Renewal Of Reduced Italian Car Scrappage Scheme Likely In February

by Ulrika Lomas, Tax-News.com, Brussels

28 January 2010

The Italian Minister for Economic Development, Claudio Scajola, has disclosed that the decree containing the terms and conditions of the renewal of the Italian car scrappage scheme, to provide further incentives to purchase new vehicles in 2010, is likely to be ready in February.

The current eco-incentive scrappage scheme, which ended on December 31, 2009, gave EUR1,500 (USD2,100) to those who purchased a new low-emission petrol or diesel car, after scrapping an old vehicle produced before December 31, 1999.

It had proved extremely successful in supporting the car market in Italy. Despite the economic recession, the number of new cars sold in Italy in 2009 reduced by only 0.17% compared to the previous year, with almost one-half of those vehicles being purchased under the scheme – nearly 1.06m, out of a total of 2.16m. Without a scheme, car sales fell by over 30% in Italy in January this year.

However, while the Italian car industry has therefore repeatedly underlined the necessity to continue the scheme, its renewal became intertwined in November last year with the proposed closure by Fiat, the Italian vehicle manufacturer, of its factory at Termini Imerese in Sicily. There was then immediate pressure to link any consideration of a renewal to Fiat’s maintenance of all its productive capacity in the country.

In fact, Scajola has said that a renewal was not yet ready as some of its details were still to be resolved. He added that it would not be ready, as hoped, by end-January – particularly as, at that time, he was to hold a meeting with Fiat to discuss the company’s plans, in the light of the closure of Termini Imerese. It is also felt that no announcement would be made before the European Union industrial sector meeting in San Sebastian on February 9, at which auto incentives are likely to be discussed.

The government has already confirmed that incentives for the auto sector are to be fewer in 2010, as part of a gradual reduction so as not to distort the market. The extent of that reduction is obviously part of what is yet to be resolved. It remains possible that this year’s scheme will include other products, such as household electrical goods and computers.

Scajola also commented on the current debate in Italy on the possibility of tax cuts in the near future. The Minister of the Economy, Giulio Tremonti, has concentrated on the necessity to reform the tax system, rather than promise tax reductions. On the other hand, Scajola expressed the opinion that, when the Italian economy begins to show a growth rate of 1% or more, a program of gradual tax reduction could begin, with the objective of taking Italy to the levels of taxation seen in other European countries by 2013.

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