New Italian government agrees to delay tax rise until October

THE NEW Italian government yesterday postponed a planned rise in VAT, a key test for the coalition, demanded by Silvio Berlusconi’s party.

VAT was supposed to rise one percentage point to 22 per cent in July. It will now not rise until October, when the government sets a new budget.

According to Prime Minister Enrico Letta, the change will mean the government receives €1bn (£840m) less revenue through taxation. It has also been suggested that the change will now be shelved permanently.

Despite the loss of some anticipated revenue, the government also committed to a €2.5bn package of measures to alleviate youth unemployment. The programme includes tax reductions for companies that give full-time contracts to young people.

Around 40 per cent of Italians under 24 are jobless, much higher than the Eurozone average.

Italy has been acting to reduce a persistent budget deficit, since EU rules prohibit the government from running a deficit of over three per cent of GDP repeatedly. The government provided no new information on how the revenue gap will be closed.

After no party won a majority in the recent Italian elections, the main centre-right and centre-left parties formed a grand coalition.