Rome – Italian lawmakers have 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 agreed on December 29 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:
– Pension reform –
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.
– Citizen’s revenue –
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.
– Fiscal amnesty –
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.
– Fiscal reform –
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.
– Limited investment increase –
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.
– No automatic VAT hike –
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.
– Spending cuts, new revenue –
– Civil service permanent hire freeze until November 15, 2019.
– 500-million euro cut in funds for migrant relief.
– Tax hike on gaming and privatisation revenues.
– Progressive reduction in direct aid for the press, from 28.5 million euros less in 2019 to none at all in 2022.
– Tax of 1,100 to 2,500 euros for the purchase of higher-powered vehicles except utility vehicles, and a bonus for electric or hybrid vehicles.
– Rome and Venice –
– Venice would be allowed to charge a visitor’s tax of 2.5 to 5.0 euros per person depending on the time of year.
– Army engineers would fill potholes in Rome meanwhile, prompting other cities to call for similar help.