Recently appointed Italian prime minister Matteo Renzi appeared on a popular television chat show last night and promised that significant tax cuts lopping €10 billion off the amount Italy’s taxman will expect from its citizens would be announced this coming Wednesday.
Details of the tax cuts have yet to emerge and Mr Renzi has explained that those earning €1,500 a month are most likely to benefit. Last week, Italy’s interior minister Angelino Alfano also hinted at tax cut, so something is being cooked up.
As with the details of the actual cuts, how Italy with its huge national debt will cover the shortfall is not clear. The EU told Italy that EU funding could not be used to help Italy lower its tax burden.
One thing is clear though, without tax cuts, Italy’s shaky economy risks collapse. Tax cuts may boost consumer spending which is at record low levels in Italy. Something else which would help would be getting more Italians back to work. Italians who are not working aren’t paying taxes and Italy will find it increasingly difficult to fund services.
Mr Renzi and his government are working on employment law reforms, the aim of which is to get Italians back to work. This has to happen or else the tax cuts may end up being cut themselves.
Details of the tax cuts will appear on Italy Chronicles this Wednesday, should the cuts actually materialize.