9 Ottobre 2012
The Italian government in the early hours of Wednesday adopted the draft budget for 2013 as well as the budgetary Stability Law for the period of 2013-2015.
It will allow the government to reach its objective of a balanced budget in structural terms in 2013 while providing some room to support low-income families and economic activity and employment overall.
The budget is based on a second-round of structural cuts (€3.5 billion), regarding the purchase of goods and services, including in the health sector, according to the principle of better spending taxpayers’ money. This adds to the other permanents savings totaling €26 billion for the 2012-2014 period that were identified in July’s first spending review exercise. The cuts, which preserve carefully the quality of public services, enable the government to limit the increase in the VAT rates to one percentage point to avoid depressing economic activity further (In September 2011 it was decided to increase the low VAT rate from 10% to 12% and the standard rate from 21% to 23%. The increase was initially due on October 1st 2012). The budget also tables on a tax on financial transactions, currently being introduced with 10 other euro area countries, including Germany and France. Technical fiscal provisions in the banking and insurance sector are also increased.
With the expenditure cuts the government will notably support the achievement by the social partners of much-needed productivity increases (productivity-linked salary increases may be de-taxed to the extent of €1.6 billion over 2013-2014); cover for the temporary effects of the pension reform (‘esodati’); reduce the backlog of late payments by the public administration; and finance investment. To alleviate low-income revenues and give some relief to domestic demand, personal income tax (IRPEF) is lowered to 22% from 23% for revenues up to €15,000 a year and to 26% from 27% for revenues between €15,001 and €28,000.
“This budget shows budgetary discipline - vigorously pursued by this government since its first day in office - does pay off, allowing for a better and more equitable tax structure and enabling the government not to have to run after deteriorating cyclical conditions with further containment efforts”, said Prime Minister Mario Monti. Finance Minister Vittorio Grilli also said: “Thanks to the savings achieved through the spending review and other expenditure cuts, the increase in VAT will be limited to one-percentage point starting from July 1st 2013”.
The cabinet meeting also proposed a change to Article V of the Constitutional Law to better guarantee the principle of legal and economic unity of the Republic and supremacy of the State by bringing within the exclusive control of the State big transport networks, energy transmission and distribution, external trade and a number of other areas that were previously either the prerogative of both State and regions or of disputed jurisdiction. Tourism, one of the country’s most important resources, becomes a shared competence (currently it is the exclusive competence of regions). The Constitutional reform also brings local finances firmly and structurally under central government control and reinforces the powers of Italy’s Court of Auditors to inspect the regions’ finances and ensure they respect national and EU budgetary stability rules.
Earlier on Tuesday night, the weekly cabinet meeting also dismissed, under the anti-Mafia law, the local government of the southern city of Reggio Calabria. The city will be run by three government-appointed commissioners for 18 months until new elections are held. It is the first time that the government of a provincial capital is dismissed en masse because of suspected links to organised crime.
Separately, having noted the opinion of the Council of State, of 4 October, on the draft ministerial decree introducing the payment of the IMU property tax on the commercial activities of nonprofit organisations, the government also clarified in primary law when an activity is considered commercial in the different areas concerned, including welfare, health, education, cultural and sports. The implementing rules will be in place as planned by of January.
