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POLITICS

Here’s what the Italian budget means for foreign residents

With Italy's finalised 2020 budget set to be approved, we look at what it will mean for those of us living in the country.

Here's what the Italian budget means for foreign residents
Will the new budget mean you'll have more of these in your pocket? Photo: AFP

Italy's recently-installed coalition government hopes that its fiscal plan for next year will allow it to avoid a VAT hike, without sending national debt skyrocketing.

Here, The Local takes a look at elements of the budget which could be particularly important for foreign residents.

This article was written for Members of The Local. Read more about Membership here.

Italy's Five Star Movement-Democratic Party government said last month that the key aims of the budget were tackling tax evasion while raising enough revenue to cancel a scheduled hike in VAT, twhile its wider goal is to rein in the country's massive (and growing) deficit and jump-start its sluggish economy.

READ ALSO: Europe warns Italy over spending, but gives green light to the budget

 

Italian Prime Minister Giuseppe Conte in Brussels on Thursday October 17. Photo: AFP

“The bill does not stop at eliminating the [increased] VAT clause for 2020, but contains important provisions for work, the environment, investments, families and disabilities,” the government said in a statement.

No VAT increase

Cancelling a planned hike in VAT next year will leave Italy with a 110 billion euro tax gap, but the government believes it will be able to make up this loss through other measures – particularly by clamping down on tax avoidance.

Clampdown on tax-dodging

Government ministers have said a clampdown on major tax-dodging by big companies and CEOs is the focal point of the tax plans.

By going after tax evaders, they hope to bring between €800 million and €1 billion euros back into public coffers.

The government is discussing measures including longer prison terms for tax evaders as well as enforcing a three percent tax on web giants like Facebook and Google.

Italy has a tax evasion rate of about 30 percent, one of the highest in Europe, although companies and CEOs rank among the biggest tax dodgers, with an evasion rate almost 19 times higher than that of employees.

Five Star Movement (M5S) leader Luigi Di Maio stressed on Thursday that the government will be beefing up jail terms for big tax evaders, but will not be targeting small business owners.

Encouraging card payments

In a related effort to regularise Italy's enormous shadow economy and its culture of cash payments, the budget includes measures intended to incentive card payments and electronic transactions, including charges for large cash withdrawals.

READ ALSO: Italy's black market is now worth more than €200 billion

“We want to introduce incentives to push the acquisition of card readers by shop owners and traders, and talk with operators about reducing commission,” Economy Minister Roberto Gualtieri said.told the Sole 24 ore newspaper on Thursday.

The measures will cut the maximum cash payment that can be made in Italy from the current 3,000 euros down to 1,000 euros by 2022.

The government has said it would also drastically reduce the expense of electronic transactions.

Photo: AFP

Taxes on plastic, company cars and sugar

After an outcry from businesses, a planned tax on plastic has been softened and will now be limited to some types of packaging – mainly that used for food and drinks. The government is reportedly revising its plans to increase taxes on the use of company cars.

Gualtieri also said the budget bill would include a sugar tax, but that it would be “restricted to drinks and not applied to snacks” as had previously been discussed by ministers. Taxing sugary soft drinks is expected to bring in 234 million euros to state coffers next year.

Gualtieri added: “there are no interventions on petrol and there won't be a retroactive intervention on tax breaks, which has been talked about.”

Flat tax for entrepreneurs

The government has confirmed it will go ahead with the introduction of a flat 15 percent tax rate for small business owners and self-empoyed workers earning less than €65,000 annually.

Tax cuts for low-to-middle earners

A proposal to reduce the “tax wedge” for Italian employees (the difference between before-tax and after-tax wages) has also been included, at an expected cost of some three billion euros.

Deputy Economy Minister Antonio Misiani announced that cuts to the tax wedge would give each worker around 500 euros more income per year net, on average.

Extended baby onus
Italy's “baby bonus”, which has so far been reserved for families with a total income below 25,000. will become available to everyone from 2020. It's paid in monthly installments, with payments varying across the following income brackets:

  • Up to €7,000: bonus of €1,920 per year (as before)
  • Between €7,000 and €40,000: bonus of €1,440 (reduced)
  • Over €40,000: bonus of €960 (new)

The rate applies to children born or adopted in 2020, and increases by 20 percent if a second child is born or adopted in the same year.

This is not the same as the existing bonus mamma, or “mothers' bonus”, which the government confirmed will continue next year. This is a sum of 800 euros paid to parents on the birth of each new baby.

READ ALSO: How ageing Italy plans to bump up its birth rate in 2020

Childcare payments

From 2020, payments of between €1,500 – €3,000 will also be made available per family, depending on income, to help with the cost of nursery school or babysitting.

Increased paternity leave

Mandatory paternity leave is increasing from five to seven days. The government said it aims to bring it up to ten days within the next few years, but has so far struggled to fund the scheme.

Every extra day of leave costs €10 million, meaning they'll have to allocate a total of €70 million to the measure in 2020.

Pension reform

Despite months of rumours and squabbling within the government, there will be no change to the recently-introduced “Quota 100” pension system. Italian media reports however that the scheme will not be renewed once the current three-year trial period expires in 2021.

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ITALIAN ELECTIONS

Who can vote in Italy’s elections?

With Italy's next general election scheduled for September 25th, who is eligible to vote - and how can those who are do so?

Who can vote in Italy's elections?

Who can vote in Italy?

For the upcoming election in September, the answer is simple: only Italian citizens are eligible to vote in Italy’s general elections.

Foreign EU nationals who are resident in Italy can register to vote in municipal and European parliamentary elections, but national elections are reserved for Italians only.

Until recently, not even all Italian adults could participate fully in the process: just last year, voters needed to be over the age of 25 to take part in senate elections.

That finally changed with a reform passed by parliament in July 2021. It’s now the case that any citizen over the age of 18 can vote for their representatives in both the lower house and the senate (both ballots are held at the same time).

READ ALSO: An introductory guide to the Italian political system

You don’t need to be resident in Italy to vote; Italian citizens living abroad can register to vote via post.

In fact, Italy is unusual in assigning a set number of MPs and senators to ‘overseas constituencies’ that represent the interests of Italians abroad.

These constituencies are split into four territories: a) Europe; b) South America; c) Northern and Central America; d) Africa, Asia, Oceania and Antarctica. Each zone gets at least one MP and one senator, with the others distributed in proportion to the number of Italian residents.

Up until recently, there were as many as 12 MPs and six senators dedicated to overseas constituencies. This will drop to eight MPs and four senators from September, thanks to another reform enacted in late 2020.

READ ALSO: Why has Italy’s government collapsed in the middle of summer?

How can you vote?

While Italy has a postal vote option for citizens living abroad, Italians resident in Italy must vote in the town in which they are registered to vote (i.e., their comune, or municipality of residency), at the specific polling station assigned to them.

What's behind Italy's declining voter turnout?

Italian citizens who are resident in Italy can only vote in person. Photo by Miguel MEDINA / AFP.

The lack of a postal vote for Italians in Italy is thought to be one of the main factors behind Italy’s declining turnout in elections, and a parliamentary committee on elections has advised introducing one to help remedy the situation; but for now, only in-person votes count.

READ ALSO: What’s behind the decline in Italian voter turnout?

Italians living abroad who are on the electoral register should receive their ballot papers (pink for the Chamber of Deputies, yellow for the senate) from their consulate in the lead up to the election. Their completed ballots must arrive back at the consulate no later than 4pm local time on September 22nd.

Those who haven’t received their ballot papers by September 11th should contact their consulate to request that the documents be resent.

Italians in Italy must have a tessera elettorale, or voter’s card, to be allowed to vote in person. The card contains the holder’s full name, date of birth, address and polling station. Every time the holder goes to vote, the card – which takes the form of a piece of reinforced folded paper – is stamped.

The tessera elettorale should be automatically sent out to Italians at their home address when they reach the age of 18; for those who acquire citizenship and move to Italy later in life, it should be automatically sent to their address by the comune where they are registered as a resident.

If the tessera gets lost, damaged, or becomes filled up with stamps, the holder should request a new card from their comune. 

When an individual moves towns, they should turn in their tessera in order to receive a new one from their new comune. For those who move house but stay in the same town, their comune should send an official slip confirming the new address that can be used to update their tessera.

Anyone who hasn’t automatically received a tessera elettorale and is entitled to one should contact their comune to claim theirs.

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