The PBO testified at a hearing before the Finance and Treasury Committee of the Senate as part of the fact-finding inquiry into the draft legislative decree concerning tax evasion and base erosion. In his remarks, the Chairman of the PBO first discussed the issue of monitoring tax base erosion, emphasising the need to increase understanding of the phenomenon in order to create a foundation for policy decisions on reorganising so-called tax expenditures. The very identification of tax expenditures in theory is itself a challenge and, once the area for intervention has been delineated, it is essential to develop an appropriate knowledge base, which should include at least two key pieces of information: the microeconomic effects of each measure and a comparison with expenditure programmes with the same purpose. The Chairman then turned to address the complexity that characterises the analysis of the distributive impact of individual tax relief measures.
The second part of the hearing examined the issue of monitoring tax evasion, comparing the analytical methods and models developed in the literature to estimate the extent of the phenomenon with the approach adopted in the draft decree, which consists of a direct macroeconomic-accounting methodology. The Chairman welcomed the intention to measure the scale of tax and contribution evasion and to render the identification of tax expenditures systematic with a transparent and stable methodology. However, he also emphasised the uncertainties inherent in measuring the resources produced by the fight against tax evasion, which in the draft legislation are to be channelled into a fund for reducing the tax burden. Care must be taken to avoid any mechanistic approach that takes the change from one year to the next in the estimated scale of evasion to draw conclusions about the amount of resources that would be immediately available to reduce the tax burden.