Italian Prime Minister Giorgia Meloni's government on Thursday agreed the outline of a vast tax reform plan aimed at cutting taxes for households and businesses to boost the economy.

The proposed law aims to "structurally revolutionise the Italian tax system, 50 years after the last comprehensive reform" in the 1970s, the government said in a statement this week.

The plan, which will come into effect in two years, aims to reduce the number of income tax brackets from four to three, with the ultimate goal of a single tax rate for everyone by the end of the parliamentary term in 2027.

"This tax reform is fundamental to relaunch the economy, encourage business investment and guarantee greater wealth for employees," Meloni said Wednesday.

Introducing a so-called "flat tax" was one of the pledges made by Meloni's far-right Brothers of Italy party and her coalition partners in September's general elections.

Her first budget introduced a flat tax of 15 percent for self-employed workers earning up 85,000 euros ($90,000) a year.

However, trade unions oppose the plans -- while many question how the heavily indebted Italian state can pay for it.

"We do not agree either with the reduction in tax rates, which favours the rich, or a flat tax, which is against the idea of progressive" taxation, said Maurizio Landini, general secretary of the Cgil union.

The Italian tax system currently has four bands -- a rate of 23 percent for annual income of up to 15,000 euros, 25 percent up to 28,000 euros, 35 percent up to 50,000 euros and 43 percent above this threshold.

On corporate tax, Meloni's government plans to reduce the rate for companies that invest in innovation and employment from 24 percent currently.

"The more you hire, the less you pay in taxes," said Meloni.

Carlo Bonomi, head of the main business organisation Confindustria, said on Monday he was waiting to see the detail but said the reform was "going in the right direction".

The government has at the same time vowed to step up the fight against tax evasion, and is expected to close tax loopholes and reduce other tax relief measures to fund the changes, which have not yet been costed.