Italy Can Keep Tax Pledges Without Budget Cuts, Saccomanni Says

The Italian government won’t need to make more budget cuts this year to finance a plan to ease taxes, and it remains committed to suspending payment of an unpopular property levy, Finance Minister Fabrizio Saccomanni said.

The government held a Cabinet meeting yesterday to suspend the June payment of the tax on primary residences in a bid to make good on Prime Minister Enrico Letta’s inauguration pledge. The decision was put off until the next meeting, which may be held as soon as May 12, when Letta’s new government holds a retreat at a monastery near Siena, Italy, Saccomanni said on the “Otto e Mezzo” program on La 7 television

“There is a commitment to suspend the payment of the tax due June 16 and to redefine the entire property tax within 100 days of the first payment being due,” he said in his first television interview since Letta’s government was installed last month.

Saccomanni said the government would also pass measures to add funds to a temporary layoff program known as CIG, which was also on the agenda of today’s Cabinet meeting. The two measures could require 3.5 billion euros ($4.6 billion) to finance, newspaper Il Sole 24 Ore reported yesterday without saying where it got the information.

Budget Cuts

The government would be able to finance the measures without the need for a new package of budget cuts, Saccomanni said.

Letta initially announced his plans to suspend the property tax payment in his first speech to Parliament on April 29. The levy known as IMU was introduced by former premier Mario Monti in December 2011 to reduce the deficit and provoked a popular backlash that contributed to February elections producing a hung Parliament.

Repealing the levy was a central part of the campaign of former prime minister Silvio Berlusconi, who won a blocking minority in the Senate in the February vote and this month became part of the governing coalition with Letta and his Democratic Party. Berlusconi pledged in the campaign to abolish the tax on primary residences and refund last year’s payment.

Saccomanni said the tax would be overhauled, though not eliminated on first homes. The review will also consider changes to the level of tax paid by commercial real estate owners, he said.

An economic recovery in Italy will begin late this year or early next year, he said. Responding to remarks by comedian-turned-politician Beppe Grillo that Italy risked going bankrupt in October, Saccomanni said there was “no threat of default now, nor in the future.”