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Funding Italy’s Tax Cuts

Tomorrow, Wednesday, Italy’s prime minister Matteo Renzi may announce tax cuts to the tune of €10 billion. Today, Italy’s RAI news channel hinted at how funding for the tax cuts may be found.

Apparently, Italy’s government is examining whether it could cut the nation’s military spend by enough to make up for the shortfall the tax cuts would leave. Part of Italy’s military spending budget includes provisions for the purchase of 131 F35 fighter aircraft which will cost Italy somewhere in the region of €16 billion.

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While 5 Star Movement politicians have called on Italy to cancel its order for the F35 aircraft, this may incur penalties. However, there are a number of reports that the F35 is not necessarily fit for purpose and Italy could, in theory, delay its purchase of these fighters until what could be teething troubles have been ironed out. One has no idea at all whether multi-million dollar fighter aircraft come with any form of guarantee, but it sounds as if the F35 should come with one from what I’ve read.

With clever negotiating, Italy could either cancel or delay its F35 order. In theory, tax cuts could kick-start Italy’s sludgy economy and if this happens, then overall tax income may actually increase enough for the nation to be able to afford F35s at a later date.

Now all that remains is to hear details of the tax cuts, though there are already signs that the announcements on the subject due tomorrow may be postponed. Working out how to fund Italy’s tax cuts is proving to be a problem, it seems.

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