Europe keeps measure but rejects tax reform: “More burden on families and businesses”

There is no complete failure, but the economic maneuver of the Giorgia Meloni government on some “issues” has been postponed. Especially on tax reform, which risks increasing “the burden on eligible businesses and families, that is, taxpayers.” We read this in the opinion prepared by the European Commission regarding Italy’s 2024 budget plan.

The positive news, according to Brussels, is that this measure does not violate the Stability Pact, despite the budget deficit being over 3 percent and public debt expected to increase rather than decrease in 2024. On the contrary, the document initiated by Rome is “not fully compatible with the recommendations of the Council” of member states. However, it must be said that Italy is in a good position in this regard: the same decision was made for eight other countries, including the ‘frugal’ Germany and the Netherlands. France, along with Belgium, Croatia and the other frugal Finland, is approaching failure for deviating from EU recommendations.

Shared pain or half-joy? Not exactly. The Commission warns that in any case, excessive deficit procedures will begin when the Stability Pact comes into force next year. The government plans to increase the 2024 budget deficit to 4.3 percent from this year’s 5.3 percent. But what is most worrying is that Brussels’ public debt forecast for next year has increased, contrary to Rome’s predictions in its program document. The problem for the commission is that the Italian economy will grow less than the government expects.

It would therefore be better to bring public spending under greater control: the Commission writes that the economic package “provides additional funds for the renewal of public contracts for 2022-2024 (also for the health sector) and the extension of some early retirement programs until 2024 (with some changes) ), measures to support the birth rate and additional funds for the health sector, local governments and flood-affected areas in May 2023”. According to Brussels, all these measures are only partially offset by spending savings and spending reviews. Their impact will be “equivalent to 0.7% of GDP in 2024” and worse, “many of them will have a permanent impact on public coffers”. Another sore point is the subsidies on bills: it is true that Italy plans to phase out aid, but not all the savings resulting from these cuts will go towards reducing the budget deficit.

But the biggest blow comes from Brussels’ view and concerns taxes. The Commission recalls that last July the Council of Member States “recommended that Italy should make its tax system more efficient and further reduce taxes on labour, by duly adopting and implementing the enabling law on tax reform, while maintaining the progressiveness of the tax system and improving fairness” . “In particular, through the rationalization and reduction of tax expenditures, including VAT and environmentally harmful subsidies, and by reducing the complexity of the tax system”. The Council also recommended that Italy “bring cadastral values ​​into line with current market values.”

All this was not done. Brussels’ view is negative at the point where the government takes action. Reference is made to taxation measures: “The scope of these interventions, including the review of tax deductions, is quite limited and does not address the erosion of the tax base, which was further reduced last year by the extension of flat-rate schemes for self-employed workers”, writes the Commission. Overall, the Commission concludes that “frequent changes in tax policy increase uncertainty in the economy, make the tax system more complex, and increase the burden on tax-compliant businesses and families.”

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Source: Today IT