The ordinary IRAP rate will drop from 3,9 to 3,7% for the year 2014. But the benefits of this reduction can only be achieved when the balance of the tax is paid, i.e. in 2015. Consequently, even the increase in taxation on financial income, from 20 to 26%, could be postponed to 1 January next year.
Instead, as early as May of this year, as repeatedly announced by the head of government, Matteo Renzi, the major deductions for employee income will start. Which will be financed for the most part by the reduction in expenses implemented with a "spending review" decree law and for the remainder by using part of the lower remuneration costs of government bond holders, deriving from the fall in interest rates.
This appears, at the moment, to be the scenario on which the Ministry of Economy and Finance is working, for the final touches to the Economic and Financial Document (Def) and related documents, which will be brought to the approval of the Government at the next meeting of the Council of Ministers on Tuesday 8 April. The Def must be sent to the European Commission by Thursday.
For the related regulatory provisions, i.e. for the decree law on public spending cuts and for the one with the increase in deductions for employees, however, the times could be extended by a week.
Together with the Def, the National Reform Program (Pnr) will be sent to the European Commission, which will indicate the actions to be taken to achieve the national growth, productivity, employment objectives and, in particular, the progress of the reforms undertaken, the times envisaged for their implementation and their foreseeable effects in terms of economic growth, strengthening of the competitiveness of the economic system and increase in employment.
This PNR is the document on which Renzi focuses the most, to show the conditions of the Italian economy in a dynamic way and to incorporate, in some way, the effects of the reforms he has started and he intends to start. The resulting economic framework is, of course, better than the current one as well as the programmatic one resulting from the regulatory measures already "obvious" in our legislation. The positive effect of future reform programs should "soften", in the hopes of the premier, the position of Europe in the assessment of the Def, of our budget balances as well as the financing of the tax relief measures that the Government is preparing to launch .
The fundamental numbers of the Def should revolve around a GDP growth rate of 2014% in 0,8 (albeit against estimates of 0,6%, prevailing at the moment) and a deficit/GDP ratio for this year of 2,6 percent. The deficit target would therefore remain at least formally unchanged and there would be no intention of increasing it to obtain resources to be allocated to the announced measures.
To finance the 6,6 billion tax cuts for employees, the famous 80 euros a month from May onwards for those who earn up to 1.500 euros net a month, 4,5-5 billion "cuts" would be used expenses to be achieved already in 2014 with the imminent decree law; the remaining part, equal to 1,5-2 billion, would be covered with the lower disbursements consequent to the decrease in the "spread" and, therefore, of the interest on the public debt, calculated overall at 2,5-3 billion. At least one billion euros would still remain available, from the drop in interest, to be used as a "reserve" or for other contingencies. But the real challenge, to keep the deficit within 2,6%, will be to effectively implement the planned spending cuts, in the desired measures and in the remaining eight months of the year.
As for the reduction in Irap, announced by Renzi, it now seems obvious that it will be implemented by law towards the end of the year, at the time of the launch of the stability law. Although already operating this year (Renzi had announced it starting from 1 July), it will produce effects only when the tax is paid, therefore in 2015. The reduction, which when fully operational should be 10% according to what has been said by the head of government, will be applied generically to the whole tax, not just to the labor cost component. Half of which was implemented in 2014, it will be equivalent to a decrease in the ordinary rate from 3,9 to 3,7%, which will further decrease to 3,5% in 2015.
To finance this reduction in the IRAP levy, Renzi had announced the increase from 20 to 26% of the tax rate on financial income, which would take effect from 1 July, at the same time as the reduction in the IRAP rate. But at this point the contextuality would no longer be necessary from the point of view of public accounting and, therefore, could be postponed to 2015.
