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

  • Sep 5, 2013 | Richard Asquith

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

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.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.