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EU warns against euroscepticism as populists prepare to govern Italy

EU leaders expressed concern on Friday about the rise of populism within the bloc, fuelled by the migrant crisis, as Italy came a step closer to forming its first anti-establishment government.

Published: 11 May 2018 17:32 CEST
EU warns against euroscepticism as populists prepare to govern Italy
Antonio Tajani. Photo: Patrick Hertzog/AFP

“Being a good Italian also means being a good European citizen. It needs to be repeated out loud, especially now,” EU parliament head Antonio Tajani said at the State of the Union conference in the Tuscan city of Florence. 

Italy's populist Five Star Movement and far-right League party are currently locked in negotiations to form a coalition to lead the country. Should they succeed, the new government would represent a significant change in policy for the Eurozone's third largest economy whose outgoing government is pro-European and centre-left.

The nationalist League is particularly eurosceptic and has advocated renegotiating European treaties, and insisted the euro is doomed to fail.

“Leaving the single currency would be shooting oneself in the foot,” said Tajani, in what appeared to be a direct warning to the League.

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Addressing the conference, European Commission President Jean-Claude Juncker said he was worried about the feelings of “resentment” in Europe generated by the arrival of millions of migrants on European shores in recent years.

This resentment “gave populists and nationalists the material they needed to undo solidarity” in Europe, Juncker said, adding that he was shocked by the “ruptures and cracks” that had emerged during the migrant crisis between EU member states. 

“The Italian and Greek people asked loudly for more solidarity because you can not leave countries all alone … unfortunately our response was too late,” said Juncker referring to the burden felt by Europe's southern nations who have shouldered the majority of the responsibility for the new arrivals.

Both the League and M5S have promised to crack down on immigration in Italy.

On Thursday, Italian President Sergio Mattarella was also in Florence and warned against bowing to nationalism.

“To think that we can get by alone is a pure illusion or, worse, a deliberate deception aimed to sway public opinion,” he said.  

READ ALSO: Italy could have a government by Sunday


Matteo Salvini (L) and Luigi Di Maio. Photos: Filippo Monteforte/Alberto Pizzoli/AFP

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ECONOMY

Who will pay less income tax under Italy’s planned reforms?

Italy is planning an overhaul of the tax system meaning new income tax rates for many - but who will benefit the most, and least?

Published: 17 March 2023 13:41 CET
Who will pay less income tax under Italy's planned reforms?

Italy’s government on Thursday submitted the text of a long-awaited tax reform bill which ministers say will be the first step in a sweeping overhaul of the system planned by 2027

As previously reported by The Local, the bill will introduce a raft of major tax changes aimed at gradually reducing Italy’s notoriously high tax burden and making investment in Italy more appealing. 

The plan includes a substantial change to Italy’s main income tax, Irpef (Imposta sui Redditi delle Persone Fisiche), with the number of  tax brackets dropping from four to three.

READ ALSO: Flat tax for all? Italy announces plan to overhaul tax system

This change is expected to mean a new tax rate for many workers in Italy starting from next year. But who’s going to benefit the most from the changes? 

Here’s what we know at this point. 

Irpef, which applies to all employees, many self-employed workers (regular partita Iva holders, but not those on the flat tax rate) and pensioners, currently counts four brackets, which are arranged as below:

  Income (annual) Irpef rate
First bracket Up to 15,000 euros 23 percent
Second bracket Between 15,000 and 28,000 euros 25 percent
Third bracket Between 28,000 and 15,000 euros 35 percent
Fourth bracket Over 50,000 euros 43 percent
     

The coming tax reform will reduce the number of tax brackets down to three, with the second and third bands being merged into a single one.

The tax rate for the lowest earners is expected to remain unchanged at 23 percent (for those earning 15,000 euros a year or less).

The tax rate should also stay the same for the highest earners taking home 50,000 euros a year or more, at 43 percent.

But middle earners who are currently in the second or third bracket may end up paying more or less tax – and it’s still unclear exactly what will happen. 

READ ALSO: The tax changes in Italy to know about in 2023

While Thursday’s announcement confirmed the number of tax bands will drop to three, the newly published bill didn’t specify what tax rate the new band would carry nor confirm how rates in other bands would be readjusted. 

However, Meloni’s cabinet is reportedly considering two options. 

First scenario

Under the first, and currently more likely, option, the new middle bracket will mean all taxpayers earning between 28,000 and 50,000 euros a year will pay a 33-percent rate.

Rates for the first and last brackets would remain the same.

This would mean all those who are currently in the second (income between 15,000 and 28,000) and third bands (28,000 to 50,000) would see their tax rate drop by two percent next year and subsequently benefit from sizable cuts to their Irpef payments. 

  Income (annual) Irpef rate
First bracket Up to 28,000 euros 23 percent
Second bracket Between 28,000 and 50,000 euros 33 percent
Third bracket Over 50,000 euros 43 percent
     

Second scenario

Meloni’s government is also considering a second scenario, with a 27-percent rate for a larger middle band – an option that would be much more costly to the state, and so seems less likely.

This would mean people currently in the second bracket (15,000 to 28,000) will see their tax rate increase by two percent, while those in the third bracket (28,000 to 50,000) would benefit from a whopping eight-percent cut. 

Rates for the first and last brackets would again remain the same.

  Income (annual) Irpef rate
First bracket Up to 15,000 euros 23 percent
Second bracket Between 15,000 and 50,000 euros 27 percent
Third bracket Over 50,000 euros 43 percent
     

Which path will the government go down?

While it was hoped that the bill’s text would clarify what rate the new band would carry, there are currently no details as to which option the government intends to go with.

That said, the first option seems to be the more likely one at this point in time, not least because implementing it would reportedly cost state coffers around 6 billion euros, whereas the second option would present the treasury with a 10 billion-euro bill.

Further information over which route the government will ultimately go down should emerge in the coming weeks as the bill goes through parliament. 

And even the possibility that Meloni’s executive might end up adopting an Irpef system other than the two described above cannot be ruled out at this time.

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