Italian Tax Reform Debated

by Ulrika Lomas, Tax-News.com, Brussels

16 March 2010

At its 2010 Forum, Confcommercio’s president, Carlo Sangalli, called for tax cuts to help the economic recovery in Italy, but Giulio Tremonti, the Minister of the Economy, reiterated that overall fiscal reform could take up to three years.

Sangalli emphasised the serious effect that the economic recession has had on members of Confcommercio, the national federation representing small and medium-sized enterprises, professionals and sole traders. He pointed out that the service industries in Italy contribute more than 40% of both the value-added and employment in the economy, and any action to increase their productivity would give an important boost to the nascent economic recovery in the country.

While he was in agreement with the government that the levels of public sector debt led to a conclusion that it may be difficult, in the short-term, to afford substantial tax cuts, he asked the government to look into what could be done to reduce the burden on individual taxes as soon as possible, in order to stimulate productivity gains and consumer spending.

In addition, he said, it would help the tourist sector if the rate of value added tax in Italy could be reduced to the more competitive rates found in other European countries.

Tremonti had previously stressed that he did not believe the government would be able to afford tax cuts in the near future. Italy is in a situation where it will have to issue debt in the amount of EUR485bn (USD667bn) in 2010, or up to EUR2bn every working day.

Therefore in reply to Confcommercio’s request to look at some immediate measures, Tremonti was only able to reiterate that the government had an objective of finalising tax reforms, after discussions with all interested parties, in the next two to three years. He confirmed that such an overhaul of the tax system was the government’s top priority, and that there should be no piecemeal rate changes before the overall reforms were decided.

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