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Renzi Explains 'Double-Digit' Cut To Italian Taxes

by Ulrika Lomas,, Brussels

28 February 2014

"The double digit reduction in tax burdens was in billions of euro, and not in percentages," Italian Premier Matteo Renzi has clarified, after confusion surrounding his pledge to cut taxes.

After illustrating his proposed manifesto to obtain the approval of both houses of parliament, Renzi was required to clarify his declaration that there would be an almost-immediate "double-digit" reduction in tax burdens in Italy, after it had provoked a certain amount of confusion.

The confusion had been caused by a misunderstanding by most listeners that he had instead said tax burdens would fall by 10 percent, which would have cost at least EUR30bn (USD41bn), deemed unobtainable in the short-term. In fact, he meant that individual and corporate income tax burdens would be cut by only EUR10bn.

It was left to Filippo Taddei, economic spokesman for Renzi's Democratic Party, to give further details. It is proposed that the IRAP – the regional tax on production – will be reduced by 10 percent and that there will also be a significant cut in the individual income tax, IRPEF. Funding worth EUR6bn for the tax decrease would be found from spending cuts, and the remainder from reducing inefficient and unused corporate subsidies.

Taddei agreed in a media interview that the tax burden decrease would not be a life-changer for any taxpayer, but that it would be a "real signal" and a "movement in the right direction." He said the measures were part of the new government's "commitment for a future drastic reduction in taxes on employment."

Further confusion had been caused, however, by announcements regarding future action on the structure of taxes by the Renzi Government, and Taddei also had to deny that, within a "remodelling" of Italian taxes, there was any intention to "launch a campaign against savings."

It had been indicated that there was an intention to study the relatively low level of taxation generally imposed on financial income at 20 percent, and the possibility of using an increase to reduce IRPEF's higher 23 percent to 45 percent rates. There was also talk, which was later denied, that the new Government was to impose a wealth tax, or even increase the tax reduction enjoyed by short-term government debt – the sacred cow of Italian domestic investors.

TAGS: individuals | tax | business | corporation tax | tax rates | Italy | tax breaks | tax reform | individual income tax

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