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EU Reminds Italy Of Its Tax Undertakings

Friday, 12 July 2013   (0 Comments)
Posted by: Author: Ulrika Lomas
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Author: Ulrika Lomas

An Italian government coalition meeting to discuss the local property tax on first residences and value-added tax has been postponed after the coalition was reminded of its financial commitments by Olli Rehn, Vice-President and member of the European Commission responsible for Economic and Monetary Affairs, of its financial commitments.

The decision by the EC, on May 29 this year, to close the European Union's (EU) excessive-deficit procedure against Italy included a warning that the country's fiscal consolidation should continue, together with recommendations on future tax measures that run contrary to the Government's current proposals.

While the EC had accepted the present Government's confirmation that it will maintain the previous Government's budgetary constraints that produced the necessary reduction in Italy's fiscal deficit below the 3 percent limit, the EC's country-specific recommendations, made at the same time as the excessive deficit review, run contrary to both of the Government's current overriding concerns: to remove, or at least alleviate, the incidence of IMU on first residences and to eliminate, or at least further delay, the programmed one percent VAT rate hike.

The EC strongly suggested that a shifting of the tax burden towards, and not away from, property and consumption is essential in Italy, in order to reduce the very high tax burden on employers and employees in a revenue-neutral way and, thereby, to foster economic growth and competitiveness.

When questioned on prospective Italian policies after the end of the EU's Economic and Financial Affairs (Ecofin) meeting on July 9, Rehn stressed that he expected the Government would "take into serious consideration the EC's recommendations of May 29 that have been formally approved by Ecofin.

"Rehn's reaffirmation has coincided with repeated warnings from the Italian industrial sector that the lack of investment and economic growth will continue, unless the Government begins immediately to reduce corporate tax burdens that have grown increasing onerous.

There has also been a downgrading of Italy's debt credit rating from BBB+ to BBB by Standard & Poor's, with a continuing negative outlook, and with the rating agency pointing to the continuing economic recession in Italy and the lack of policies being formulated to reduce tax burdens.

In reply, after the Ecofin meeting he had also attended, Fabrizio Saccomanni, Italy's Minister of the Economy and Finance, said that he was confident that a solution would be found by the government coalition meeting to be held on July 10. Unfortunately, that meeting had to be postponed due to a separate protest by the center-right coalition party led by the former Italian Prime Minister Silvio Berlusconi.



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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