By Francesca Amaddeo, Researcher, Tax Law Competence Centre (SUPSI), Manno, Switzerland
On October 21, sometime after 9.00 p.m., Italy’s Council of Ministers, in their umpteenth meeting, changed again Budget Plan 2020 and related measures.
Following a proposal of President Giuseppe Conte, the Council of Ministers on October 16, had adopted three main documents “unless otherwise agreed”: a fiscal decree introducing urgently required fiscal measures, the draft budgetary law, and Budgetary Plan 2020, already sent to the European Commission.
The safeguard clause, “unless otherwise agreed,” keeps on surprising.
The so-called “fiscal manouvre” laid down by the Italian government provides measures from education to pensions, passing a new strategy for strengthening the fight against tax evasion and green taxes to pursue the collection of at least EUR 2 billion in 2020.
However, politicians do not share the same perspective and these issues are strongly disputed. The approval of the new fiscal policy for 2020 represents de facto the first test for the new political alliance.
Keep it green: sugar and plastic taxes
Environmental taxes are one of the most discussed issues of the Italian fiscal strategy for the upcoming year.
Among these proposals, which would bring into Italian tax revenue EUR 1.2 billion, there is the excise tax of EUR 10 per hectolitre on drinks sweetened with added sugar, the so-called sugar tax.
Even this morning, economic operators in this field started to complain because of the consequences of this measure which will have a deep impact on the market and consumers. Indeed, early estimates show that prices will increase from 5% to 10%.
In fact, the sugar tax will represent a kind of “second VAT”. Moreover, this intervention will affect tax certainty, damaging the investment planning of entrepreneurs, which will face a completely new scenario.
That is not all! Also a plastic tax is provided; one euro on each kilo of plastic must be paid on all types of “packaging”. This means “primary packaging”, such as bottles and disposable containers, boxes, and industrial casings.
Plastic actually costs (more or less) EUR .90 per piece. Imposing the plastic tax as defined within the budgetary law will create consequences for the environment, consumers, and businesses.
Actually, Italy is the second largest plastic producer in Europe but if they must face a doubled price of raw material, entrepreneurs fear that no one will invest in recycling and the circular economy, requiring increased imports, especially of bio-materials from China.
Fight against tax evasion, digital tax
Consistent with international aims, the government proposes to fight tax evasion through the implementation of a transparency standard for commercial transactions based on the development of electronic payment methods.
So, to reach this objective, the budgetary law includes measures to promote the use of traceable payments instead of cash.
Although this tool will be deferred to summer 2020, the digital tax, defined in line with proposed EU directives at the rate of 3% on digital businesses’ income, will enter into force from January 1, 2020.
The director of the public business association, Confesercenti, Patrizia de Luise, represented that the scope pursued must be the correct assessment and collection of taxes from big tech firms. Indeed, she said that last year “Amazon, Google, Instagram, Facebook, Twitter paid in Italy [EUR] 14.3 billion, which represents the 0.01% of taxes paid by businesses in our country.”
Unanimous, instead, was the consensus for tightening sanctions for tax evasion, especially evasion from false tax returns. This change, Minister of Finance, Roberto Gualtieri, explained, “will be based on a first step, a first legal base [which will increase] to 8 years the period of imprisonment for false tax returns.”
On October 22, rumors suggested that the threshold difference between income declared on tax returns and actual income will be about EUR 100,000. In addition, administrative tools will apply, namely, forfeiture and administrative liability for businesses.
Next steps
The proposal is now passing to the Parliament, where it will be discussed and enhanced. The budgetary law will be definitively approved by December 31, 2019.
Francesca Amaddeo
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