Italy’s government wins confidence vote on 2017 deficit cuts

Italy's government won a confidence vote on a deficit-cutting package on Wednesday, smoothing the way for measures aimed at curbing tax evasion, boosting revenue from internet companies and reinstating voucher payments for workers.

The lower house voted in favor of the bill proposed by Prime Minister Paolo Gentiloni's government by 315 votes to 142, with five abstentions. The bill must now be read in the Senate.

Savings in the new budget add up to 3.4 billion euros ($3.81 billion) and will whittle down Italy's deficit as requested by the European Commission, the government says.

The bulk of the savings come from changing the rules governing payment of value-added tax, which the government says will reduce evasion.

All public bodies will from now on pay value-added tax directly to the Treasury when they buy goods and services, instead of paying it to the supplier.

Controversially, the bill introduces two voucher systems to pay workers, months after the government bowed to pressure from labor unions to scrap a similar scheme.

Companies with five employees or fewer, excluding building firms, will be able to pay wages in vouchers worth 9 euros each. A company can pay no more than 5,000 euros in vouchers each year, with a maximum of 2,500 euros per worker.

In a bid to reconcile ongoing tax disputes with Internet companies, the budget offers them the chance to fix their tax bills in advance.

Levies on slot machines will be also raised, and the bill stipulates that more than 100,000 machines - around 35 percent of the current total - must be scrapped by early 2018.

Short-term rentals like those arranged through online marketplace AirBnB will now incur a 21 percent tax.

This year, Brussels has agreed to let Italy shave just 0.2 percent of GDP off its structural budget deficit, which excludes one-off items and the effects of the business cycle. Officially, these deficits should reduce by 0.5 percent of output each year until balance or surplus is reached.
($1 = 0.8914 euros)
Reuters
1 June