OECD, Italy needs tax wedge reform. Too much social security spending

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20 October 2021 "Italy should give targeted financial support until the recovery is underway and then it must invest in green infrastructure and reform justice". The representatives of the OECD about the 2021 Economic Report on Italy said this in a videoconference hearing to the Senate Budget Committee.

The OECD expects growth of 6% this year and 4.1% in 2022 and GDP will return to 2019 levels by mid-2022, it was explained. "The short-term rebound is an important point but Italy cannot return to pre-covid growth levels because they were too low", underlined the OECD representatives.

For Italy, tax reform is "fundamental" because "it has the fifth highest tax wedge of the OECD and this does not encourage work in a country where employees represent 57% of the active population" against "67% the rest of the OECD ". Thus Catherine MacLeod, representative of the OECD, before the Senate Budget Committee. The "government has recognized" this problem and reduced the wedge "especially for young people and women" and for the "South". But a "permanent reduction in the tax wedge would be especially important for women".

"The Italy spends much more on pensions and debt services than other OECD countries and this penalizes young people and future growth prospects ".

 "Italy is in an excellent position but the PNRR imposes a demanding agenda from an administrative point of view", said the representatives of the OECD, underlining how important it is to reform the public administration and push hiring young people, even with flexible contracts.