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Italian retailers bemoan small-business 'massacre'

Economic development minister vows to avoid VAT hike

19 June, 17:18
Italian retailers bemoan small-business 'massacre'

(By Elisa Cecchi) (ANSA) - Rome, June 19 - Each day 134 shops, restaurants and bars close in recession-hit Italy, retail association Confesercenti said on Wednesday. Confesercenti, which represents small and medium-sized businesses in the retail and tourism sectors, said 224,000 enterprises had closed their shutters since the start of the global economic crisis in 2008.

"It's a massacre," said Confesercenti President Marco Venturi.

"Every day five green grocers, four butchers, 42 clothes shops, 43 restaurants and 40 bars and catering business close down". Confesercenti gave a grim outlook on the economy stressing that if the longest recession in over 20 years continues throughout 2013, Italy's GDP will drop by another 20 billion euros, bringing to a total of 126 billion euros losses accumulated since 2008.

In the meanwhile the association says that consumption will contract by a further 60 billion euros this year from the 85 billion lost between 2008 and 2012. Presenting the association's annual report, Venturi also said families and businesses were suffering from an excessively high tax burden and called for a comprehensive fiscal reform.

Italian households in the past five years saw their income drop by 238 billion euros, approximately 9,700 euros per family, Venturi told the association's annual gathering. Consumption also dropped by over 145 billion in six years, with a loss of almost 6,000 euros per family. In 2013, Confesercenti said, each household will suffer an average contraction of its buying power by 4,000 euros.

Unemployment is expected to drop further, Confesercenti denounced, reaching a total of 1.6 million jobs lost since 2008.

Venturi called on the broad left-right government headed by Premier Enrico Letta for a change of strategy to kick-start a dying economy. ''After five years of crisis and austerity policies, we must switch strategies'', he said. ''Either the market and internal demand pick up or companies will be closing at an increasingly fast pace''.

He also spoke out against a rise in the top band of value added tax VAT and Tares, a municipal tax on waste and local services, prompting the immediate response of Economic Development Minister Flavio Zanonato who told Confesercenti's gathering that the government would work to avert a VAT increase. ''Given the very limited amount of time in which we are operating, each path will be tried to avoid increasing VAT at the end of June'', said Zanonato.

Silvio Berlusconi's People of Freedom party (PdL) wants to avert a rise in the top band of VAT, from 21% to 22%, that is scheduled after being put in place by the technocrat administration of former premier Mario Monti. The PdL has also threatened to pull the plug from Premier Enrico Letta's broad coalition government if it fails to scrap the unpopular IMU property tax and refund the revenues raised from it in 2012 to respect a key pledge made during the electoral campaign. Economy Minister Fabrizio Saccomanni last week said implementing each measure would cost four billion euros and the total eight-billion-euro public cost would entail ''compensatory measures of extreme severity, which at the moment is preposterous''.

On Wednesday, Zanonato also told the Confesercenti gathering that the IMU property tax would be reformed by September with tax breaks on real estate used by businesses as factories or stores although he said it was ''difficult to think about a total abolition of IMU''.

Labour Minister Enrico Giovannini also addressed the assembly, stressing that ''finding funding for IMU, for VAT and also to lower labour taxes, in particular to boost youth employment. is not easy''. He said the government was sounding different options to boost employment including tax breaks for new hires.

Overall, Confesercenti called for a comprehensive reform to lower taxes.

''We cannot accept a measure which lowers (regional tax) Irpef and raises VAT, scraps (real estate property tax) IMU and increases (municipal tax) Tares'', said Venturi. ''We need a real reform to reduce fiscal pressure and aid companies and employment rather than annuities and estates''.

According to the association's annual report, Italy's tax burden on families and companies could reach 44.4% of GDP in 2013 if the ongoing economic crisis continues. The country's overall tax burden at 44% of GDP is some 3% higher than in other European Union countries, the Bank of Italy said in March.