Italy VAT rise to 22% proceeds 1st Oct 2013 as government teeters

Sun 29th Sep 2013

An attempt to delay again the planned Italian VAT rate rise to 22% has failed.  The Italian VAT rate will now rise on 1 October 2013, as first announced in 2012. This sales tax increase is estimated to cost the average Italian family €350 per year.

Plans to delay Italy VAT rise to 1 January 2014 fail

There had been a draft agreement to delay the Italian VAT rise to 1 January 2014 which went to the cabinet for approval on Friday.

Silvio Berlusconi pulled his centre-right PDL party out of the coalition on Saturday 28th following the centre-left Prime Minister Enrico Letta calling a halt on discussions to delay the Italian VAT rise. Both parties had failed to come to an agreement on government spending cuts and the VAT rise.  They were seen as vital to give Italy a chance of achieving the Euro-currency 3% deficit target for 2013.

This collapse means a new Cabinet must be formed to reconsider the delay – but it is now too late to do so in time to stop the scheduled VAT rise on Tuesday 1st.

With €2 trillion of debt, Italy has the third largest stock of sovereign debt in the world – after the US and Japan. Whilst its deficit is relatively under control compared to other countries such as the UK, its long term solvency is in doubt.  This is compounded by an aging population and a continuing 2-year recession.



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