The government's 2016 budget bill came under fresh criticism in official reports on Tuesday as a row between Premier Matteo Renzi's executive and the nation's regions rumbled on.
On Monday Piedmont Governor Sergio Chiamparino, the outgoing president of the conference of Italian regional governments, said cuts in the bill threatened the very existence of the regions.
Renzi hit back saying he was going to "have fun" in the confrontation with the regions, adding they should stop complaining and find ways to cut spending.
"I'm not going to the meet the government with a spirit of having fun, but in a spirit of work," Chiamparino replied on Tuesday. "I don't think that presenting demands is subversive.
Either the figures that we have should be shown to be false, and no one has done that so far, or the regions should get answers.
"It's not a challenge or a tug of war, the regions just want to give answers to the public". Meanwhile, after Lower House and Senate experts took issue with the bill and the CGIL, Italy's largest trade union, said it benefited the "have mores" on Monday, there was fresh criticism on Tuesday from the Audit Court and the Bank of Italy. The State auditor highlighted the temporary nature of some of the provisions.
The bill "suffers for the temporary character of certain coverage and the persistence of safeguard clauses that are postponed to the future", Court President Raffaele Squitieri said in a hearing before the Senate. Consequently it will be necessary to "make large budget cuts or increase revenue considerably" starting from 2017, he added. The proposed abolition of the local services tax TASI "freezes" the fiscal competence of local councils, to the advantage of those that raised the tax rate has high as possible and penalising those where the TASI tax was lower, Squitieri said. The brunt of the budget adjustment will be borne by local administrations "with negative repercussions on the quality of services", he said.
The Bank of Italy commented on the raising of the limit on cash transactions from 1,000 to 3,000 euros. "A limit on cash transfers, even a low one, must be maintained," Bank of Italy director general Luigi Signorini told the Senate. The government has said the move aims to boost consumer spending but critics have said it risks making tax evasion easier. "The existence of macroeconomic effects caused by the ceiling on consumption is not supported by clear empirical evidence," Signorini said. "It is advisable to maintain a stricter regime for activities that are more exposed to contamination, such as money transfers". Measures contained in the so-called Stability Law to reduce the tax burden on production "seem better able to increase growth in the medium-term" than do those to relieve taxation on property, he continued. The bill will abolish the IMU property tax on people's first homes and on farm property.
"From a macroeconomic perspective on the basis of empirical evidence available to date, elimination of property taxes may only impact families subject to restricted liquidity," Signorini said. The director general also warned that the proposed reduction in taxes "is financed only in part by spending cuts".
"(The bill) forecasts greater income deriving largely from voluntary disclosure (of assets held abroad unbeknown to the Italian tax authorities)" Signorini said. This income is only of a "temporary" nature, he added.
National statistics agency Istat said that the budget bill will have a modest impact in economic growth in 2016, adding that the effects will be felt more the following year. It said in a report that the positive effect will be manifest "in a slight manner in 2016 (0.1 of a percentage point) and more significant in 2017 (0.3 of a percentage point)". Istat said the effect in 2017 would largely be due to a fall in business tax IRES.
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