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Italy Surprised By Property Tax Windfall

by Ulrika Lomas,, Bussels

12 July 2012

The Italian government has confirmed that the first collections of IMU, Italy’s new unified property tax, have been such that the threat of increasing its rate at the end of 2012 has dissipated.

IMU, which reintroduced in 2012 the local tax on prime residencies that had been taken off by a previous Berlusconi government, was part of the Monti government’s ‘Save Italy’ budget, which was approved at the end of last year, and designed to enable the country to reach fiscal balance by the end of next year.

IMU, providing the greatest slice of increased revenue for the budget, is applied (with local variations and an allowance for family dependents) at a standard rate of 0.40% to first residences, with all other residences being subject to a rate of 0.76%. With the extension of local property taxes to primary residences, accompanied by a 60% average increase in the official value of properties, the new tax was expected to yield some EUR20bn (USD24.6bn) this year.

The Italian Treasury has, in fact, disclosed that the first 50% instalment of IMU, which was due on June 18, has resulted in tax revenues totalling more than EUR9.5bn, and that the forecasted annual IMU collections should therefore reach almost EUR20.1bn.

By June 18, around 23.8m taxpayers had paid their first IMU instalment, out of an expected total number of 25.5m. Out of the EUR9.5bn paid as a first instalment, only EUR1.6bn related to prime residencies, with the remaining EUR7.9bn relating to other properties.

Vieri Ceriani, undersecretary in the Finance Ministry, explained that the government’s objective had been reached. Notwithstanding all of the criticism of the new tax, and a threatened taxpayer revolt, there will not now, he confirmed, be any need to move IMU rates upwards towards the end of the year when its final instalment is due.

The government’s priority has now shifted to putting its spending review into effect so as to move the threatened 2% value-added tax (VAT) rate hike from October 1 this year to July 1, 2013, and to identifying further savings from a review of tax expenditures, such that the increase to VAT rates can be avoided altogether.

TAGS: tax | investment | economics | real-estate investment | value added tax (VAT) | property tax | fiscal policy | real-estate | budget | tax rates | Italy | revenue statistics

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