Italy’s cabinet approves tax cuts

ROME

Italy’s government has approved a draft 2020 budget in the early hours of Oct. 16 that aims to cut taxes for middle-earners and crackdown on tax evaders, while holding the deficit at the same level as this year, government officials said.

The package was agreed at a cabinet meeting of the anti-establishment 5-Star Movement and its center-left coalition partner the Democratic Party. It will now be sent to Brussels for scrutiny by the European Commission.

The budget scraps a hefty increase in sales tax worth 23 billion euros ($25.35 billion) which had been scheduled to take effect in January, but which the coalition feared would push Italy’s already-stagnant economy into recession.

However, since setting the economic targets that provide the framework for the budget in September 2019, the ruling parties have struggled to agree on many of the measures to adopt.

The financial bill targets the 2020 deficit to remain at 2.2% of gross domestic product for a third consecutive year.

Deputy Economy Minister Laura Castelli, from the 5-Star Movement, said in a statement on Oct. 15 that the lengthy negotiations with the PD had yielded “an expansionary budget” that will increase benefits for poor families and the disabled.

To help finance these measures, the government has put together a raft of measures to curb rampant tax evasion which costs the state some 109 billion euros every year, according to Treasury estimates.

The budget must be presented to parliament by Oct. 20 and approved in both houses by the end of this year.

It remains to be seen whether it will be rubber-stamped by the European Commission.

The package targets the structural deficit — which strips out the effects of economic growth fluctuations — to rise by 0.1 percent of GDP next year, reversing a commitment made in July to reduce it by 0.6 points.