January 19, 2018 / 2:25 PM / 9 months ago

Italy's center right vows deep tax cuts, funding unclear

ROME (Reuters) - A center-right grouping involving former Italian prime minister Silvio Berlusconi is pledging to slash taxes and throw out a drastic pension reform in its bid to win over voters at a national election in just over six weeks’ time.

FILE PHOTO: Forza Italia party leader Silvio Berlusconi waves during a rally for the regional elections in Palermo, Italy November 1, 2017. REUTERS/Guglielmo Mangiapane/File Photo/File Photo

Late on Thursday, Berlusconi met his allies, the anti-immigrant Northern League and nationalist Brothers of Italy, to sign a 10-point pact, which does not spell out where they would find the money for the measures.

Parties across the spectrum are campaigning on promises to spend more and tax less, but Italy, weighed down by one of the world’s largest public debt pile and weak productivity, has little room for maneuver within European Union budget rules.

(Graphic: Italy's debt - reut.rs/2DjRa8S)

One entire section of the manifesto is devoted to ensuring “Less restraint by Europe”, reflecting frequent complaints about Brussels from League leader Matteo Salvini and Brothers of Italy’s Giorgia Meloni.

Polls show the group in the lead ahead of the March 4 vote, but failing to muster enough support to govern alone, meaning it may have to make overtures to rivals to form a majority.

First on the list is a flat tax, replacing the current system whereby the top tax rate is 43 percent, but the document published on Friday does not say what the new toll would be.

However, Berlusconi said on his Mediaset TV network on Friday: “We plan to start with the lowest current rate of 23 percent with the aim of slowly reducing it, if revenue rises.”

The League, which polls around 13 percent versus roughly 16 percent for Berlusconi’s Forza Italia (Go Italy!), has called for the rate to be set at 15 percent.

In line with the “Italians first” credo promoted by Salvini and Meloni, the manifesto gives the Italian constitution precedence over legislation approved by the European parliament.

The allies promise to review EU treaties, reject austerity and pay less into the bloc’s budget, but there is no mention of any plan to exit the euro. Both the League and Brothers of Italy want an orderly break-up of the currency union.

All outstanding litigation over tax matters would stop, and there would be an amnesty for “smaller payers who find themselves in economic difficulty”. The agency responsible for collecting overdue taxes, Equitalia, would be closed, leaving local authorities to do the job.

Also in the firing line is a 2012 overhaul of the pension system, made at the height of Italy’s sovereign debt crisis, which linked retirement age to life expectancy.

The parties promise a new welfare system, and to hike the lowest pensions. Small-denomination, interest-free bonds would be issued to firms and individuals owed money by the state.

All illegal immigrants would be repatriated, boat migrants would be blocked from arriving and rules on asylum would change.

Former prime minister Mario Monti has scolded politicians for making “irresponsible” promises in the campaign, but a survey published last week showed most Italians did not like or believe any of the pledges anyway.

The parties have not united behind one prime ministerial candidate, deciding instead that whoever gets the most votes chooses the premier. Salvini is campaigning hard for the post, but Berlusconi said on Thursday he would be ready to lead again if a ban on his holding public office is overturned.

Reporting by Isla Binnie and Gavin Jones Editing by Steve Scherer/Jeremy Gaunt

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