Berlusconi Keen To See Cuts In Italian Income Tax

by Ulrika Lomas, Tax-News.com, Brussels

30 March 2004

Speaking at an economic conference in Northern Italy last week, Italian Prime Minister Silvio Berlusconi reiterated a previous pledge to cut taxes, arguing that after poor economic growth last year, the domestic economy needed a “shock”, despite fears such a move would erode the government’s already fragile fiscal finances.

The Prime Minister explained that the Economy Ministry is currently examining a proposal to cut the top rate of personal income tax from 46% to 33%, after the euro-zone’s third-largest economy suffered its worst rate of economic growth in a decade: just 0.3% in 2003.

However, such a move would have to be accompanied by productivity increases, and Berlusconi suggested that fewer public holidays would help balance the reform.

The Italian Prime Minister acknowledged the fact that tax cuts would deepen the nation’s budget deficit, and would likely result in Italy’s infringing the EU’s Growth and Stability Pact by increasing the deficit level above the 3% of GDP threshold.

However, Berlusconi took a pragmatic view of such a possibility. "It's not a crime to exceed the 3.0 percent deficit," he remarked. "We don't want to exceed it, but sometimes a deficit for a short period can be positive to overcome a period of economic stagnation."

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