Italy drops proposed tax on high earners

 
Italian Prime Minister Silvio Berlusconi The austerity measures are reported to have caused tensions within Mr Berlusconi's coalition government

The Italian government has dropped plans to introduce a tax on high earners, Prime Minister Silvio Berlusconi's office has said.

The "solidarity tax" on those earning more than 90,000 euros (£79,000) was one of several new measures announced earlier this month as the government aims to balance Italy's budget by 2013.

The announcement came after senior ministers met Mr Berlusconi on Monday.

The Bank of Italy has warned there must be no reduction in the austerity plan.

The government said it would instead step up measures to fight tax evasion.

In a statement issued after several hours of talks, the prime minister's office said it would also exclude years spent at university and military service from retirement age calculations, delaying retirement for some people.

There are also plans to spare the governments of small towns from cuts.

But the statement made no mention of any increase in VAT, which had been widely mooted in the media.

Although the EU had welcomed Italy's proposed new austerity measures, the country's largest union, the CGIL, has criticised the plan and threatened strike action.

The plan is also reported to have caused tensions within the centre-right coalition government.

The Bank of Italy has warned that the government must still save a combination of 45.5bn euros ($65.5bn; £40.2bn) in higher taxes and lower spending.

The deputy head of the Bank of Italy, Ignazio Visco, told a parliament committee that the overall austerity measures "cannot be reduced".

 

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  • rate this
    -1

    Comment number 60.

    What's the point of increasing taxes on anybody, rich or otherwise, if payment of tax is voluntary anyway (as it effectively is in Italy, where like Greece, evasion is rife)? They would do better by ensuring collection of evaded taxes.

  • rate this
    -1

    Comment number 59.

    "Dr_Vanadium - Taxes pay for the armed forces that secure resources." Yep
    "They pay for roads;" - We wished!
    "they pay for healthcare that their workers need;" - Not for much longer if the Torys have their way.
    "they pay for running water and sewage" - Not quite, Water Cos bill you, sewage is part Council Tax.

    The "Rich" have been getting richer, the poor poorer. Time to reverse the disparity.

  • rate this
    0

    Comment number 58.

    "More Italians died in world war 2 than British. There's a little fact for you."
    But more UK military died than Italian. And overall only 7k more Italians than UK, roughly.
    But the rich should still pay more tax, both UK and Italy. How much more food can you eat with an extra 100K? But at the other end of the scale an extra 1K means you eat better and pay your bills and spend a bit more.

  • rate this
    -3

    Comment number 57.

    A casino could have come up with a more coherent and organic proposal for austerity measures: every day, even the most obscure of parlamentarians raises his hand with yet more far-fetched ideas and the government keeps bickering all the time, having their eyes firmly set on incoming elections. They are all weak, weak and weak with no pluck to do the right things.

  • rate this
    +8

    Comment number 56.

    So the Italian government has decided to drop the idea of higher taxes for the rich. Why will that come as no surprise to us. Meanwhile Puglia has had to close 19 hospitals because of underfunding and the city where I live is about to impose a city wide tax on electricity (the idea of the local mayor - guess whose party he belongs to!).
    The rich / poor divide between north and south is growing.

  • rate this
    +3

    Comment number 55.

    52.Justin150

    "You'll find that the top 10% paid a greater share of the total income tax burden when tax was at 40%."

    You'll find that's mathematically impossible.

    Without looking at "the evidence" one of the main reasons for that would be tax loopholes were far more more numerous in the 1970s and unearned income might have been much lower.

    Reducing taxes crippled USA in the long term

  • rate this
    0

    Comment number 54.

    The richer already pay significantly more?

    A salary of £25k pays £5,637 tax per annum, (tax & NI), 22% net tax

    Whereas a £100k salary pays £35,391, (tax & NI), 35% net tax

    The salary is 4 times greater but the tax contribution is 6.3 times greater.

    People shouldn't be apologetic for being successful, in fact we should welcome success as it clearly pays the bills.

  • rate this
    0

    Comment number 53.

    I'm sure all of us would quite like to see the bankers on ridiculous salaries helping to repair the mess they have made.

    However, there is almost contempt for people who have done well for themselves regardless of how they have got their money. We need to encourage the risk takers and entrepreneurs to invest in our country and create jobs. High taxes are counter productive to this

  • rate this
    0

    Comment number 52.

    #29 You are wrong, then is evidence and it comes from the UK.

    Compare the top 10% of earners under the 1970s regime of 83% tax (+15% surcharge on unearned) against to 10% when top rate tax was 40%. You will find that the top 10% paid a greater share of the total income tax burden when tax was at 40%. In other words reducing top rate tax also meant lower earners were taxed less as well

  • rate this
    +4

    Comment number 51.

    31.Martin Richardson

    So, if low earner is able to survive on £20k why wouldn't rich person survive on the multiple of that? What is wrong with rich contributing proportionately more, esp. in the crisis? Warren Buffett, as usual, is well ahead of the pack on that one.

    Also - remember, " we are all in this TOGETHER."...Allegedly

  • rate this
    +16

    Comment number 50.

    One point that seems to get missed in all these discussions on tax is that if you lower the taxes for the poor they spend the extra in the economy and if you lower the taxes of thew rich they save more.

    At the moment where we need all the growth we can get if we want to cut taxes the focus should be on taking the lower paid out of tax rather than lowering taxes for the higher paid.

  • rate this
    +9

    Comment number 49.

    @Whitefall - "The only way that the rich can make the poor poorer is by stealing from them, but if they do they go to jail."

    Maybe you live in a different world to me but all I see is the rich stealing from the poor all over the world.... and getting away with it.

  • rate this
    -4

    Comment number 48.

    "Taxing the rich" is a typical populist policy. It relies on the envy and hate for those who achieved more in their lives.
    And it is never driven by economic considerations - just politics of the lowest possible kind.

  • rate this
    +2

    Comment number 47.

    #14 Whitefall
    Taxation IS a payment for government services like the police and courts.
    This is why the rich should pay more. They get proportionately more out of society than the poor and on the whole the police and courts benefit them and imprison the poor!
    No envy here I get paid more than £100K and could pay more as unlike the government I believe we are all in this together.

  • rate this
    -1

    Comment number 46.

    25.Lemog said: "You can make the poor poorer by making the rich richer. Not all rich people innovate and generate jobs"

    - Most do, and if they want to remain rich, then they have to continue doing these things, along with creating wealth/profits.

    Also, the rich are a boon to the poor. The only way that the rich can make the poor poorer is by stealing from them, but if they do they go to jail.

  • rate this
    +5

    Comment number 45.

    Most people (not all) seem to be missing the point of this article. The Italian government assured everyone (the ECB, the 'markets', etc.) that they would take the necessary steps to get their financial house in order. Now that is starting to unravel (and one assumes it's because those with the power and influence would have been hit by this and that surely won't do). This will have consequences.

  • rate this
    0

    Comment number 44.

    Unlike the UK, in Italy, they do not have their own currency, so they indeed do have a financial constraint, which is why they should leave the EU.

  • rate this
    -3

    Comment number 43.

    The purpose of Tax is to create a demand for the currency, moderate aggregate demand, and (indirectly) enable redistribution of wealth.

    Taxes do not "pay" for anything. Spending comes from nothing, and taxation returns to nothing.

    We've all fallen for the fallacy that the government has a 'financial constraint' - it does not, its spending is constrained only by price stability.

  • rate this
    0

    Comment number 42.

    Tax regimes need to avoid penalising innovators who bring wealth through export sales. Just think of what the Italians have done for us; they invented or established the encyclopedia, ball bearings, helicopter (yes it wasn't the Brits), induction motor, dynamo, battery, and indeed, as some would argue the under utilised, condom. But my favourites are spaghetti and the 458.

  • rate this
    -1

    Comment number 41.

    BUNGA BUNGA

 

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