Italian 1% VAT rise to 22% in October 2013 still in doubt

Fri 6th Sep 2013

Plans to raise Italian VAT from 21% to 22% from 1 October 2013 are still in doubt following conflicting statements from coalition government.

Italian VAT rise to 22% in 2013 may be delayed to 2014.

The Italian VAT increase was initially scheduled for 1 July 2013, but was delayed following the intervention of the Berlusconi-backed coalition party.  It threatened to break-up the coalition of Prime Minister Enrico Letta if the consumption tax rise was not delayed.  The delay of 3 months is estimated to cost around €1 billion.

Following the agreement by the parties to scrap the highly unpopular IUA property tax last week, it would seem that a further delay of cancellation of the Italian VAT rise is now in doubt.  In particular, the European Commission will be concerned that the government will fail to meet the Euro-currency 3% budget deficit requirement for 2013 if the VAT rate is not upped.

Letta re-stated last week that the government is examining many alternatives to raising the Italian VAT rate, including further cuts to government spending.  A number of his minister have proposed a further delay to January 2014 when the recovery in the economy can be re-evaluated.

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