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EU Tells Italy To Revise 2019 Budget Plan

Friday, October 26, 2018

On October 23, 2018, the European Commission issued a request to the Italian Government that it revise its draft budgetary plan for 2019 because it breaches European Union fiscal rules.

The Commission said it has identified "particularly serious non-compliance" with the fiscal recommendations made to the Italian Government in July 2018.

"Having taken all factors into account, and after consulting the Italian authorities, the European Commission considers that Italy's draft budgetary plan for 2019 presents a particularly serious deviation from the Council's recommendation of July 13, 2018," the Commission stated. "The Commission also notes that the plan is not in line with the commitments presented by Italy in its Stability Program of April 2018. The Commission is therefore requesting Italy to submit a revised draft budgetary plan for 2019."

The 2019 budget plan includes a proposal to reduce the rate of corporate tax on profits reinvested in the purchase of capital goods and the hiring new employees from the headline rate of 24 percent to 15 percent.

Another measure would replace the existing tax rules for small businesses and self-employed workers with a 15 percent flat tax for beginning in 2019.

The plan also cancels the value-added tax (VAT) safeguard clause, which has been a feature of recent Italian budgets. This provides that Italy would gradually hike its 10 and 22 percent VAT rates by three percent beginning on January 1, 2019, if it misses its fiscal targets.