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Italy Looking For Avenues To Increase Tax Revenues

by Ulrika Lomas,, Brussels

22 February 2017

It still remains uncertain as to how Italy's additional 2017 fiscal adjustment required by the European Commission (EC) will be funded, but a major part could involve cuts to individual income tax deductions.

The EC is insisting that the Government introduce policies that will further reduce Italy's fiscal deficit in 2017 by at least 0.2 percent of gross domestic product, or the equivalent of EUR3.4bn (USD3.6bn). Measures are required to be in place by the end of April at the latest.

It had been decided that, net of government spending cuts and revenue from action against tax evasion, around EUR1.5bn of the required finance would be collected from increases in excise duties and other indirect taxes. There has been, however, political opposition to a tax burden increase at present, when most recent government measures have involved their reduction in order to support Italy's economic recovery.

Although a modicum of additional government spending decreases has been found, it is becoming apparent that the Government is finding it difficult to identify other acceptable savings.

The Government is therefore expected to re-propose that, although a rise in the excise duty on oil products should be dropped, duties on tobacco and alcoholic drinks should be increased. To make up the shortfall, there could be a capping of the current tax deductions allowed for expenses on funerals, veterinary care, and sporting activity, probably depending on the level of household income. Gaming taxes could also be affected.

While it had been feared that the Government's package of measures would need to be available this month, the EC has now delayed its review until a meeting due to be held on March 20.

TAGS: tax | European Commission | value added tax (VAT) | gambling tax | oil and gas | excise duty | gambling | Italy | tax breaks | individual income tax | European Union (EU) | Europe

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