Monti announces surprise income tax cut
12 October 2012
Posted by: SAIT Technical
By Reuters (Business Report)
Rome – Italy’s government unexpectedly cut
income tax rates for the country’s lowest earners while promising to stick to
the budget goals it has agreed with the European Union.
After an eight-hour cabinet meeting that ended
early on Wednesday, the government said it would also halve a planned increase
in sales tax rates to a single percentage point.
Italy holds parliamentary elections in about six
"Today we can see that budget discipline pays
and makes sense” because "we can allow ourselves some moderate relief,” Prime
Minister Mario Monti told reporters after the meeting.
The severe austerity imposed by Monti since he
took over an unelected government in November has exacerbated a year-long
recession in the euro zone’s third-biggest economy and been a focus of
criticism by all political factions.
He increased taxes and cut pensions to put the
public accounts on track and head off a Greek-style debt disaster.
Monti has repeatedly denied he would stand in
the election but did say he would serve his country again if asked following
Italy will reduce by a percentage point the two
lowest income tax rates.
The rate will drop to 22 percent from 23 percent
for those earning less than 15,000 euros per year, and to 26 percent from 27
percent for salaries between 15,001 and 28,000 euros. The top three rates will
Italy will balance its budget in structural
terms next year, as it has pledged its EU partners it would do, according to a
statement from the cabinet meeting.
A second round of cuts to health care spending
and other state expenditure, a new tax on financial transactions and "fiscal
interventions” for banks and insurance companies will help pay for the
measures, according to a statement.
The savings should amount to 3.5 billion per
year when at full regime, the government said. Savings from a previous round of
spending cuts will total 4.4 billion euros this year, and 10.3 billion euros
Also decided during the cabinet meeting was a
reform to the constitution to centralise spending controls over the country’s
20 regional governments, which have been the focus of a recent series of
high-profile corruption scandals.
That will involve reforms designed to regain
coordination of spending on energy, tax collection, and the national
Also to address corruption, the position of
anti-corruption commissioner, who will be given investigative powers, will be
created with the passage of the budget.