Italian retailers jeer minister over sales tax

ROME, June 12 Wed Jun 12, 2013 9:32am EDT

ROME, June 12 (Reuters) - Delegates at a retail conference in Rome jeered Italian Industry Minister Flavio Zanonato on Wednesday after he said he was unsure if the government would be able to fulfil its aim of cancelling a planned sales tax increase.

Italy's retail industry has pleaded with the government to halt a hike in sales tax due to come into force in July, as it fears it will further depress the already gloomy mood among Italian consumers after almost two years of economic recession.

Prime Minister Enrico Letta has said he aims to stop the tax increase, an initiative of the government of former Prime Minister Silvio Berlusconi, but only if he could do so without increasing Italy's budget deficit.

Speaking at the annual assembly of retail association Confcommericio, Zanonato said the government hoped to avoid the increase, "but I can't promise you I will be able to do it".

The planned increase in the main sales tax rate to 22 percent from 21 percent would mean the government would lose out on 2 billion euros ($2.65 billion) in 2013 and 4 billion euros in 2014, funds it must find somewhere else if it is to keep the deficit within European Union limits.

"The latest one point increase in sales tax must be prevented," Confcommercio president Carlo Sangalli said. "The impact of this increase on consumption, growth and employment would really be pouring petrol on the flames."

According to a report from the CER research institute presented at the assembly, the average Italian family has seen a decline in its annual purchasing power of more than 3,400 euros.

If the economy returned to the sluggish growth rates seen before the crisis, the sales tax shortfall would not be made up before 2036, according to the report.

"There's no point beating around the bush. Without a profound transformation of economic policy in Europe and Italy, we will not get out of this," Sangalli said. ($1 = 0.7533 euros) (Reporting by Antonella Cinelli; Writing by James Mackenzie; editing by Raissa Kasolowsky)

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