MIRRLEES’ AND DE VITI DE MARCO’S FISCAL SYSTEMS. New insights from the history of economic thought.

 Vitaletti, G. 2020. Rivista di diritto finanziario e scienza delle finanze.


Many tax reforms, sometimes radical, have been suggested in the last decades.

A recent contribution by Giuseppe Vitaletti, “Mirrlees’ and De Viti’s Fiscal Systems”, published in Rivista di diritto finanziario e scienza delle finanze, outlines and discusses Mirrlees’s fiscal system, which also deals with a series of reform proposals concerning direct, indirect, and wealth taxation, comparing it with the De Viti de Marco’s system (Principi di economia finanziaria, 1933), taken as the emblem of the Italian School of Public Finance.

The Mirrlees’ interpretative categories are very known. As regards direct taxation, he and his supporters subdivide the system according to the income provenience. The personality and the progressivity are reserved principally to labour incomes, dependent and autonomous. The other main incomes are: 1) those deriving from savings, for which an income basic deduction, and the taxation of the remaining income through personality, with or without progressivity, are recommended; 2) those from businesses, for which the usual proportionality of drawing, together with ACE type mechanisms to reduce the double taxation of incomes, do apply. Moreover it is recommended that the contributions from all labour incomes, which are actually directed to finance social security, are included in the fiscal progressivity. In the international arena, all the actual complications, aimed at preserving CEN (i.e. capital export neutrality), do remain. As regards indirect taxation, a single rate would apply for VAT drawing, and minor modifications are directed to environmental taxation.

The principal characteristic of De Viti’s system, as regards direct taxation, is its reality. There are other aspects which follow to reality (i.e. the drawing regard things, not persons): a) the proportionality of the rate, with different rates according to the hit income; b) the nationality, which is embedded in the system, producing CIN (capital import neutrality); c) the prevalence of public administration, which pretends the payment from taxpayers only after estimating their incomes beforehand; d) the reference to an existing fiscal system, that prevailing in Italy up to 1973. As regards indirect taxation, its revenues are greater with respect to the direct, thanks to the circumstance that, beyond consumption as the VAT, it includes productive inputs, with different rates. These characters are very useful to contain the rate of direct taxation. The entire system is inspired by the collective benefit principle, i.e. taxpayers payments are correlated specifically to received public services.

The actual discussion is absorbed in implementing specific modifications, all inspired to Mirrlees’s system. A reform of personal taxation is reclaimed, with small decreases of fiscal pressure, whereas ACE has been reinforced with respect to its 2012 configuration. Tax evasion dominates the debate, where most of the academic body is convinced that its roots lie in personal attitudes, and not in the lack of the collective benefit principle and of low personal tax rates. Very scarce attention is dedicated to: 1) the distinction of personal/real taxation in three streams, with businesses and saving taxation which are decreasing and the progressive taxation on labour incomes which has strongly increased; 2) the mostly personal and proportional taxation on savings, which leads to international devastating evasion effects; 3) the double taxation on business, which involves on one side the (false) hitting of international capital gains, and on the other side the with-drawl on produced income at the home country; 4) the problems of European Vat, which have started in 1993, producing additional strong tax evasion; 5) the necessity of reinforcing the specific payments for social security.

If on the contrary we progressively inspire to the De Viti de Marco’s system (substantially shared by Einaudi and Steve), all the problems from 1) to 5), and other difficulties, would be dealt with. In fact: a) what is needed is an abatement of real businesses taxation, together with a stronger reduction and transformation of personal income taxes, which should become real, imposing only the national basis; b) in order to allow high public debts, taxes on incomes saving must be increased, touching the 100% rate. The imposition of saving must occur entirely on the businesses side, with redraft on savers, and with reductions to take into account lender banks costs; c) business should pay at a moderate rate in their normal competitive income, and substantially more on rents, in the context of international agreements (these would regard also the incomes in point b); d) personal taxation of capital gains must be eliminated, and the effective capital gains must be paid for by businesses where form, on the accrual basis; e) indirect taxation must increase, with the taxation at a small rate of B to B commerce and a reformulation of the other indirect taxes; f) also social contributions must increase, and must become slightly progressive, incorporating Irpef and the part now paid by businesses (with an increase of wages and salaries in correspondence to social contributions now paid by businesses); g) the containment of evasion must start from Vat, which should be made in great part regional through a new mechanism (already introduced in Italy), which allows to overcame the 1993 problems, and allows through modified Sectors Study to control consumption.

The guarantee is the collective benefit principle, with indirect taxes directed to collective public expenditure, contributions to social transfers, and direct taxation to redistributive expenses. A substantial revenue increase towards the local finance would occur, also inspired by the benefit principle. The system is orderly even as regards the international finance, to which the resources of measures under b) and c) can be destined.


Vitaletti, G. 2020. Mirrlees’ and De Viti’s Fiscal Systems. Rivista di diritto finanziario e scienza delle finanze. LXXIX, 2, I, 161-190


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