Italy cuts tax for low-wage earners
Source: Agencies |
October 11, 2012, Thursday
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Print Edition
Print Edition
ITALIAN Premier Mario Monti's government has announced a cut in income taxes for low-wage earners, an unexpected move aimed at easing the pain of austerity measures being enforced to reduce public debt.
The government said the tax cut is part of a draft budget that will allow it to balance the budget in 2013 but also give some relief to low income families and support economic activity and employment.
"This budget shows budgetary discipline - vigorously pursued by this government since its first day in office - does pay off," Monti said yesterday after a Cabinet meeting.
Among the measures were a cut in the personal income tax rate to 22 percent from 23 percent for salaries up to 15,000 euros (US$19,330) a year and to 26 percent from 27 percent for salaries between 15,000 euros and 28,000 euros.
These cuts are designed to reduce the impact of an increase planned for June next year in the value-added levy to 22 percent, a 1 percentage point rise, less than the 2 points initially planned.
The government also announced an additional 3.5 billion euros in spending cuts and a new tax on financial transactions it said was being introduced in 10 other eurozone countries, including Germany and France.
Italy's need to regain market confidence in its public finances was highlighted in a pair of short-term bond auctions yesterday in which it raised 11 billion euros at slightly higher interest rates.
Particularly noteworthy was the increase in the interest rate on one-year bonds to 1.91 percent from 1.69 percent in the previous auction of such debt. While the rate is still manageable and demand was strong, the increase shows investors are somewhat more wary of taking on Italy's debt.
The government said the tax cut is part of a draft budget that will allow it to balance the budget in 2013 but also give some relief to low income families and support economic activity and employment.
"This budget shows budgetary discipline - vigorously pursued by this government since its first day in office - does pay off," Monti said yesterday after a Cabinet meeting.
Among the measures were a cut in the personal income tax rate to 22 percent from 23 percent for salaries up to 15,000 euros (US$19,330) a year and to 26 percent from 27 percent for salaries between 15,000 euros and 28,000 euros.
These cuts are designed to reduce the impact of an increase planned for June next year in the value-added levy to 22 percent, a 1 percentage point rise, less than the 2 points initially planned.
The government also announced an additional 3.5 billion euros in spending cuts and a new tax on financial transactions it said was being introduced in 10 other eurozone countries, including Germany and France.
Italy's need to regain market confidence in its public finances was highlighted in a pair of short-term bond auctions yesterday in which it raised 11 billion euros at slightly higher interest rates.
Particularly noteworthy was the increase in the interest rate on one-year bonds to 1.91 percent from 1.69 percent in the previous auction of such debt. While the rate is still manageable and demand was strong, the increase shows investors are somewhat more wary of taking on Italy's debt.
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