Italy to raise VAT 1% from 21% to 22% September 2011

Thu 8th Sep 2011

The Italian Parliament has agreed to an emergency VAT rise of 1% to 22% from 17 September 2011.

The rise was originally submitted in June 2011, and was scheduled for January 2014.  However, following continuing volatility in the financial markets during the summer, and fast rising Italian debt prices, the rise had been brought forward.

If you would like to learn more about Italian VAT, please see our country briefing.

In the past year, there have been many similar VAT increases across the European Union.  Countries such as Portugal, Greece, Romania and Finland have all raised VAT as they tackle their large sovereign debt overhangs.  Whilst there is an inflationary cost, which may dent already fragile consumer confidence.

Many countries have used VAT rises as a funding mechanism to enable them to cut labour tax charges.  This shift in the tax burden moves the charge from job-creating industry onto the consumer.  This manipulation of the cost of production (salaries) gives the effect of currency devaluation which is ordinarily unavailable to the Euro currency countries.