Italy Narrows Budget Deficit
May 30, 2013 Taxation in Italy
BRUSSELS – Italy’s budget deficit has reached an acceptably low level, and the European Commission has given its approval to the government’s plan of dropping property taxes for this year.
On May 29th the European Commission ruled that Italy’s has made enough corrections to its fiscal position and will no longer be subject to the EU Excessive Deficit Procedures.
Under the provisions of the EU Stability and Growth Pact, all member states should maintain their deficit-to-GDP ratios at below 3 percent, and are required to maintain their debt-to-GDP ratios at less than 60 percent, and any country that is found to breach the outlined conditions may be subject to corrective procedures, which may include sanctions.
In its report on Italy’s budget deficit, the European Commission stated that it does not object to Italy’s current plan of suspending the country’s controversial property tax for 2013, and believes that enough tax revenues will be raised this year to bring the government’s budget deficit to 2.9 percent, down from the current level of 3 percent.
Despite dropping the excessive deficit procedures, the Commission still issued several recommendations for tax changes in Italy, including reducing taxation on labour while hiking taxes on consumption, and implementing new procedures to battle rampant the rampant tax evasion in the country.
Shortly after the Commission’s announcement the Commissioner of Monetary and Economic Affairs Olli Rehn said that while Italy’s fiscal position has improved, the government now has only a very small margin to ensure that the budget deficit is maintained at below 3 percent.
Photo by ell brown