Italian Stability Law: Income tax down, VAT up one point. A look at all the measures
11.6 billion euro interim budget to reduce the deficit, including taxes and cuts to the regions. Tobin tax passes.
A "mini-budget" (even if the government doesn't like that name) totaling 11.6 billion euros. Main news: a drop in taxes and, specifically, in income tax rates. In fact, the government decided to reduce personal income tax rates by one point for the lower two brackets. But it was a decision made at the cost of VAT.
IRPEF (income tax) - Taxes will be lower for everyone. The rate for the first two brackets was cut: respectively, from 23% to 22% and from 27% to 26%. The cost of the reduction of the first bracket, applied to all incomes, is 4 billion euros, while for the second it is 1 billion. Incomes under 7,500 euros are not subject to tax and, therefore, are not affected. Also safeguarded are incomes up to 15,000 euros for which neither detractions nor deductions will be touched. Above this cut-off, however, the tax rate will be reduced from 23% to 22%, but there will be cuts in tax breaks: a 3,000 euro ceiling for detractions, and many deductions will be lumped together with a total blanket deduction of 250 euros.
VAT - The planned 2-point increase in VAT was eliminated which was to take effect on July 1, 2013. VAT will increase by just one point: from 10% to 11% and 21% to 22%.
TOBIN TAX - Stability Law coffers will not only be filled by the spending review, but also through the Tobin Tax and revision of "tax expenditures".
IMU tax on CHURCH PROPERTIES - The government modified the IMU property tax law for non-commercial properties, and therefore also those belonging to the Roman Catholic Church in order to draw up the regulatory structure "in time for the tax year" which begins on January 1, 2013.
PUBLIC SECTOR EMPLOYEE WAGES - Confirmed the contract freeze until 2014. For 2013-2014, not even the vacation benefits stipulated by contract will be paid out, but they will return in 2015, calculated on the basis of projected inflation levels.
WAR PENSIONS - War and disability pensions will be subject to IRPEF income tax, but only those over 15,000 euros.
BANKS AND INSURANCE COMPANIES - As Economics Minister Vittorio Grilli explained, insurance minimum reserve advance payment will rise from 0.35% to 0.50%. The law calls for the payment amount to decrease to 0.45% in 2014. Bank deductions for the higher amount due to realignment for the substitute tax will be deferred for 5 years.
ASSISTANCE FOR THE HANDICAPPED - Cutbacks in personal days provided for in Bill 104/1992 to handicapped persons or those who care for handicapped family members. Pay for personal days (up to three per month) drops to 50% unless the time off is used by the public employee him/herself for their own illnesses or those of their children or spouse. Excluded from full retribution are those personal days used to care for handicapped parents.
DEBT REDUCTION FUND - New arrival is the possibility of contributing to the fund to amortize government bonds and receive a tax break of 19% of the gross tax.
RENT AND CAR AND PROPERTY PURCHASE - Rents and purchase of new properties by all public administrations has been halted, as well as the purchase and leasing of cars. Cutbacks also in the purchase of furnishings and expenditures for IT consulting.
PUBLIC HEALTH CARE - Cut of 1.5 billion euros in the public health care system thanks to a further reduction in expenditures for the purchase of goods, services and medical equipment.
CUTS TO REGIONS, MONEY TO MUNICIPALITIES - Across-the-board cuts to special-statute regions provided for in the first spending review have been increased by 1 billion. But 160 million more will go to theCampania region and about 130 million to the fund for municipalities in economic difficulty.
PERFORMANCE PAY - In 2013, corporate wage increases will be taxed at a rate of 10% with a ceiling of 3,000 euros gross, for a total expenditure of over one billion in 2013, and just under a half of that in 2014. Total: 1.6 billion.
ESODATI" PENSION REFORM VICTIMS - 100 million earmarked from the Letta Fund for the "esodati", victims of Italian pension reform.
UNIVERSITY - The university budget could increase by 3% per year. For some research bodies, this rises to 4%.
PUBLIC DOMAIN ASSETS - OK for the sale of publically-owned properties through real estate funds.
HIGH-SPEED TRAIN (TAV) AND TRANSPORT - About 800 million euros earmarked to finance study, planning, activity and works: 1.6 billion starting in 2013 for local public transport. 800 million euro for the Italian rail network and 300 million for ANAS (entity that oversees roads and highways). 300 million penalty for the halt in theMessina bridge project.
CHEAPER WIRE-TAPPING - Flat-rate for telephone wire-taps.
ANTI-CORRUPTION COMMISSIONER - Creation of this new position to preside over the commission for public administration evaluation, transparency and integrity. Will be zero cost.
PATRONAGE BELT-TIGHTENING - Patronage funding cut by 30 million euros in 2014 and an additional 30 million in 2015.
MILK QUOTAS - Collection of the fines for those who exceed milk quotas returns under the aegis of Equitalia.
PUBLIC ILLUMINATION - In order to save, there will be less artificial lighting at night.