Renzi presents 'historic' 10-bn-euro tax-cut package
Premier also pledges investments for schools, social housing12 March, 20:30
Renzi is trying to push through sweeping reforms to revive the Italian economy, which is weak after emerging from its longest postwar recession last year, and overhaul the country's costly and slow-moving political system.
Earlier on Wednesday he secured his first major victory since last month's unseating of his colleague in the centre-left Democratic Party (PD), former Premier Enrico Letta, when a bill for a new election law to replace the dysfunctional system declared unconstitutional in December was approved by the Lower House.
But Renzi, Italy's youngest premier at 39, was keen to show the public that the government is also taking action on issue that affect their everyday lives. He said the cuts would take effect from May and would benefit "10 million Italians" who will have 80 euros a month more net in their pay packets on average.
The cuts will be focused on low-earners, giving 1,000 euros a year more net to people who earn less that 1,500 euros a month. He added the cuts would not be covered by increases in other taxes.
Renzi was low on detail, but stressed Rome would not breach 3% deficit-to-GDP limit set by the European Union. "The financing of this 10 billion euros is totally carried out by the government on the basis of spending cuts... without tax increases," Renzi told a press conferences after the tax cuts were approved at a cabinet meeting along with labour-market reforms and school and housing measures. "It's obvious that putting 1,000 euros (per year) into people's pockets helps make people more likely to spend," Renzi said.
"But it's also a measure of attention and equity that is the fruit of a political system that gives a good example. It's an operation that I'd say is of historical dimension". He said some of the money for the tax cuts would come from the government having to spend less on servicing Italy's public debt of over two trillion euros thanks to a recent reduction in Italy's borrowing costs.
More money will come from a review of public spending that will be presented within two weeks.
Carlo Cottarelli, the official in charge of a spending review, told the Senate on Wednesday that the government could achieve three billion euros in cuts in 2014.
But Renzi said the official was being prudent and that the real figure for 2014 was closer to seven billion.
He said the the Irap regional business tax will be cut by 10% with lost revenues made up by increasing taxes on financial instruments to 26% from present levels of 20%.
He also announced that the Italian government will pay 68 billion euros in outstanding bills owed to businesses for goods and services by July, on top of the 22 billion euros that has already been paid. Around 1.74 billion euros will be invest into a social housing plan that will boost supply and provide support for renters. Another 3.5 billion euros will immediately be ploughed into projects for Italy's schools, many of which are in a state of disrepair. Other ministers were set to give further details about the measures later on Wednesday.
These include Renzi's Jobs Act package to simplify Italy's labour system, eliminating many parts of the current myriad of work contracts and lay-off benefits, and combat chronic unemployment of almost 13%, with over four in 10 under-25s out of work.