Italian Income Tax Cuts Delayed Until 2006

by Ulrika Lomas, Tax-News.com, Brussels

11 November 2004

The long wait for Italian Prime Minister Silvio Berlusconi to deliver on his income tax cut pledge has been lengthened by another year in a concession to political allies concerned at the government’s budget deficit, it emerged yesterday.

This means that tax cuts due to be implemented next year will be postponed until 2006, although the government reportedly plans to go ahead in 2005 with certain regional business tax cuts and tax breaks for families with children worth €3 billion.

Berlusconi first pledged to reduce income taxes in 2001, although budgetary constraints have continued to thwart his plans to the give Italy’s flagging economy a boost.

“Since next year's funds were limited, it made more sense to do something to help the competitiveness of businesses rather than make very small reductions in income taxes,” Luigi Casero, Berlusconi’s economic advisor, told Bloomberg.

One of the key features of the Prime Minster’s plans to pare down income tax is a reduction in the number of brackets from five to three, in the process cutting the top rate of income tax to 39% from the current rate of 45%.

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