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Italian Tax Bonus Fails To Stimulate Economy

by Ulrika Lomas,, Brussels

07 August 2014

In its latest report, Confcommercio concluded that the Renzi Government's EUR80 (USD107) per month bonus income tax deduction, received by Italian taxpayers since May 1 this year, has had a negligible impact on consumer demand and the economy.

Confcommercio, the federation representing small and medium-sized enterprises, professionals, and sole traders in Italy, has said that its consumer index for June (the month following the first receipt of the bonus deduction) shows only a marginal 0.1 percent rise over the level seen in May – much less than had been anticipated.

The federation saw the level of the index as "a positive signal, but extraordinarily weak, and insufficient to confirm that families' consumer demand has reached any encouraging sign of change. The present economic trend has therefore remained without any sense of direction, which, after a long and exceptional period of recession, cannot be anything but very worrying."

In the opinion of Confcommercio's President, Carlo Sangalli, it seemed as if consumers have seen the EUR80 monthly bonus as "only a measure of redistribution and not for growth, not structural but only a periodic occurrence."

"The bonus," he added, "even if it has changed things a little, has not achieved its dual objective – to provide a sharp impetus to consumption and to generate the widespread confidence that would be fundamental to kick start internal demand. … While the Government's move has been in the right direction, it is evident that the country expected more in returning families' incomes to former levels."

Sangalli also commented that, "unfortunately, 2014 will be a year of transition and, without further action, we risk that the possibility of growth in 2015 will also be compromised."

He concluded that the Government's priority should be finding "the necessary resources to cut individual and corporate income taxes and make 2015 a year of robust and long-lasting growth. And to do that there are no shortcuts: funding must be found from cuts in unproductive public expenditure and action against tax avoidance and evasion."

However, Premier Matteo Renzi rejected Confcommercio's message, claiming: "For those that say EUR80 has no effect, there are 11m Italian taxpayers who think differently. We are not out of difficulty, there is still much to do, but we still have other measures to take in the future."

TAGS: individuals | tax | economics | fiscal policy | Italy | tax breaks | individual income tax

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