Following the tax increases which formed the major part of recent packages intended to reduce Italy’s fiscal deficit, it was perhaps unsurprising when the Italian Economy and Finance Ministry was able to announce that tax revenues in the first half of this year had increased by almost EUR8bn (USD9.9bn), or 4.3%, over the same period of 2011.
In the six months from January-June 2012, total tax collected reached EUR191.2bn. In fact, if the once-off flat rate tax that was payable on property leases in April 2011 is omitted, the actual growth trend in revenue was even greater at 5.1%.
Direct taxes were also seen to have increased by 5.1%, but that was made up of a slight fall in individual and corporate income taxes and a much larger increase in taxes on financial income. The latter increased by over EUR1.5bn, or 46.7%, due to the harmonization of withholding taxes on financial income at the higher rate of 20%, with effect from January 1, 2012.
Indirect taxes grew by 3.5% (+EUR3bn), or by 5.0% (+EUR4.25bn) if the above-mentioned property lease taxes are omitted. However, despite the 1% rate increase in the period, value added tax collections (VAT) actually fell by 1.4% – made up of a 2.8% increase in VAT on imports, but a 2.2% fall in VAT on internal transactions; the latter probably reflecting the continued economic recession in Italy.
