Italy changes housing tax rules, but is it enough to help country’s poor?

Italy’s Government made more changes on Wednesday to its already much-altered housing tax system.

Now, local authorities have the ability to raise the tax rates on more costly homes, in order to fund deductions for Italy’s lower income households.

Announced by Italian Prime Minister Enrico Letta’s left-right office, this is the newest change in a series of backtracking maneuvers designed to turn Italy’s financial situation around.

Italy – like Greece, Japan, Lebanon, Grenada, Portugal and Ireland – has a positive debt-to-gross domestic product (GDP) ratio.

Already one of the world’s largest government debtors, Italy has long been struggling to reinvent its finances and pull the country back into profit.

Italy’s tax burden

The alterations come after news Italy has reached a record 44.3% tax burden in 2013.

The study, conducted by Confcommercio, noted that the combined burden of both taxes and social security increased by EUR 1.6 billion.

Meanwhile, gross domestic product decreased by EUR 8.7 billion.

The business association called for “greater courage and incisiveness in public spending cuts.”

In particular, it emphasised that reducing the tax burden needs to be the “priority and undeniable action” of Letta’s government, claiming it was the “only way to re-launch the vital productive forces present in the country.”

Tax minefield

The Government said it would propel further reductions for the country’s poorer families and proposed legislation to increase the housing services tax up to 0.08%.

This would increase the top rate of primary residence service tax to a maximum of 0.33% of the property’s value.

Second houses would incur even higher rates, yet overall, the Government has stated there will be no rise in the culminate tax burden.

After conceding to scrap the publically hated IMU tax – the municipal real estate on first residences – Letta’s Government faced uproar from local authorities which need the tax to fund public services.

Yet the new housing tax – nicknamed ‘Tasi’ – has faced condemnation, with many opponents claiming it is simply the IMU tax rebranded.

Letta’s government has repeatedly stated the Prime Minister’s intent to reduce the overall tax burden.

The proposed reductions have been attributed to variously cutting Government spending, a crack-down against tax evasion, and better performance of the Italian government bonds, which will help Italy’s lower income earners who have suffered during years of austerity.

In a country where 80% of the population owns their own house, the revisions and tax increases have angered many in the population.

On Tuesday the 7th of January, it has been confirmed that a bomb squad was dispatched to remove a live hand grenade that had been placed at the entrance of a tax collection office in Chivasso.

The removal was the latest in a series of bomb scares at Italian tax offices.

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