Italian Prime Minister Mario Monti’s review of the country’s tax policy was endorsed by the International Monetary Fund, which urged the premier to ease levies on labor and broaden the value-added tax.
The review “provides a framework for significant structural improvement,” the IMF said today in a report distributed by the Italian Finance Ministry. “It is, understandably, silent on some of the most challenging problems of the current tax system, notably the high labor tax wedges and the narrowed base of the” VAT, the IMF said.
Monti, who introduced a property levy this year to reduce the deficit, is seeking parliamentary authority to make adjustments to Italy’s tax code. His predecessor as prime minister, Silvio Berlusconi, raised the VAT rate 1 percentage point last year to 21 percent. Monti must now seek to boost VAT revenue by adjusting its application, the IMF said.
“Italy has one of the weakest-performing VATs” in the European Union, the IMF said. The country’s record is due to “the presence of reduced rates and imperfections of compliance,” the IMF said.