Italian Tax Cuts Under Threat As Berlusconi Loses Grip On Power

by Ulrika Lomas, Tax-News.com, Brussels

20 April 2005

Italian Prime Minister Silvio Berlusconi may be forced to abandon a plan to cut taxes by EUR12 billion in 2006, the centrepiece of his economic policy, as the governing coalition of which he is head appears to be rapidly unravelling around him.

According to reports, statements from Berlusconi's coalition allies have suggested that the Prime Minister may be forced to drop the controversial tax cut agenda, a policy he is determined to force through despite warnings from the EU over the Italian government's dire fiscal record, in order to maintain their support and stay in government.

However, amid claim and counterclaim in a scene which has become familiar in Italian politics in recent years, it is as yet unclear whether Berlusconi will carry out his threat to resign, as he has offered to do, and reform the government afresh.

The current crisis was ignited after the centre-right suffered a damaging electoral defeat in regional elections earlier in the month, and exacerbated when centrist coalition party, the Union of Christian Democrats jumped ship last week.

Reports in the Italian media have also suggested that Berlusconi may force through the 2006 budget by decree, dispensing with the need for the usual political bartering over its contents.

It has additionally been reported that should Berlusconi succeed in reforming the government, he intends to force a confidence vote in order to ensure that a package of business-orientated tax cuts gets approved.

Furthermore, it is thought that plans to scrap the regional corporate tax known as IRAP are progressing, despite the political turmoil.

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