Key measures in revised Italian government budget

Italian lawmakers on Saturday approved a revised 2019 budget after the populist government’s initial plan faced stiff opposition from EU officials and a cool reception in financial markets.

The draft budget includes 32 billion euros ($28 billion) in extra spending, but estimates it will limit the public deficit to 2.04 percent of national output, a level watched closely by European Union authorities.

Italy’s huge public debt of 2.3 trillion euros, or 131 percent of gross domestic product (GDP), has forced the anti-establishment Five Star Movement (M5S) and the anti-immigration League coalition to curb several campaign pledges that brought it to power.

Following are key items from the proposed budget:

Retirement conditions have been relaxed, a leading League promise that would cost 3.9 billion euros next year and 8.6 billion in 2020, according to government estimates.

The current retirement age is 67 but that would be cut to 62 if the worker has paid into the system for 38 years. The government believes 340,000 people would take advantage of the new conditions next year, freeing up jobs for younger workers.

Higher-income pensions are to be reduced and the new text progressively curbs inflation-indexed increases on pensions of more than 1,500 euros net per month.

A major M5S campaign promise, this would pay a monthly stipend of 780 euros to 1.7 million of Italy’s poorest families, and hopefully support their social integration.

Nine billion euros was initially earmarked for this measure next year, but the number has been cut to 7.1 billion. M5S vows that the first cheques will be sent in April, but conditions are strict and the process is fairly complicated.

Another League measure, the amnesty would concern those who did not pay taxes that they either correctly declared or underestimated between 2000 and 2017.

In addition, the government has proposed a flat tax rate of seven percent for pensioners who settle in small southern towns as long as they are Italians returning to the country, or foreigners.

Taxes are to be cut to 15 percent for more than a million self-employed workers and artisans with annual revenues of less than 65,000 euros.

A 3 percent “web tax” is to be introduced on companies who sell goods, services or advertising on the internet, a measure estimated to bring in 150 million euros next year and 600 million once the system is fully operational.

Corporate taxes in general are to rise, with banks and insurance companies hit hardest.

Non-profit organisations would also see their tax rate double, though the government has pledged to revisit this measure in January.

The government pledged in May to invest 38 billion euros over 15 years in infrastructure, including nine billion in the next three years, a figure that has been cut to 3.6 billion euros.

An previously planned automatic increase in VAT has been scrapped, depriving the government of 12.5 billion euros in revenue next year.

The increase has been maintained for the following years however unless the government comes up with an additional 23 billion euros in revenue in 2020 and 28 billion in 2021.

 

Key measures in revised Italian government budget

Italian lawmakers on Saturday approved a revised 2019 budget after the populist governments initial plan faced stiff opposition from EU officials and a cool reception in financial markets. The draft budget includes 32 billion euros ($28 billion) in extra spending, but estimates it will limit the public deficit to 2.04 percent of national output, a level watched closely by European Union authorities. Italys huge public debt of 2.3 trillion euros, or 131 percent of gross domestic product (GDP), has forced the anti-establishment Five Star Movement (M5S) and the anti-immigration League coalition to curb several campaign pledges that brought it to power. Following are key items from the proposed budget: Retirement conditions have been relaxed, a leading League promise that would cost 3.9 billion euros next year and 8.6 billion in 2020, according to government estimates. The current retirement age is 67 but that would be cut to 62 if the worker has paid into the system for 38 years. The government believes 340,000 people would take advantage of the new conditions next year, freeing up jobs for younger workers. Higher-income pensions are to be reduced and the new text progressively curbs inflation-indexed increases on pensions of more than 1,500 euros net per month. A major M5S campaign promise, this would pay a monthly stipend of 780 euros to 1.7 million of Italys poorest families, and hopefully support their social integration. Nine billion euros was initially earmarked for this measure next year, but the number has been cut to 7.1 billion. M5S vows that the first cheques will be sent in April, but conditions are strict and the process is fairly complicated. Another League measure, the amnesty would concern those who did not pay taxes that they either correctly declared or underestimated between 2000 and 2017. In addition, the government has proposed a flat tax rate of seven percent for pensioners who settle in small southern towns as long as they are Italians returning to the country, or foreigners. Taxes are to be cut to 15 percent for more than a million self-employed workers and artisans with annual revenues of less than 65,000 euros. A 3 percent web tax is to be introduced on companies who sell goods, services or advertising on the internet, a measure estimated to bring in 150 million euros next year and 600 million once the system is fully operational. Corporate taxes in general are to rise, with banks and insurance companies hit hardest. Non-profit organisations would also see their tax rate double, though the government has pledged to revisit this measure in January. The government pledged in May to invest 38 billion euros over 15 years in infrastructure, including nine billion in the next three years, a figure that has been cut to 3.6 billion euros. An previously planned automatic increase in VAT has been scrapped, depriving the government of 12.5 billion euros in revenue next year. The increase has been maintained for the following years however unless the government comes up with an additional 23 billion euros in revenue in 2020 and 28 billion in 2021.