Italy to seek EU budget flexibility in 2017

(ANSA) - Rome, March 22 - Italy's spending-review commissioner Yoram Gutgeld said Tuesday the government would seek budget flexibility from the European Union again in 2017. "We requested and obtained the concept of flexibility last year (for the 2016 budget) and so we will obviously continue on this path," Gutgeld said.
    Separately on Tuesday, Italy's Audit Court said an economic recovery is underway, but may not have much staying power. "On the one hand, the Italian economy appears to have left the recessive phase behind," the Court said in a public finances report. "On the other, the recovery is still weak and may have trouble consolidating. Uncertainties weigh on the 2016 outlook due to slowing international trade and turbulence on financial markets". In its report, the Court said the nation's pensions system "is balanced, as long as Italy returns immediately - albeit gradually - to a path of moderate growth".
    It added that Italy has the second-highest labor tax rate in the European Union. "Tax withholding on job income is equal to 42.8%, almost eight points above the European average," the Court wrote. Italy ranks third in the EU in terms of business income taxation of 26%, or "over 50% higher than the EU average". The way taxes are distributed in Italy "place a burden on productive factors (work and business income) that is significantly higher than that placed on consumption and on capital," the Court wrote. It also found that tax rebates and other breaks and benefits are on the rise, as is their impact on public finances.
    Compared to 2011, the Court found "a significant expansion in both number (of tax breaks, 799) and loss of tax take (313 billion euros)," the Court wrote.
    Italy's Audit Court said in a public finances report Tuesday that intervening on the Value Added Tax (VAT) on goods and services would be "preferable" to other changes to the country's taxation system. Such a measure would be "justified, given that Italy's VAT take lags behind in the European classification". The Court said "the priority should be a wide-ranging reorganization of taxable income" as a way to cut down on what it termed "areas of erosion" in the tax take.