‘It’s a crock’: Italians outraged at 25-cent fuel discount

Italy cut fuel duties - and therefore the price at the pump - on Wednesday in response to soaring costs. But drivers and petrol station operators are far from impressed with the move.

'It's a crock': Italians outraged at 25-cent fuel discount
A picture taken in Rome earlier this month shows a board displaying the fuel price at a gas station, as refueling has become more expansive as a result of the war in Ukraine. (Photo by ALBERTO Pizzoli / AFP)

Italy has cut fuel duty in a move aimed at bringing the cost back down below two euros a litre, after prices soared to record highs in March due to the war in Ukraine.

But motorists and gas station operators were not satisfied with the cut, which amounts to a 25-cent discount for one month only.

This is a reduction in excise duty (a tax on the production and consumption of goods) on petrol and diesel. After adding VAT at 22 percent, the total discount to the consumer is 30.5 cents per litre.

The reduction came as part of a package of measures approved by the government on Friday, worth 4.4 billion euros, which Prime Minister Mario Draghi said would be “financed not by the public purse but by companies in the energy sector”.

READ ALSO: ‘The impact is zero’: Energy giants not worried by Italy’s tax on profits

But the government’s response was not welcomed at the pumps on Wednesday, with may left unimpressed by both the size of the discount and the length of the validity.

“I feel a bit fooled. In 30 days it will be over and everything will be as it was before, so what has changed?” Italian citizen Marco Morbidelli from Pesaro told newspaper Il Resto del Carlino.

“It’s a crock,” he said.

Petrol station operatives are also dissatisfied with the plan, arguing that it doesn’t help them run their business.

Alessandro Bailetti, a manager of a petrol station, said, “The state has lowered the cost of excise duties, but we have paid for our fuel by paying them too. Who will give us back these 30 cents that they have taken away? They say there will be a contribution – we hope so, even if we still don’t know when and how.”

Even with the cut to fuel cost, some Italians say that prices at the pump are still very high.

Motorist Daniele Luzi told the paper, “The state should not allow these increases and, above all, should examine its conscience about everything it makes us pay, because it is inappropriate.”

READ ALSO: How to save money on your fuel in Italy

The measures come after Italian industry and consumer groups urged the government to slash VAT and excise duty to keep the country moving after businesses, including Italy’s hauliers, said they couldn’t afford to operate.

Last week, Italian consumer watchdog Codacons revealed that the price of petrol had risen by 39 percent in a year in Italy, and diesel prices have risen by 51 percent.

Codacons said taxation was at 55.3 percent on every litre of petrol and 51.8 percent on diesel.

According to industry group Confindustria, the surge in fuel prices means the Italian state is “taking higher tax revenues thanks to the VAT paid on fuel prices.”

In the last week alone, the extra revenue gained [from VAT] is up by approximately 45 million euros compared to in the second week of February, the group said.

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KEY POINTS: The tax changes in Italy to know about in 2023

From a proposed 'flat tax' to VAT, Italy is planning a raft of changes that you should be aware of as part of longer-term reforms. Here's a quick overview.

KEY POINTS: The tax changes in Italy to know about in 2023

The Italian government is preparing a set of major reforms to the tax system by 2027, and the first changes set to come in to force over the next two years were announced on Thursday, March 16th.

The existing tax system in Italy, which has been in place since 1971, is often criticised for being overly complex and for placing too high a tax burden on employees and businesses – one of the factors regularly blamed for Italy’s longstanding problem with sluggish economic growth.

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

Economy Minister Giancarlo Giorgetti has said the planned reforms will reduce this tax burden “gradually” and make investment and commercial activity in Italy “more appealing”.

Few details of the reforms were immediately given on Thursday, but here’s a look at what we know so far about the initial changes coming in 2023 and how they could affect you.

‘Flat tax’ and income tax changes

The government has confirmed it is planning changes to the way the amount of personal income tax you have to pay is calculated, and that it will push ahead with longer-term plans to bring in a so-called flat tax, which was one of the flagship promises made by the coalition of right-wing parties which took power following September’s general elections.

The coming reforms will initially reduce the number of income tax (Irpef) brackets from four to three, with the ultimate goal of a single tax rate for everyone by 2027 – when the current government’s term in office is set to end.

Irpef (Imposta sui Redditi delle Persone Fisiche) is the main income tax in Italy and applies to all employees, many self-employed workers (regular partita Iva holders, but not those on the flat tax rate) and pensioners.

This tax is the cornerstone of Italy’s fiscal system. It injected just shy of 206 billion euros into state coffers in 2022, accounting for around 38 percent of the country’s total tax revenue last year (544.5 billion euros).

The first reforms came in 2021, when the number of income tax brackets was cut from five to four to create the current system:

Current tax brackets:

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

The coming change will reduce the number of tax brackets down to three by merging the second and third tiers into a single one.

The reforms are expected to set the three bands at 23 percent, 33 percent and 43 percent initially, and government officials have said that a more costly option under consideration would lower the second band to 27 percent.

No further details were immediately given on Thursday, and the draft outline approved by Italy’s cabinet still needs the green light from parliament and then implementation by the finance ministry.

This change means people who are currently in the second bracket will see their Irpef payments increase by two or three percent, whereas those who are now in the third bracket will benefit from a seven- or eight-percent cut.

VAT cuts

The government has also said it is looking at cuts to VAT (known as IVA in Italian) on various products – and reports suggest it could scrap it altogether on at least some essential goods.

Italy applies a standard 22-percent VAT rate to most consumer goods, and lower rates to essential items (for instance, 4 percent on bread). This can be surprising to people from countries where VAT is usually zero-rated on basic foodstuffs.

With the new tax bill, the government plans to lower rates on all consumer goods which households purchase regularly: so-called shopping cart goods.

READ ALSO: Cost of living: What are Italy’s best price comparison websites?

The government is also reportedly considering scrapping VAT on at least some essential purchases, though this was not announced on Thursday and no further details have emerged yet.

Italian consumer group Codacons estimates that scrapping the tax on essential items would save the average household up to 300 euros a year.


Lower corporation tax

Meloni’s government said it plans to cut corporation tax from the current rate of 24 percent to 15 for companies that create jobs and make investments in “innovation” – a move that was initially welcomed by business groups, who said they’re waiting for more details to come.

Tax ‘bonus’ cuts

The changes have not been costed yet, but the plan to bring in a flat tax is expected to cost the treasury around 10 billion euros.

The government says plans to recoup this sum partly by curbing many of the financial incentives currently available to Italian taxpayers.

Italy has a mind-boggling array of tax rebates and other incentives in place – over 600 in total – which collectively cost the state 165 billion euros a year. 

The 2023 tax reform is expected to cut the amounts available through these incentives, and will also mean fewer people are eligible to claim.

The government has already begun to curb some of Italy’s most popular – and costly – tax rebate schemes as of the beginning of this year; namely the building bonuses providing generous state-funded discounts on renovation work. This includes the so-called superbonus 110, which was initially cut back in January before being made almost completely unavailable in February.

EXPLAINED: Are any of Italy’s building ‘bonuses’ still available?

Ministers have not yet released any details as to which other incentives may be affected by planned cuts.

Property taxes simplified

The taxes paid when buying property in Italy are notoriously hefty, with experts often advising buyers to budget around an additional ten percent of the purchase price in order to pay the various taxes and charges involved.

While there’s no sign that these costs will be lowered anytime soon, some of them are set to be streamlined: the upcoming bill will merge stamp duties (imposte di bollo) and cadastral taxes (imposte catastali) into a single fixed-rate fee which ministers hope will somewhat simplify the process of buying a home.

The Local will report further details of the upcoming tax changes once they become available.