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Increased Property Taxes Badly Affect Italian Builders

by Ulrika Lomas,, Brussels

19 November 2014

Assimpredil Ance, an association of construction companies in the north of Italy, has complained that property taxation in the country has reached such a high level as to present a serious problem for its member firms.

Claudio De Albertis, its President, stated that, "The imposition of property taxes has been seen, particularly in the last few years, as the easiest means of reply to the country's need for additional revenue, and the principal instrument for improving its worrying fiscal deficit."

"Unfortunately," he added, "the imposition of taxes on the property sector has increased from EUR9bn (USD11.3bn) in 2011 to nearly EUR25bn this year, striking heavily at a sector that has been in crisis for many years. It could be said that property taxation has been useful to compensate for the Italian Government's cut in the level of its funding of local authorities."

The association provided a specific example of a building company making a EUR22.5m investment. If the company was completely successful in selling the apartments it built, it could expect to make a profit of EUR4.3m, but the tax authority, at the same time, would levy taxes totaling EUR7.2m, "without taking any risk." On the other hand, if the company was completely unsuccessful, it would make no profit, but taxes would still amount to EUR2.8m, the Association said.

De Albertis further noted that "residential property has ended in the sights of the Italian tax authority because property ownership cannot, without difficulty, escape from its audit, unlike the holding of financial assets, and because real assets represent the most important item of Italian family wealth."

Property investment, he continued, is taxed annually, not on the income that it produces, but on its value. Property ownership has therefore changed recently "from being a non-risky item to representing a constant source of expenditure. Home owners see themselves today as forced to pay an amount of property tax that reduces their families' wealth, … and that also hits at the level of overall consumption in the Italian economy," the Association concluded.

TAGS: individuals | tax | investment | business | real-estate investment | property tax | real-estate | tax authority | Italy | revenue statistics | construction

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