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Monti Negates Rumours Of Italian Income Tax Cut

by Ulrika Lomas,, Brussels

21 August 2012

In reply to a recent media report, Italian Prime Minister Mario Monti has denied that the government is currently considering any reduction to individual income tax (IRPEF), as it will be impossible to cut any taxes before the Italian fiscal deficit problem is resolved.

A recent article in the Repubblica newspaper had indicated that there have been discussions between the government and Italy’s political parties on an IRPEF tax rate reduction, but, in a note, Monti has categorically denied that there is any current plan to reduce taxes.

Although he admitted that the Italian tax burden on both individuals and businesses is, without doubt, excessively high, he confirmed that the present government’s attention to balancing the country’s fiscal deficit could not be distracted. From the moment that his government had been appointed with parliamentary support, Monti added, it had pursued structural reforms in the economy and the public sector with that singular aim.

However, despite the fact that to make a tax reduction now, for example by reducing IRPEF, would be premature, he also emphasized that to make future tax cuts possible, without making unrealistic promises, was amongst his most important objectives.

He confirmed that, when the prospect of reduced taxes becomes considered credible, also in the view of the financial markets, such a policy would be taken on board. In his opinion, less taxation was a “sacred” necessity for all “honest taxpayers”.

He later went on, in a subsequent magazine interview, to voice a further attack on tax evasion in Italy, against which, he said, the government was in a “state of war” justifying the use of strong measures against it.

He pointed out that a significant part of Italy’s public debt problem could be laid at the door of those Italians, both the wealthiest and those on middle incomes, who have decided over the years not to pay their taxes. The wide incidence of Italian tax evasion has created a bad impression in other countries, which Italy may, in the future, have to count on to extend those debts.

Given the repeated comments from other politicians, the impression is created that only substantial additional revenue from that “war” could provide the funds for any tax cuts to be made on a revenue-neutral basis in the foreseeable future. That is, unless the calls for a wealth tax, primarily from the Democratic Party, gain traction, despite such a tax having been recently ruled out by the government.

TAGS: individuals | compliance | tax | economics | tax compliance | fiscal policy | Italy | individual income tax

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