Italy delays sales tax hike
The cancellation would cost around 4 billion euros ($5.3 billion) per year.
ROME (Reuters) - Italy will delay for at least three months a rise in sales tax which was due to take effect in July and the government aims to cancel the rise altogether, deputy Economy Minister Stefano Fassina said in a newspaper interview on Sunday.
The scheduled 1 percentage point rise in the main rate of value-added tax (VAT) to 22 percent has become a major focus of tension for Enrico Letta s coalition government.
Silvio Berlusconi s centre-right People of Freedom party, which Letta depends on for his majority, has demanded that the increase be cancelled, but Letta has hesitated because of the impact on Italy s strained public finances.
"I think a delay is inevitable," Fassina told La Stampa and he predicted "the most likely outcome" would be for the increase to first be delayed until October, when the government presents its budget for next year, and then scrapped altogether.
The cancellation would cost around 4 billion euros ($5.3 billion) per year which would have to be found through other tax hikes or spending cuts if Italy is to meet its goal of holding the budget deficit below the European Union s limit of 3 percent of output.
Fassina, who comes from Letta s centre-left Democratic Party, said the government was discussing possible ways of finding the money but a solution had still not been found.
On Saturday Il Giornale newspaper, which is owned by Berlusconi s brother, said in a headline on its front page that the government would fall unless Letta cancelled the sales tax increase.
