Audit Court says government budget unfair

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Audit Court says government budget unfair

By Sandra Cordon (ANSA.IT) 15:55, October 31, 2013

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Rome, October 29 - The country's Audit Court - amid reports of Italy's continuing economic slump - warned Tuesday that Premier Enrico Letta's 2014 budget bill could pose a threat to citizen equity.

As finance committees of the House and Senate reviewed the budget bill, the Audit Court said that millions of Italy's worst-off citizens will not benefit from the package.

It said that cuts to labour and income taxes won't have any impact on about 25 million citizens, including the self-employed and "people in greatest economic difficulty", such as pensioners and those on disability benefits.

"This entails evident problems for income distribution and equity," the court reported to a Senate hearing. Letta's budget bill for 2014 has been criticized by others as too timid, and not doing enough to kick-start the country's recession-plagued economy by cutting labour and income taxes deeply enough to boost take-home pay and job creation. At the same time, Italy's national statistical agency Istat painted a grim picture of economic conditions with a report that the country's gross domestic product (GDP) will fall by 1.8% this year, worse than previously expected.

That is deeper than the 1.4% annual contraction forecast by the agency in May It is also lower than forecasts from Prime Minister Enrico Letta's government, which has said that Italy's recession-plagued economy would return to growth in the last three months of this year.

Despite the difficult conditions, the Bank of Italy said the government must tightly control its costs and trim spending if it is to remain within European-mandated targets of a 3% ratio of deficits to GDP.

In an economic statement, the central bank warned that national spending should be trimmed by 0.1% of GDP while "strict control" of government costs are also necessary in the final months of this year.

The central bank also noted that Italian labour and income taxes are high by international standards but acknowledged that the government has very limited fiscal room to make significant reductions.

Letta's government had previously acknowledged it had been on course to finish the year with a 3.1% deficit but says this budget bill is designed to correct that.

Letta has struggled to keep Italy's budget deficit at or below the 3% target established by the European Union.

Exceeding the target, as Italy has done in the past, triggers expensive sanctions.

Reviewing all government spending is essential in the search for extra revenues that could be used to reduce the tax burden, Economy Minister Fabrizio Saccomanni told the parliamentary committees.

"The work of the spending review is the essential condition in order to loosen the high pressure of the tax burden on families and businesses, especially on honest taxpayers," said Saccomanni.

He dismissed Audit Count concerns that property taxes could become higher next year.

There have been fears that the series of new taxes that will replace the IMU to finance local services - some of which will be paid by people renting property and not just home owners - will end up costing more than IMU did.

The Audit Court said the government's 2014 budget law, which gives local authorities more power in setting the tax rates, carried the risk of "further tax increases", especially on homes.

It added that people who had two properties or more were especially at risk.

However, Saccomanni said that won't be allowed.

Revenues from a series of new taxes designed to replace the unpopular IMU property tax will be controlled to ensure these do not exceed the levels of the former tax, said the minister.

The new taxes will carefully measured, "in order to not increase the overall tax burden on taxpayers," Saccomanni said.

He added that government is also expecting "extraordinary" revenues in the form of repaid tax debts from former dodgers, revaluation of holdings by the Bank of Italy, and capital due from abroad.