Italian Lawmakers Approve Supplementary Budget

by Ulrika Lomas, Tax-News.com, Brussels

04 August 2006

The Italian government has won a confidence vote on a supplementary budget which proposes the raising of additional revenues via a crackdown on tax evasion and a new system of real estate tax.

The lower house of parliament on Wednesday voted 327 to 247 in favour of the EUR7 billion ($10 billion) package of fiscal measures, which aim to reduce the government's budget deficit in line with European Union rules.

The main source of new revenue is expected to come from an intensified campaign to crack down on tax evasion, particularly in the area of value added tax. There may also be an increase in VAT on some products.

The budget also proposes a controversial 10% flat tax on real estate not used in a company's core business, which replaces the current value added tax system. The government hopes this would increase tax revenues by about EUR1.8 billion ($2.9 billion).

However, the industry has opposed the tax, complaining that it will cost the clients of Italian leasing companies billions of euros.

Analysts have also been warning that Italy will face some of the highest real estate taxes in Europe, a fact which could deter foreign investment.

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