Tremonti Talks Of EU VAT Reform

by Ulrika Lomas, Tax-News.com, Brussels

29 March 2010

While discussing the scope of Italy’s proposed tax reforms, the Minister of the Economy, Giulio Tremonti, has floated the hypothesis of changing the rates of value-added tax (VAT) on imports of goods from countries outside of the European Union (EU).

He pointed out that, as markets were now global, the EU fiscal system had to recognize that Europe’s market was no longer intra-EU, but between the EU and the rest of the world. In that respect, he disclosed that the possibility of increasing VAT on imports from non-EU countries was being talked about within the EU; sometimes expressed, for example, in terms of environmentally-friendly ‘green’ tariffs.

Tremonti made the above comments after a meeting on tax reform, at which he had forecast that wider discussions on the future reforms would begin within days. He confirmed that the government has already begun to collect the relevant data.

He also admitted to having some doubts on one of the guiding principles he had previously laid down for tax reform in Italy – the shifting of the tax burden away from direct taxes, such as personal income tax, to indirect taxes, such as VAT. He now feels that such a move requires further examination before it could be proposed.

Such a view, that now may not be the correct time to move taxes away from individuals to goods, is however in direct contrast to the proposals being made by other sectors in the economy, particularly the trade unions.

In fact, immediately after Tremonti made his remarks, Domenico Proietti, federal secretary of UIL, a major trade union, welcomed the forthcoming opening of tax reform discussions but stressed that any reforms should be concentrated on increasing the value of work.

He was of the opinion that the first policies to emerge from those discussions, and to be introduced this year, should be aimed at reducing taxes on employees and pensioners, such as by increasing personal allowances. Such measures, he said, would also sustain a significant recovery in consumer spending and productive activity in the Italian economy.

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