ROME (Reuters) - Parliament approved on Thursday Italian Prime Minister Mario Monti’s 33-billion-euro ($43 billion) austerity plan of tax hikes, pension reforms and spending cuts to shore up public finances, help economic growth, and try to head off an acute debt crisis.
A third of the package (around 21 billion euros), which was approved definitively by the Senate in a confidence vote, aims to ensure Italy meets its goal of balancing the budget in 2013 despite a steep economic downturn and rapidly rising borrowing costs.
Almost two-thirds of the fiscal consolidation comes from higher taxes, while spending cuts account for the remainder.
Following are some of the key measures.
* The introduction of a property tax on primary residences and an increase of existing taxes on second and third homes. Together with an increase in a property valuation mechanism this will bring in 11.3 billion euros per year in 2012 and 2013. Low-income families with children will have deductions.
* A 2-percentage-point hike in value-added tax rates from October next year, bringing in 3.3 bln euros in 2012 and a cumulative total of 13.1 bln in 2013, and 16.4 bln in 2014. From 2014, the rates will rise another 0.5 of a percentage point. The hikes will affect the VAT rates currently at 10 percent and 21 percent. The VAT could remain unchanged at current levels if the government can find ways to cut a series of tax benefits and deductions for both households and businesses.
* A permanent tax on money brought back to Italy under four so-called “tax shields” that gave amnesty to tax evaders who re-patriated their foreign stashes. These were adopted by ex-Prime Minister Silvio Berlusconi’s government. Revenue targeted at 1.5 bln euros in 2012, 2 bln euros in 2013, and 559 mln euros in 2014.
* A tax on bank accounts, shares and financial instruments, bringing 1.2 bln euros in 2012 and 2013, and 737 mln euros in 2014.
* Increase in excise duties on petrol, bringing in 5.85 billion euros in 2012.
* Taxes will be increased on luxury assets such as boats longer than 10 m (30 ft), private airplanes and sports cars.
* Cuts to funding for city councils of 1.45 bln euros per year and to the budgets of provincial and some regional governments by between 415 million and 920 million euros.
* Regional and city governments must draw up a plan to divide up the functions of the provincial governments by end 2012.
* From the start of 2012 pensions will be calculated only on the basis of contributions paid into the system, rather than on end-of-career salaries.
* The annual inflation adjustment on pensions will be eliminated for those who collect monthly retirement checks of more than 1,400 euros, while it will remain for those who collect smaller amounts.
* The minimum number of contribution years will rise to 42 for men and 41 for women, from 40 years at present for so-called seniority pensions, which are calculated on the basis of the number of years of paid contributions, rather than age.
* The minimum retirement age for women’s old-age pensions was raised to 62 from the current 60, with financial incentives to try to keep them working until 70. Men’s minimum retirement age will rise to 66 from 65, with incentives to work until 70.
* For women in the private sector, the minimum age for access to old-age pensions will be slowly raised to 66 by 2018 from 60 today, to eventually come into line with that of men.
* A ban on cash transactions above 1,000 euros, which is lower than the current 2,500 euro threshold.
* The use of electronic payment methods in the public administration.
* Tax breaks for small companies and artisans who declare their income. ($1 = 0.7446 euros)
Reporting By Giuseppe Fonte. Writing by Steve Scherer and Gavin Jones.