Del Turco has vowed to cut taxes by more than ITL 36 trillion between now and 2001, with the figure of ITL 50 trillion being forecast over a four year period to 2004. He said he would ensure Italian tax cuts are at least as large as those laid out by euro-zone partners Germany and France.Whilst it is still sketchy as to the exact taxes the government will target in the forthcoming budget, Del Turco said the government plans to devise a tax scheme favoring small and medium-sized businesses. It is also planning to significantly cut back a regional company tax known as IRAP. Del Turco said: 'The heart of the matter is that we want to support companies which take on new employees', but added that Italy doesn't plan to follow Germany in eliminating the tax on capital gains earned from corporate shareholdings.

Summarising the tax situation in Italy, Del Turco stated in the Corriere della Sera newspaper: 'Here fiscal pressure is 43 percent of GDP compared to 44 percent in Germany and 46 percent in France. But in any case, between 1999 and 2004 we will make between ITL 45 trillion (US$21 billion) and ITL 50 trillion (US$23.34 billion) of tax cuts, exactly the same as Germany plans. And between 1999 and 2001 Italy will cut taxes by considerably more than the ITL 36 trillion planned by France.'

Economists have hailed the Italian proposals as both necessary and realistic, saying there is no reason why Italy cannot match the figures put forward by France and Germany. According to government figures released in July, tax revenues rose a seasonally-adjusted five percent in the first half of 2000 compared to the same period in 1999. The economists' view is that most of the tax cuts will finance themselves and that the goverment, which must present its budget to parliament by the end of September, should most definitely put the simplification of corporate tax at the top of the list.

Del Turco has revealed that he does plan "drastic"' cuts to the IRAP regional corporate tax but does not intend to reduce the 12.5 per cent levy on capital gains. Economists forecast that income tax (IRPEF) will also be targeted, but not across the board. Medium to low incomes are more likely to be focused on rather than tax cuts for those with higher incomes. Del Turco plans to reduce income tax to an average 40 per cent by 2005 from 43 per cent now.

One of the reasons the tax cut plans have come about is an impressive increase in revenues. Italy has a hardy reputation for tax evasion - one only has to look at July's high-profile tax evasion case against Luciano Pavarotti, who was, incidentally, well and truly thwarted by the Italian taxman - but recent fiscal receipts would indicate that more citizens are coughing up.

Economists see the difficulty as political instability, not money, with the goverment playing host to a number of different opinions on how to go about reducing fiscal pressure. Another factor is Italy's general election due in April 2001. Centre right leader Silvio Berlusconi is leading the polls and the centre-left could be eager to steal his thunder by making substantial tax cuts before then.