Italian Tax Cuts
Contributed by Chesterfield Group
27 June, 2014
Italian Prime Minister Matteo Renzi has pledged to cut both individual and corporate income tax. Following a Cabinet meeting on 8 April 2014 Italy has issued a three year Economic and Financial Document supporting this. Mr Renzi had made many promises regarding tax cuts and reform in campaigning for office accusing his opposition of acting too slow and with the speed which he has introduced these cuts it appears he intends to keep these promises.
These tax cuts are geared towards low earners and initially the Cabinet has passed a decree to reduce taxes for employees earning between 8,000 and 26,000 Euros a year. This will raise the average persons pay by around 80 Euros per month and will work out at around 1,000 Euros a year for a worker taking home up to 18,000 Euros a year. These cuts which will effect around ten million low earners.
In order to fund these tax cuts Italy will be reducing spending on goods and services and capping salaries in the public administration sector. There have also been talks of a one-off windfall from a tax on private banks with re-valued shares and a review of spending on Lockheed Martins F-35 fighter jet.
It is anticipated that the spending cuts could generate 14 billion euros which is 4 billion in excess of the cost of the tax reduction.
It has also been confirmed that there will be a reduction of ten percent in the regional tax on production. This will be funded by increases of taxation on capital gains from financial instruments excluding government bonds.
Italy is the third largest economy in the euro zone, but is currently still struggling with a recession that has caused youth unemployment to over 40%. It is hoped that these cuts will boost consumer demand and provide increased employment.
Author: Meloney Reed
Content Contributor at Chesterfield Group
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