Rome

Italian retailers sound alarm over VAT rise

Reports govt may be unable to avert 1% increase in top band

Italian retailers sound alarm over VAT rise

Rome, May 20 - Italian small retailers association Confesercenti on Monday raised the alarm over a 1% rise in the top band of value added tax (VAT) scheduled for July. Premier Enrico Letta has said his left-right government will try to avert the rise, which was announced as part of efforts to restore health to Italy's public finances by his predecessor Mario Monti. But Letta may have decided that the rise in the top band of VAT from 21% to 22% cannot be avoided, according to media reports at the weekend. Confesercenti said the rise would deepen the recession, Italy's longest in over 20 years, and may also be counterproductive, as the negative effects on growth may end up driving tax revenues down rather than up. "VAT is a very serious problem," said Confesercenti President Marco Venturi, adding that a previous rise from 20% to 21% in the band had already created mayor difficulties. "The rise to 22% would have an even bigger effect on consumer spending, depressing it further. "This could have effects on tax revenues, which rather than increasing by three billion euros as forecast, could diminish by 300 million "It could have an effect on production and our country's economic prospects. "You have to try to tackle the problems with the public finances by cutting public spending - not expenditure to encourage production or for social services, but the waste and many excesses that exist in our country". On Sunday another retail association, Confcommercio, said the planned VAT rise would cost the average family made up of three people 135 euros a year. It added that 26,000 retailers risked going out of business this year.

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