Italy approves new budget to cut taxes and target evaders
Evasion crackdown aims to raise €7 billion through credit and debit card tracing
Italy’s government approved a draft 2020 budget in the early hours of Wednesday that aims to cut taxes for middleearners and crack down on tax evaders, while holding the deficit at the same level as this year, government officials said.
The package was agreed at a cabinet meeting of the anti-establishment 5-Star Movement and its center-left coalition partner the Democratic Party. It will now be sent to Brussels for scrutiny by the European Commission.
The budget scraps a hefty increase in sales tax worth €23 billion ($25.35 billion) which had been scheduled to take effect in January, but which the coalition feared would push Italy’s alreadystagnant economy into recession. However, since setting the
ECONOMY
economic targets that provide the framework for the budget in September, the ruling parties have struggled to agree on many of the measures to adopt.
Full details of all the agreed measures were not immediately available, but a final version of the text seen by Reuters ahead of the late night cabinet meeting showed the government planned income tax cuts for middle-earners. The reduction will cost state coffers some €3 billion in 2020.
The financial bill targets the 2020 deficit to remain at 2.2 percent of gross domestic product for a third consecutive year.
Deputy Economy Minister Laura Castelli, from the 5-Star Movement, said in a statement on Tuesday that the lengthy negotiations with the PD had yielded “an expansionary budget” that will increase benefits for poor families and the disabled. To help finance these measures, the government has put together a raft of measures to curb rampant tax evasion which costs the state some €109 billion every year, according to Treasury estimates. The budget must be presented to parliament by Oct. 20 and approved in both houses by the end of this year.
It remains to be seen whether it will be rubber-stamped by the European Commission.
The anti-tax-evasion plan, targeted to raise an ambitious €7 billion, aims to encourage the use of easily traced credit and debit cards rather than opaque cash transactions.
The budget draft seen by Reuters introduces sanctions of up to €2,000 for retailers and service providers that do not accept credit cards. It lowers to €2,000 from €3,000 the threshold above which it is illegal to make cash transactions. The amount is expected to be further pushed down to €1,000 from 2022. To encourage people to ask retailers for receipts, the budget also launches lotteries in which holders of the winning receipts, identified with a number, get a tax-free cash prize.
These “receipt lotteries” have already been adopted in several countries including Portugal, Slovakia and Malta.
A new “web-tax” on digital companies aims to raise around €600 million each year, the draft showed. The levy, applied on companies with annual global revenues worth at least €750 million and digital services exceeding €5.5 million in Italy, obliges them to pay a 3 percent levy on Internet transactions conducted in Italy.