One of the major challenges for the Italy budget 2012 will be to manage the public debt that has risen to 1.9 trillion euros. The borrowing costs too have hit the roof in recent times and authorities, responsible for framing the budget, will be expected to look into that as well.
The budget also aims to balance the national fiscal shortfall by 2013. Through the budget, the Italian government is also looking to prove to the top players in the various financial markets that it is willing to take steps necessary to achieve sustained overall economic development.
The Bank of Italy has suggested that the formulators of budget should extend local taxes to primary residents. It has also stated that earnings from government bonds should be made tax free so that corporate investments and capital allotments could be properly distinguished.
Highlights of Italy Budget 2012:
The Italy budget 2012 will look to free up the labor markets.
The regular rate of value added taxes (VAT) has been lifted to 21% from 20%.
A solidarity tax of 3% has been levied on all tax payers who earn in excess of 300,000 euros. This rate will remain effective till December 2013. The national government holds the right to extend this period till it is able to balance out the budget.
Income tax rates have been fixed at 20 percent and will be effective from 1st January 2012. However, interest generated from government bonds would be exempted.
The rate of corporate income tax that is paid by energy companies operating in Italy will go up by 4 percent in the coming three years.
Italy budget 2012 confirms previously adopted pension reforms.
State properties and other assets will be marketed in 2012 in an attempt to generate revenues. The Economy Ministry will help to set up special purpose economic programs for purchasing them. Private investors will be allowed to buy shares in these assets. The government is aiming at selling 20 percent of the barracks and prisons by April 2012. In future farms and related properties will be sold. The money generated from this sale would be used to reduce debts.
Public administration would be made simpler.
Companies that have a maximum of 9 employees and employ younger professionals on an additional basis will not be required to pay social security for the extra workers. This benefit, though, will be applicable only for the first three years the additional workers are operating in a particular company.
Excise duties on diesel and petrol will be increased marginally from 1st January 2012 onwards.
A yearly tax could be levied on the net wealth of every taxpayer along with increased rate of VAT. These features will help in generating the funds that could be used to reduce the high taxes that are presently being paid by companies and families.
No tax incentives have been provided to apprentice workers.
A package of 45 billion euros has been set aside for addressing budget related issues in 2013 fiscal.
Government expenses are going to be reduced and steps will be taken to serve the interests of Italy s creditors.
The age for retirement will be increased to 67 by 2026.
Rules that restrict transfers of employees in the public sector would now be relaxed. It will impose restrictions, though, on companies that already have too many employees.
Tax cuts will be provided to companies investing in infrastructural development preference will be given to the highway sector.
The planned construction site of Turin-Lyon railway and tunnel has been mentioned as nationally strategic areas.
Lawyers, architects, notaries and other professionals will not be required to pay tariffs. This will help them settle their own remunerations with their respective clients.
New rules will come in place with regards to employment opportunities available at the Pompeii Architectural Park. Now people from around the country will be able to apply for the jobs previously these opportunities were available only to candidates in and around Naples.
Expectations from Italy Budget 2012:
As per financial experts the newest budget that focuses heavily on reductions meets the expectations of the European Commission. However, the measures approved in the budget may not be helpful for the long term growth of Italian economy.
One of the main challenges for the new government of Italy will be to introduce measures that can contribute meaningfully towards national economic growth. According to economic analysts, the tax burdens will have to be shifted, according to economic analysts, for overall growth.
The European Commission has reportedly asked the government to relax the taxes applicable to business houses and their employees so as to help the economy get back on its feet they have further suggested that property and consumption taxes can be upped to relax the rates.
Experts feel that, unlike Greece, Italy can manage its budgetary deficit but there are still critical issues like inadequate job creation and overall economic growth.
Italy Budget 2012 – Value Added Tax:
According to financial analysts, the increase in VAT rates in Italy is one of the major steps taken by the national government to achieve fiscal stability and bring back confidence among the major players in the national bond markets. But the major aim behind increasing the value added taxes is to break even, economically, by 2014 fiscal.
Italy s GDP growth has been fairly flat in the last couple of years and this has led to fears that it might be unable to pay its debts over the long term. This has also contributed to the increase in VAT rates for the 2012 fiscal. The European Central Bank and the European Union have also exerted a fair bit of pressure on Italy to increase its VAT rates.