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MONEY

Is Italy really giving all employees a ‘pay rise’ from August?

Italy's government will meet this week to agree on measures to include in a new cost of living bill. Will a de facto pay rise be among them?

Will workers in Italy be getting a pay rise this month?
Will workers in Italy be getting a pay rise this month? Photo by INA FASSBENDER / AFP.

Having passed the decreto aiuti or ‘aid decree’ to help combat rising inflation and energy costs in May, Italy’s caretaker government is now set to enact the aiuti bis decree, a €14 billion follow-up provision.

The pandemic-induced economic crisis exacerbated by Russia’s war on Ukraine prompted the government to take urgent measures in the spring to extend energy bill discounts and roll on the deadline to claim Italy’s ‘super bonus 110’.

As inflation hit 8 percent in Italy in June – the most severe price spike the country has experienced since 1986 – the government recognised the need to take further steps to limit the impact of the cost of living crisis.

Ministers are reportedly due to convene on Wednesday or Thursday to discuss which measures to include in the new bill.

The initial decree provided a one-time €200 ‘bonus’ payment to some categories of workers, pensioners, job seekers and benefits recipients.

This time – after debate as to whether the €200 payment would be extended – the government reportedly plans to opt instead for a small income tax cut of around one percentage point over six months for earners in a certain income bracket.

READ ALSO: EXPLAINED: How to claim Italy’s €200 cost of living bonus

That’s on top of an existing 0.8 percent cut that lasts until the end of December 2022, meaning total tax cuts of around 1.8 percent will be deducted from the monthly paychecks of eligible workers.

This reduction in the tax ‘wedge’ would no doubt be welcome news for those working in Italy, where even the state audit court has said employees face too high a tax burden.

As the tax relief is expected to last until the end of the calendar year for a six month period, the July deduction is expected to be retroactive.

So does that really mean you’ll be getting a de facto pay rise if you’re an employee in Italy?

Yes, if the measure passes and your gross income is under €35,000 – but don’t get too excited just yet.

According to most outlets including the Corriere della Sera newspaper, workers on €35,000 will save just under €27 per month (one percent of a monthly salary of €2,692 – most Italian salaries are paid out over 13 rather than 12 months to give employees a tredicesima Christmas bonus).

A few news sites have used different calculations to arrive at €75, though haven’t specified how they got there.

By Corriere’s calculation, employees on salaries of €28,000 will save around €22 per month, while those on €15,000 will save less than €12.

That means total savings over the six month period of around €160 for higher earners and €69 for lower earners – not to be sniffed at, but not life-changing.

Other measures up for discussion in the new bill are an additional extension to fuel duties discounts, and a proposal to slash VAT on everday foodstuffs such as bread and pasta.

The Local will report further details of the financial aid measures included in the ‘Aiuti bis‘ decree as they are confirmed.

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MONEY

EXPLAINED: Why people in Italy might have to carry more cash from now on

Italian retailers will no longer face fines for refusing card payments on amounts lower than €60, after the government put the brakes on a recent push towards electronic payments.

EXPLAINED: Why people in Italy might have to carry more cash from now on

Italy’s new budget bill is set to add yet another controversial chapter to the country’s long and troubled history of card payment laws.

Under Italy’s new budget law, retailers will no longer be fined for refusing card payments for smaller amounts – a controversial move that is expected to have a knock-on effect for shoppers.

READ ALSO: Key points: What Italy’s new budget law means for you 

Fines for retailers refusing card payments on amounts lower than €60 will now be suspended until at least June 2023, according to a clause included in the text of the 2023 budget law published to media on Wednesday.

As set out by the bill, the six-month suspension will allow the newly created Ministry of Enterprises and Made in Italy to “establish new exemption criteria” and “guarantee the proportionality of the given penalties”.

And, though it isn’t yet clear what new exemptions the government is currently considering nor what exactly is meant by “proportionality”, what’s certain is that residents who had started to make more purchases by card will now have to repopulate their pockets with some good old banknotes because businesses – from taxi drivers to cafes and bars – might not accept card payments for small amounts.

Fines for businesses caught refusing card payments had been introduced by Draghi’s administration back in June 2022, with retailers liable to pay “a €30 administrative fee plus four percent of the value of the transaction previously denied”, regardless of the amount owed by the customer. 

Euro banknotes in a wallet

Under Italy’s new budget law, retailers will no longer be forced to accept card payments for transactions under €60. Photo by Ina FASSBENDER / AFP

The measure angered retailers who lamented having to pay hefty bank commissions on every electronic transaction – some business owners even went as far as openly defying the law and organised themselves into a protest group (Comitato No Pos, roughly meaning ‘Anti-point-of-sale committee’). 

Given the government’s new legislation, it seems like their efforts might just have paid off. 

But, while many business owners will no doubt be happy with the suspension, others have already raised doubts about the potential ripple effects of the government’s move.

Aside from shoppers having to carry more cash than they’re currently used to, many political commentators are warning that the suspension might be a “gift to tax dodgers” in a country where, according to the latest available estimates, tax evasion costs state coffers nearly €90 billion a year.

The same was said about another of the government’s recent changes: raising the cash payment limit from 2,000 to 5,000 euros.

READ ALSO: What’s changing under Italy’s post-pandemic recovery plan? 

A previous government led by Giuseppe Conte had introduced several measures aimed at encouraging the use of electronic payments, most of which have since ended or been rolled back.

The introduction of fines for businesses refusing card payments was one of the financial objectives set out within Italy’s Recovery Plan (PNRR), which expressly refers to the fight against tax evasion as one of the country’s most urgent priorities. 

It is therefore likely that the new cabinet will at some point have to explain the latest U-turn on Recovery Plan policies in front of the EU Commission.

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