Tax cuts main feature of clearly expansionary budget plan in Italy

The precise measures contained in the 2016 budget plan of Italy as well as their cost will not be known before the plan is actually sent to Brussels. What we know for sure is that the government's objective is to stimulate the economy. This is best visible in the new set of projections for the general government budget balance: compared to a surplus of 1.0% in 2019 in an unchanged-policy scenario, the metric reaches only 0.25% under the new plan. In structural terms, the public deficit is even anticipated to deteriorate by 0.4pp next year.

The government intends to abolish property taxes IMU/TASI1 on main (luxury) homes from 2015 with the aim of boosting consumption. Going forward, the plan is to reduce tax pressure by around €45bn, or 2.7% of GDP, in a three-year plan. The property tax reduction will likely be complemented by a cut in corporate tax (IRES, 2017) and personal income tax (IRPEF, 2018), says Societe Generale.

Nothing more than vaguely defined spending cuts at the moment In the latest set of projections sent to the EC (April), the government estimated that the savings emanating from its spending review would amount to €9.7bn (0.6% of GDP) next year. Thorough examination of the update published last month leads us to believe that this is no longer on the cards: the government did not give any figure. This is likely to be one the main areas of concern for European authorities, added Societe Generale.