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Italy avoids 24% VAT

Italy avoids 24% VAT

Italy is presenting a draft 2017 budget which excludes a promised 2% VAT rise from 22% to 24%. In 2015, Italy committed to raising its VAT rate in 2017 if it failed to meet deficit reduction targets.

Instead, the government hopes to renegotiate the stringent terms of its Euro-currency membership and avoid further extensive austerity measures. The European Commission is pushing Italy to reduce its deficit below 2.4% of GDP. Originally, the plan was to hit 1.1%. The Commission is anxious that Italy reduces its debt mountain, which is now over 130% of GDP – one of the world’s largest.

Italy is to hold a key constitutional referendum in December, and will not want to put forward highly unpopular tax rises.  There are no firm commitments given as to how Italy will meet the €15bn shortfall the VAT rise would have brought it.

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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 this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.