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Leading Party Rejects Italian Excise Tax Hikes

by Ulrika Lomas,, Brussels

21 February 2017

Ex-premier Matteo Renzi's Democratic Party (DP) has refused to support hikes to excise taxes that are being proposed as a major element in Italy's additional 2017 fiscal adjustment, required by the European Commission (EC).

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 (and the EC had been informed) that around one-quarter of the deficit reduction would be found from government spending cuts and the remaining three-quarters, or some EUR2.5bn, would involve a rise in tax revenue.

Of that, EUR1bn would involve the Government's anti-tax evasion effort, by extending and expanding the split payment value-added tax mechanism, and some EUR1.5bn would be collected from increases in excise duties (probably both tobacco and alcoholic products) and other indirect taxation.

Renzi resigned as Italian Premier after the rejection of his constitutional reforms in the December 2016 referendum. Paolo Gentiloni, a DP member and Renzi supporter, then became Premier and formed another coalition government, which retained the DP as its largest supporter.

However, Renzi is now insisting that, while the DP would accept an increase in revenue from further measures against tax evasion, it could not agree to any increase in tax burdens, which would be contrary to the tax-reducing reforms introduced, and proposed to be introduced, while he was Premier. His preference would be that government spending should be cut further.

As yet, the Gentiloni Government has not indicated whether it has a Plan B for achieving the necessary fiscal deficit reduction.

TAGS: tax | European Commission | value added tax (VAT) | fiscal policy | excise duty | Italy | European Union (EU) | Europe | Tax | Tax Evasion

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