the self-employed and, among employees, the most highly qualified workers.
The reduction in the tax burden with respect to the cadastral value of the home due to the elimination of the Tasi increases as that value increases.
3) The overall increase in consumption would amount to about €5 billion (44 per cent of the total tax reduction). The expansionary impact of the cancellation the Tasi on primary residences is limited by the fact that, in absolute terms, the largest share of the additional income resulting from the tax reduction would go to the wealthiest households, which have a lower marginal propensity to consume.
4) The potential effects of the abolition of the Tasi on the real estate and construction industries are uncertain. It should be borne in mine that the abolished tax was relatively small compared with the aggregates involved and that the primary residence segment is less sensitive to the impact of the abolition of a recurrent tax compared with other residential property.
Text of document (in Italian)