Italy Eyes Tax Cuts For Growth As Seeks Post-virus Reforms

Italy's government has agreed the outlines of a budget including tax cuts to underpin an ambitious reform agenda and boost growth after a pandemic-induced crisis

Rome, (APP - UrduPoint / Pakistan Point News - 20th Oct, 2021 ) :Italy's government has agreed the outlines of a budget including tax cuts to underpin an ambitious reform agenda and boost growth after a pandemic-induced crisis.

The plan, adopted by Prime Minister Mario Draghi's cabinet late Tuesday, is so far short on detail but officials say it envisages a cut in the tax burden, which media reports suggest is worth eight billion Euros ($9.3 billion).

The eurozone's third-largest economy is forecast to grow by a better-than-expected six percent this year after a deep recession sparked by the coronavirus pandemic.

Last month, the government said it was targeting a budget deficit of 5.6 percent of GDP next year, compared to 9.4 percent this year.

It expects public debt of 149.4 percent of GDP in 2022, versus 153.5 percent in 2021.

The figures are still well in excess of what is allowed under European Union budget rules, but these were effectively suspended during the pandemic so countries could spend their way out of the crisis.

Italy is the biggest beneficiary of the EU's massive virus recovery fund, standing to receive some 191.5 billion euros in loans and grants over the 2021-2026 period.

In return, Draghi has agreed to a series of reforms to address long-standing structural issues weighing on growth, from justice to the land registry.

A government press release said the draft budget is intended to "sustain the economy in the exit phase of the pandemic and reinforce the rate of growth in the medium term".

Agreed measures include the postponement of plastic and sugar taxes to 2023 and a cut in VAT on sanitary products, with money to help counter soaring energy bills.

Some reform of pensions is envisaged but appears yet to be agreed, while tougher checks will be introduced on the "citizen's income", an anti-poverty benefit.

Both moves are politically sensitive involving, respectively, signature policies of Matteo Salvini's far-right League party and the once anti-establishment Five Star Movement (M5S).

Both M5S and the League are part of Draghi's national unity government, in a somewhat awkward partnership with the centre-left Democratic Party and other smaller entities.

Elsewhere in the budget, another two billion euros annually is allocated for healthcare until 2024, tax breaks for home renovations expand and more money will be spent for research.

The outline of the draft budget is being sent to Brussels, where it must be cleared before being passed by Italy's parliament by year-end.