06/02/2012 - Italy has embarked on an ambitious, much needed reform programme to strengthen its public finances, to restore growth and to improve the competitiveness of the Italian economy.
The reform programme is well designed and comprehensive. It recognises the need to advance on several fronts to achieve the ultimate goal of enhancing the performance of the economy and the wellbeing of all Italians.
The work is currently under way. Several elements of the reform package have already been announced. They include initiatives to foster competition in the economy, to tackle dualism in the labour market, to strengthen public administration, to improve the tax system and fight tax evasion, and to encourage innovation. These are key challenges that Italy will need to address with resolute action.
OECD analysis shows that this package of structural reforms has enormous potential to boost growth and competitiveness. But there are also issues related to the sequencing of reforms and implementation that need to be addressed. We are here to share with you the expertise and the experience of OECD countries in dealing with these challenges, in identifying policies and practices that work and those that do not work.
I would like to cite a few examples of the likely gains from the reforms that are being implemented:
- Broad-based reforms to open up markets and to ensure open and fair competition could increase the overall productivity of the Italian economy by nearly 8% in the 10 years following implementation of the reforms. Nearly one-half of this increase could come from the liberalisation of professional services alone.
- Other countries have also benefited from such reforms. In Sweden, for example, opening traditional monopolies to greater competition, strengthening the competition law, reforming regulations governing the taxis, civil aviation, telecommunications, rail, postal services and electricity sectors added almost 0.5% to annual productivity growth between 1988 and 2007.
The government is also rightly putting the fight against labour market duality and precariousness at the centre of the reform agenda. This is not only about liberalising the labour code but also about putting in place a safety net for the unemployed, activation policies to help them find jobs and to boost skills and training. These issues are at the core of the OECD work. We are already working with Italy in this area, building on our Employment Outlook analysis and sharing the experience of other OECD countries.
- For example, our analysis shows that a comprehensive reform in this area could boost productivity and jobs. It could also create opportunities for those groups, such as youth, women and immigrants, who are most vulnerable and at greatest risk of being trapped in precarious jobs.
On the tax front, the government is taking courageous and important measures. It is strengthening the income tax and the VAT to make the overall tax system fairer and more conducive to entrepreneurship and growth. It is also tackling aggressive tax planning and evasion. We already had identified the need for action in this area, including in our previous Economic Surveys of Italy.
- The experience of other countries shows that there are high returns to dealing with tax planning. The UK gained more than £12 billion over 5 years of revising legislation in the light of information revealed by mandatory disclosure rules on tax planning. Italy reports savings of €1.5 billion from assessing the taxpayers involved in about a dozen aggressive tax planning schemes.
We are also working with the Italian authorities on several other important fronts: we are preparing a public expenditure review and a public sector integrity review; on education, we are providing recommendations on school evaluation. We will also soon deliver a review of Italy’s environmental policy.
The reforms you are implementing are good for Italy and they are also good for Europe. Unlocking opportunities for growth and restoring competitiveness are essential for addressing the European crisis in a durable manner.
The OECD stands ready to continue to work with Italy to promote better policies for better lives.