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Italian Parliament Agrees Stability Law Changes

by Ulrika Lomas, Tax-News.com, Brussels

21 November 2012


The lower house of the Italian parliament has approved the restructuring of the government's latest tax package, following the recent agreement reached between Economy Minister Vittorio Grilli and leading politicians from the majority parliamentary coalition.

That agreement struck out or reduced significant parts, and effected a complete remodelling of the package, which was originally introduced with the objective of giving Italian taxpayers the first strong signal that direct tax reductions should be possible, without affecting the ultimate objective of resolving Italy's fiscal deficit.

However, the government's proposal for a 1% reduction in the two lowest individual income tax (IRPEF) rates, from 23% to 22% for incomes up to EUR15,000 (USD19,200), and from 27% to 26% for incomes from EUR15,001 to EUR28,000, has been cancelled, as have the cap and restrictions on IRPEF credits and deductions (and their suggested retroactivity to this year's tax returns).

While the 1% hike in the higher 21% value added tax (VAT) rate from July 1, 2013 still remains, the proposed 1% rise in the 10% VAT rate (which is imposed on necessities such as water, milk, meat, fruit and vegetables) has been eliminated.

As a new addition to the package, the tax allowances for dependent children will be increased in 2013. The tax deduction for each dependent child living with their parents will rise from EUR800 to EUR950, while the allowance for each child under three years of age will increase from EUR900 to EUR1,200. The deduction for a disabled child will reach EUR1,620, for those under the age of three.

It had been previously agreed that any spare tax revenue available in 2013 should only be utilized to reduce individual tax burdens, and that any reduction to taxes for companies would have to wait until their tax payable in 2014.

TAGS: tax | economics | value added tax (VAT) | fiscal policy | budget | Italy | tax breaks | tax reform | individual income tax

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