The Italian government has finally approved the “Save Italy” budget with few modifications, except for those previously agreed by the government. Despite continued opposition from different groups, especially, the trade union to the pension reforms in the budget, the major focus of the proposed budget has been maintained.  It has been assured that by taking a net EUR20bn (USD26bn) out of the fiscal deficit, the Italian budget will be brought back into balance by 2013 through this proposed budget.

A noteworthy percentage of the budget’s fiscal correction has been found from increased tax revenues with relatively minor funds being released by public spending cuts due to this proposed budget. Despite the fact that the tax increases are always expected to generate a negative influence on the economy, it is shown that additional taxation will provide 85% of the needed resources in 2012, 79% in 2013, and 74% in 2014.

Introduction of IMU in 2012, the new unified property tax, at a rate of 0.40% applying to first residences and with all other residences being subject to the expected standard rate of 0.76%, contributed the major share in the national revenue. It is expected that this extension of local property taxes to primary residences, accompanied by a 60% average increase in the official value of properties, should bring in an extra EUR10bn per year.

According to this new budget an allowance of EUR50 for each dependant living in the home, up to the age of 26 years has been included to alleviate the effect of the tax on families. The original IMU threshold of EUR200 has been raised to a maximum of EUR400 due to the new dependant’s allowance.

The additional annual levy of 0.4% on financial funds declared during previous tax amnesties is now made permanent and will be increased to 1% in 2012 and 1.35% in 2013. A levy of 0.76% on the purchase cost or market value of property held abroad by individuals, and of 0.1% (rising to 0.15% in 2013) on the market value of their foreign financial assets has been incorporated in this budget.