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Italy's Tax Policy Direction Uncertain Following Elections

Tuesday, March 13, 2018

Inconclusive elections in Italy on March 4, 2018, have cast doubt over the country's likely tax policy direction going forward.

The March 4 election saw the center-right coalition led by Lega Nord (partnered with Berlusconi's Forza Italia) gain the most seats – about 37 percent in both houses of parliament – followed by the Euroskeptic Five Star Movement, with about 32.5 percent, and Matteo Renzi's Democratic Party-led center-left coalition securing about 23 percent.

With 630 seats contested, 265 were secured by the center-right coalition, 227 by First Star Movement, and 122 by the center-right coalition. None has enough to form a government without engaging another to form a coalition.

There are some notable schisms on tax and European policy. Silvio Berlusconi's Forza Italia Party has, for instance, proposed a flat tax, which would see the 23 percent rate of personal income tax imposed across the board. Berlusconi has argued that this would reduce evasion and stimulate the economy, thereby increasing revenue collection.

The Democratic Party, led by Matteo Renzi, had argued that such a policy could end up costing the Italian authorities significantly, resulting in spending cuts.

Parliament is set to convene for the first time on March 23, with the election of presidents of the two chambers and the constitution of a new government to follow shortly thereafter.