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Italian Parliament Insists On Changes To Tax Package

by Ulrika Lomas,, Brussels

30 October 2012

The Finance Committee of the Italian Chamber of Deputies has given its go-ahead to the latest revenue-neutral budgetary package, but on condition that the government makes some significant and vital changes.

Among the changes insisted on by the Committee would be the cancellation of the retrospective restrictions on individual income tax (IRPEF) credits or deductions. With effect from the tax payable on 2012 earnings, the government had proposed that the expenses claimed for each tax deduction would have to be reduced by EUR250 (USD323), and an overall EUR3,000 maximum tax deduction imposed, for those individuals earning incomes above EUR15,000 per year.

According to the Committee, the economic effect of the credit and deduction restrictions and the government’s other IRPEF proposal - a 1% reduction in the two lowest rates, from 23% to 22% for incomes up to EUR15,000, and from 27% to 26% for incomes from EUR15,001 to EUR28,000, as from January 1, 2013 – would be limited and, in any case, difficult to quantify.

In fact, in the Committee’s view, the government should allocate all of its available resources towards an elimination of the 1% increase in the rate of value added tax still programmed for July 1 next year. That could, it was said, also entail reducing only the first rate of IRPEF (from 23% to 22%), rather than both.

While the Minister of the Economy Vittorio Grilli had already responded to parliamentary criticism of the budgetary package a few days ago by stating that the government is “open to a discussion” on all of its measures, the changes proposed by the Committee are considered to be substantial and warranting a complete remodelling of the package.

In addition, with regard to the proposed 0.05% “Tobin tax”, also to be imposed from January 1, 2013, on all financial transactions by Italian residents in shares, bonds and other financial instruments, including derivatives but excluding those in government bonds, the Committee decided that it should be levied at different rates on transactions in shares as against those in derivatives.

The government, it suggested, should also make a distinction between those transactions of a purely speculative nature, and those connected directly with business operations; for example, those covering the risk of raw material price fluctuations or currency exchange risks.

TAGS: individuals | tax | economics | business | value added tax (VAT) | fiscal policy | capital markets | budget | tobin tax | tax credits | ministry of finance | tax rates | Italy | tax breaks | individual income tax

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