UPDATE 2-Berlusconi offers big tax cuts in "last great battle"
* Promises to reimburse Italians for real estate tax
* Says sure centre-right will win Feb. 24-25 elections
* Will cut number of parliamentarians, end political funding
* Opponents deride speech, accusing him of propaganda (Adds reaction, promise to cut personal income tax rates)
ROME, Feb 3 (Reuters) - Italy's former prime minister Silvio Berlusconi announced his "last great electoral and political battle" on Sunday with a sweeping promise to cut taxes and the cost of government if his centre right wins elections this month.
In a passionate and much anticipated speech to supporters in Milan, the city where he built his fortune, he said only his centre right could lift Italy out of the dark fog of recession and re-establish trust between government and citizens.
His political opponents were quick to deride him. Caretaker Prime Minister Mario Monti said Berlusconi "has never kept any of his promises" and one centre-left parliamentarian called the speech "a laundry list of stupidities".
The centrepiece of Berlusconi's fiery speech was the unveiling of what he had billed beforehand as a "shock proposal" - a promise to reimburse Italian families for a much-hated tax on their primary residences.
That tax, known as IMU, was imposed last year by Monti's technocrat government to help with Italy's financial crisis, after it had been abolished in 2008 by Berlusconi.
The master communicator peppered his speech with repetitions of the words "tax" "taxpayer" and "tax man" along with references to "the anxiety of families".
He said he would scrap the tax at his first cabinet meeting and refund payments already made.
He promised a centre-right government would eliminate a regional tax on businesses over the course of five years, reduce personal income tax rates, would not increase VAT and would not impose a so-called "wealth tax" on higher earners.
"I have nothing to ask for myself," said Berlusconi, 76, one of Italy's richest men. "I want to fight one last great electoral and political battle."
Gianfranco Fini, the speaker of the lower house of parliament who broke with Berlusconi in 2010, tweeted that in his second cabinent meeting, Berlusconi would "decree that everyone wins the lottery".
Berlusconi took simultaneous swipes at both Monti's centrist coalition and the centre left, saying: "I want to help Italy get out of this dark atmosphere the technical tax men have put it in, and in which the tax men of the left will leave it mired."
Italy is deep in recession. Last month the central bank forecast that GDP will fall by 1.0 percent this year rather than the previously forecast 0.2 percent. Unemployment is seen climbing from 8.4 percent in 2011 to 12 percent by 2014.
One candidate running for Monti's centrist group called the speech tantamount to "vote-buying", and Rosy Bindi, president of the centre-left Democratic Party, slammed it as "dangerous electoral propaganda".
Berlusconi said revenue to cover the elimination of the real estate tax on primary residences would come in part from striking a deal with Switzerland to tax financial activities there by Italian citizens.
He also promised a number of measures to cut the cost of government, to halve the number of parliamentarians, to cut government waste, and to eliminate public financing of political parties.
Most opinion polls indicate that the centre-left coalition, headed by Democratic Party secretary Pier Luigi Bersani, will win the Feb. 24-25 election.
But the gap between the centre left and the centre right has been narrowing steadily since Berlusconi returned to active politics. On Sunday even La Repubblica, a left-leaning paper, ran an editorial headlined: "If Berlusconi's horse wins the race."
Berlusconi told cheering supporters: "We think we are close to an historic result. Simply put, we are sure we are going to win."
But the media magnate, who stepped down in November 2011 when Monti's technocrat government was installed to lead Italy out of a full-blown economic crisis, will not be prime minister again if the centre right wins.
That job will go to Angelino Alfano, secretary of Berlusconi's People of Freedom party.
Berlusconi had said earlier that he would be the economy minister in a centre-right government. In his speech on Sunday, he said he would be both economy minister and industry minister.
"That is, if Angelino Alfano reconfirms his trust in me," joked Berlusconi, who has been the voice and face of the centre-right campaign, often leaving Alfano in his shadow. (Editing by Andrew Roche)