Italy’s economy and finance ministry is working on plans to keep the spiralling cost of living in check by scrapping IVA (sales tax, or VAT) on bread and pasta products, and lowering it from 10 to 5 percent on other foodstuffs.
Deputy Economy Minister Laura Castelli told Radio 24 on Monday the measure was likely to be included in the government’s so-called July aid decree, aimed at managing the cost of living crisis, which is currently being finalised.
“It is a concrete plan and possibly an alternative or addition to [extending] the 200 euro bonus,” Castelli said.
“The costs of both measures are being evaluated now.”
A joint statement from the undersecretaries for the economy and for agricultural, food and forestry policies read: “Removing VAT on basic items such as bread, pasta, milk, fruit and vegetables, and reducing VAT on products such as meat and fish from 10 to 5 percent, means safeguarding purchasing power particularly of those on lower incomes who are therefore more affected by price increases in the shopping cart.”
The cut would reportedly be paid for using billions of euros from a recent increase in VAT revenue, due to the rising price of many consumer goods.
Economy and Finance Minister Daniele Franco told a cabinet meeting on Tuesday that Italy’s debt is expected to be about 14.3 billion euros lower than expected in 2022 after a major increase in tax revenues in the first six months.
With inflation now at eight percent – the highest since 1986 – the majority of this money is to be used to mitigate the impact on households and businesses under plans drawn up before the resignation of Prime Minister Mario Draghi last week.
There is doubt about whether the government will now be able to go ahead with some planned reforms, as it stays in place in a caretaker capacity until early elections in September.
But the financial measures included in the July ‘aid decree’ should not be affected, according to reports.
The plan to slash VAT on food has particularly broad cross-party support in the coalition government – with several parties now laying claim to the policy ahead of the upcoming election campaign.
The tax cut is not yet confirmed, however.
It is set to be approved by the end of July, along with other cost-saving measures which include prolonging the tax cut on petrol and diesel again after it was last week extended until August 21st.