ROME: The Italian cabinet outlined the 2016 budget blueprint, with expansionary measures aimed at boosting domestic consumption and economic recovery.
The 27-billion-euros (30.7 billion U.S. dollars) blueprint will now go before the parliament, whose approval is required by the end of the year.
Meanwhile, the plan was sent to the European Union (EU) Commission, which is in charge of assessing national budgets of EU countries to see if they comply with EU fiscal rules.
The EU executive body might demand Italy some changes in the draft before it becomes law.
A key measure was the abolition of a controversial property tax on primary residencies, Prime Minister Matteo Renzi and Economy Minister Pier Carlo Padoan explained at a press conference after the cabinet’s meeting.
The provision would cost some 3.6 billion euros (4.1 billion U.S. dollars), Italian media recently estimated.
The 2016 budget would also introduce tax cuts on agricultural equipment and farm buildings, a decrease in levies on municipal services, and a tax break for companies investing in new machinery.
Other provisions included cutting the TV licence fee, stopping a planned VAT hike, and increasing resources for poor people and social housing.
Renzi stressed an expansionary budget was needed to stimulate consumption and strengthen Italy’s economy, which has only recently showed signs of recovery after a 3-year-long recession.
“Not only are taxes not being raised, but are decreasing instead,” he told the press conference.
“For the first time in recent history, this is happening in a systematic way”.
The main corporate tax IRES might also be lowered to 24 percent from 27.5 percent in 2016, only providing Italy will agree with EU authorities on it.
The provision was officially scheduled for 2017. Yet, the cabinet said it would anticipated it, if the EU will grant an additional fiscal flexibility by recognizing the clause of “exceptional event” linked to the unprecedented migration emergency Italy is facing.
The costs of such emergency would be worth “0.2 percentage points of gross domestic product (GDP), or about 3.3 billion euros,” Renzi said.
Most of the tax cuts will be funded through extra borrowing, instead of spending cuts as it was originally planned.
The public spending review would in fact amount to 5 billion euros only, half of the 10 billion euros the cabinet had set as a goal in recent months, the prime minister explained on Thursday.
