Berlusconi Promises Cuts To Italian Regional Corporate Tax

by Ulrika Lomas, Tax-News.com, Brussels

28 October 2009

In an unexpected message to the National Assembly of the Confederation of Artisans and Small and Medium-Sized Companies, Italy’s Premier, Silvio Berlusconi, has announced that the government is planning company tax reductions and investment incentives.

Berlusconi's message revealed that the planned measures included gradual reductions to IRAP (the regional corporate tax)until its abolition, or increased exemptions for the smallest companies.

He also referred to the extension of the tax credits for investments in plant and machinery introduced this year, as well as sustained assistance to small companies investing in innovation and research.

While these pledges follow a request to the government earlier this month to consider an IRAP reduction from Emma Marcegaglia, the President of Confindustria (the Italian Business Federation), they do not tally with previous comments from Giulio Tremonti, the Minister of the Economy, who had earlier said that the government was convinced that fiscal stability was what was required for a recovery in economic growth.

Any further measures, he had said, should await the agreement of an exit strategy from the current economic situation at a European level.

Tremonti added that, in the meantime, any unexpected addition to tax revenues (for example, from the present tax amnesty) would be allocated towards the most urgent public spending needs at the time, and not tax reductions. Abolition of IRAP would, in fact, take around EUR40bn (USD60bn) out of tax revenues.

Guglielmo Epifani, the General Secretary of the Italian General Confederation of Labour, a national trade union, has said, in a reply to Berlusconi, that there should be reductions in taxes payable by employees and pensioners, before talking of any reduction to IRAP.

Marcegaglia, speaking on behalf of Confindustria, restated her support for a reduction in IRAP.

She argued that it was particularly important in this moment of difficulty for Italian businesses, and that Confindustria was ready to meet with the government to discuss ways to put the policy into effect.

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