Before you have to steady yourself at the mere thought of tax cuts in Italy, I have to warn you, (sorry, I am so used to warning people about tax increases that it comes naturally to use the word, ‘warn’), or I am pleased to inform you that if you can hang in there a little longer they may be on their way.
And ‘I am’ talking about ‘Income tax Cuts’ (IRPEF)!
Renzi and Padoan have realised that the way that the tax rates are structured in Italy basically choke the sector of society which provides the most, the middle earners i.e any income from €15000 up to €55000p.a.
Therefore, proposals to restructure the current tax bands are currently on the table. The proposals are as follows:
1. Lower the tax rates by 1% on the tax bands of gross income from €15000 – €28000 and €28001 – €55000p.a. The bands would effectively lower to 26% and 37% respectively.
On an income of €35000 p.a, this would equate to an annual saving of €210 p.a.
That doesn’t sound very interesting does it? Although it would cover my 6 monthly TARES bill.
The other proposal which is also on the table is to radically alter the existing tax bands from 5 tax bands to only 3, as follows:
- The first €15000p.a of income to be taxed at 23%
- Between €15001p.a and €75000p.a taxed at 27%
- Over €75000p.a. at 43%
Certainly the savings would be much more interesting. Using the same example above, someone with an annual income of €35000p.a would make an annual saving of €770p.a.
In reality the first option, a 1% reduction in the 2 tax bands, is likely to be introduced in ‘la Legge di Stabilità 2017’ and to be actioned from January 2018.
At the end of 2016 a proposed cut in corporation tax and a freeze on IVA is expected to be introduced.
Obviously, we should not hold our breaths because all these cuts are Renzi’s proposals and should the public not vote in favour of his Constitutional Reform in October this year, then he has already stated that he would stand down as Prime Minister and then I would imagine the proposed tax reforms would go ‘out of the window’.
In the meantime let’s all get through the BREXIT vote and take one step at a time.