January 7, 2014 / 9:26 PM / 4 years ago

Italy's Renzi backs higher financial taxes to lower labour costs

ROME, Jan 7 (Reuters) - The new leader of Italy’s Democratic Party (PD) said on Tuesday that he supported raising financial gains taxes in order to lower labour costs, and that he would put forward the proposal as part of a larger reform package.

The 38-year-old Florence mayor Matteo Renzi was elected last month as head of the centre-left PD, the largest party in Prime Minister Enrico Letta’s coalition government, and he has said he will present a comprehensive overhaul of the country’s labour rules this month.

So far, few details have emerged about the reform package, dubbed the “Jobs Act”, but during an interview with La7 TV Renzi said he would support higher financial gains taxes as long as the extra revenue is used to lower a regional labour levy, known as Irap.

“The increase in financial gains taxes will be one of the points of the Jobs Act,” Renzi said, without giving further details. He said the tax increases must not lead to greater government spending, but be balanced out by labour cost cuts.

Renzi also said the package would include as much as a 10 percent cut to energy costs for companies, without saying how the reductions would be made.

With youth unemployment at more than 40 percent and the overall jobless rate at record-high levels, Renzi has promised sweeping changes to the labour system to create jobs, which is also a top priority for Letta’s government.

But Renzi gave no new details about how he plans to make Italy’s “dual track” labour system more flexible.

Now workers on full contracts enjoy extensive rights in contrast to the army of others on temporary or part-time contracts with little protection.

Former technocrat Prime Minister Mario Monti, facing virulent opposition by labour unions, introduced a flawed labour reform in 2012 that became one of the defining episodes of his government and contributed significantly to its sharp fall in popularity. (Reporting by Steve Scherer)

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