Rome

Tax turmoil continues within Letta govt alliance

PD, Berlusconi's party bickering over VAT, IMU property tax

Tax turmoil continues within Letta govt alliance

Rome, June 17 - The unprecedented left-right alliance supporting Premier Enrico Letta's government continued to be hit by turmoil over taxes on Monday, feeding speculation the administration could be short-lived. Letta was sworn in as prime minister in April after his centre-left Democratic Party (PD) reluctantly agreed to form a coalition with their bitter rivals in ex-premier Silvio Berlusconi's centre-right People of Freedom (PdL) party to end two months of deadlock following February's inconclusive general election. But since then the PD and PdL have been bickering about several issues, above all tax. The PdL has threatened to pull its support and sink 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 the key pledge Berlusconi made in the election campaign. But the centre-right party also wants to avert a rise in the top band of value added tax (VAT), from 21% to 22%, that is scheduled for July after being put in place by former premier Mario Monti's technocrat administration. The PdL fears the VAT rise will further depress weak consumer spending and deepen the country's longest recession in over 20 years. But Industry Minister Flavio Zanonato said in an interview published in Monday's edition of Rome-based daily La Repubblica that "it is very difficult to find the money" to not raise VAT. He added that he hoped Economy Minister Fabrizio Saccomanni manages to "pull off a miracle" and stop VAT increasing. The PdL hit back with senior Senator Fabrizio Cicchitto saying that "Zanonato is a gaffe merchant or a (political) killer". Saccomanni, a former Bank of Italy director general who is not a member of a party, said last week that it would not be possible to avert the VAT rise and scrap IMU. He was contradicted soon after by Deputy Premier and Interior Minister Angelino Alfano, who is the PdL's secretary. In a separate interview with Corriere della Sera, Relations with Parliament Minister Dario Franceschini, another PD man, said combatting youth unemployment was more of a priority than IMU and VAT, with around four out of 10 Italians aged 15-to-24 out of work. There are media reports that part of the PD unhappy about being in government with the PdL may want to see Letta's administration fall to make it possible to form a new executive with the left-wing SEL party and possible defector lawmakers from the anti-establishment 5-Star Movement.

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