Italy Rethinks Solidarity Tax

August 30, 2011 Taxation in Italy

Silvio Berlusconi Announces Solidarity ChangeWealthy Italians are breathing a sigh of relief, as the Prime Minister announces changes to the country’s current austerity plans, which will see the removal of a proposed temporary solidarity tax on high income earners.

In an effort to round up more support for the Italy’s proposed austerity plans, on August 29th the Prime Minister Silvio Berlusconi and Finance Minister Giulio Tremonti met with Umberto Bossi, leader of their coalition ally the Northern League party.

Following the seven hour long meeting, the Prime Minister’s office released a statement announcing that the proposed solidarity tax on wealthy individuals was no longer a part of the country’s tabled austerity package. The government would seek to raise much needed revenues by concentrating efforts on reducing tax evasion, and closing off several tax loopholes enjoyed by high income earners.

Under the original austerity plan, approved by Cabinet on August 12th, all personal incomes above EUR 90 000 would have faced an additional 5 percent tax, with the rate increasing to 10 percent for earnings above EUR 150 000. The tax was met with immediate and widespread controversy. As reported earlier, the tax even led to calls for strikes by Italy’s professional football players.

It was revealed in the Prime Minister’s statement that the new austerity plan will also scrap plans to heavily reduce funding of regional and local governments. However, the new plan will continue with the proposal to reduce spending by the national government.

The Italian Senate is scheduled to vote on the revamped plan next week.

Photo by Downing Street