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Monti Agrees Changes To Italian Budget Measures

by Ulrika Lomas,, Brussels

16 December 2011

While Prime Minister Mario Monti had previously stressed that there was little room for changes to Italy’s latest budget, the final version of the bill currently going through parliament does include modifications agreed by the government, which are said to make it more “equitable”.

The budget is being introduced to ensure that the Italian budget will be brought back into balance by 2013. Its package of measures are to take a further EUR20bn (USD26bn) out of the fiscal deficit, to provide additional reassurance to the financial markets that the target will be reached.

Monti had subsequently said that, in the budget, he has requested taxpayers to make “many sacrifices”, and that tax burdens are bound to increase in the next two years as a result. However, the final draft of the legislation which is now proceeding through both the Chamber and the Senate, probably by the use of guillotine motions, does contain minor changes in taxation, funded by other changes so as not to reduce its overall effect.

For example, apart from a relaxation of the restrictions to the indexing of state pensions, dependants’ allowances have been introduced into IMU, the new unified property tax, which, having been brought forward from 2014 to 2012, also extends local property taxes to primary residences, accompanied by a 60% average increase in the official value of properties.

While the government has pointed out that a continued exemption from local taxation for primary residences would be an anomaly as they utilize local services probably the most, to alleviate the effect of the tax on families, the budget now includes an allowance of EUR50 for each dependant living in the home, up to the age of 26 years.

On the other hand, the revaluation in the official value of properties utilized by banks and insurance companies will rise by 80%, rather than 60%.

The revenue given away within the new version of the budget decree will amount to some EUR2bn. Part of that will be found by an additional annual levy of 0.4% on funds declared during previous tax amnesties, which will be increased to 1% in 2012 and 2013. The penalty for non-payment will include the loss of anonymity for the taxpayer.

In addition, the government is to introduce a tax on foreign assets held by Italian residents. There will be a levy of 0.76% on the purchase cost or market value of property held abroad by individuals, while their foreign financial assets will also suffer a 0.1% tax in 2011 and 2012, to increase to 0.15% from 2013.

TAGS: individuals | compliance | tax | investment | economics | real-estate investment | tax compliance | property tax | law | banking | insurance | real-estate | budget | tax thresholds | offshore | legislation | tax rates | Italy

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