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Monti Lays Out Tax-Cutting Campaign Promises

by Ulrika Lomas, Tax-News.com, Brussels

30 January 2013


While Mario Monti has spent his time as Premier increasing taxes to rectify Italy's fiscal deficit problem, he is now proposing tax cuts, both in property and income taxes, over the next two years as part of his general election manifesto.

All major parties now appear to be suggesting that the burden of the unified local property tax (IMU), which was first introduced last year, should be reduced after February's election. There have been continual rumblings against it in the country as attention has been drawn to the extent of local tax increases because of its incidence on prime residences.

IMU, in fact, provided a major part of the increased revenue in the government's "Save Italy" budget, which was approved at the end of 2011 and was designed to enable the country to reach fiscal balance by the end of this year. The tax 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%.

Silvio Berlusconi, who has returned to politics as leader of the center-right, has promised to remove IMU from prime residences. Others, including Monti and Pier Luigi Bersani, General Secretary of the Democratic Party, newly-elected leader of the Italian center-left and front-runner to win the election, have promised that it would be made more progressive.

Bersani has previously indicated that he would favor a tax imposed on the value of real estate held by individuals above a threshold of EUR1m (USD1.33m), although he would be willing to negotiate on where that threshold should be, and has now added that IMU could be eliminated for those who, in 2012, paid a tax of EUR400-EUR500.

In a television interview in which he gave a synopsis of his fiscal program, Monti has now also promised that he would reduce IMU's incidence – by doubling the deduction on first residences from EUR200 (USD270) to EUR400, and on dependent children from EUR100 to EUR200, together with a deduction for pensioners, up to a total of EUR800.

In addition, Monti has reminded Italian voters that his government, in its original budget for 2013, had proposed that there should be a 1% reduction in the two lowest individual income tax (IRPEF) rates, from 23% to 22% and from 27% to 26%, but that those tax cuts had been cancelled in parliament.

He is now recommending that the incidence of both IRPEF and the regional corporate tax (IRAP) could be alleviated in 2014. As has been consistently requested by Italian business, his program targets the elimination of labor costs in the calculation of IRAP, while the burden of income taxation would be reduced on lower and middle-income families, not only by reducing the lower IRPEF rates, but also by increasing the tax deductions available for dependents.

TAGS: individuals | tax | economics | business | property tax | fiscal policy | budget | corporation tax | Italy | individual income tax

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