Rome

IMU rift threatens govt after IMF call

PdL irked by advice to keep hated property tax

IMU rift threatens govt after IMF call

(By Denis Greenan) Rome, July 5 - A rift over ex-premier Silvio Berlusconi's vow to scrap an unpopular housing tax threatened to undermine the unprecedented right-left government Friday after the International Monetary Fund (IMF) said Italy should keep it. Rumblings over the tax, IMU, have hit the government ever since the centre-left Democratic Party (PD) joined Berlusconi's People of Freedom (PdL) party as strange bedfellows to tackle Italy's worst recession in 20 years and pass key reforms after a two-month post-election impasse in May. PD Premier Enrico Letta put off a June instalment and said Thursday the government would settle the deeply divisive issue before the summer recess - only for various ministers to say there was not enough cash in the kitty to cover its removal. The rift was worsened by the IMF saying IMU was a "good and fair" tax, and it continued to roil politics Friday when the Organisation for Economic Cooperation and Development (OECD) said essentially the same thing. After several PdL bigwigs had sounded off, its Senate whip, Renato Schifani, said a government crisis was "inevitable" unless the PD disowned the IMF statement. Letta sought to restore calm by repeating that the government would "supersede" IMU in a "collegial" decision, but the PdL looked hard to mollify. Deputy Premier and Interior Minister Angelino Alfano, seen as a possible heir to Berlusconi, bluntly said: "We will not accept the IMF's advice". Earlier, the PdL's ire roared across Rome. Reaction was swift and angry to the IMF and OECD recommendations to retain IMU, whose elimination was the key pledge behind Berlusconi's surprising comeback in February's general election. "We have already made a commitment," to cut the tax, said the head of the Lower House finance committee, Daniele Capezzone, a long-time former PdL spokesman. "Reform is expected by the citizens," added Capezzone. The IMF said Thursday that Italy cannot afford the billions of lost revenues that are now generated by IMU. It also said IMU is among "the fairest and most efficient" forms of taxation, but noted that there should be improvements, calling for an "accelerated" revision of the country's land-surveying policies, "in order to ensure equity". Three-time premier Berlusconi has repeatedly insisted IMU must disappear and last year's proceeds returned to taxpayers. Letta, whose PD narrowly beat the PdL in the general election but failed to secure a majority, has indicated IMU will be changed to exempt most primary residences, except for those with big property holdings. But the PD has never said it will scrap IMU entirely and repay last year's take. The IMF report came the same day that Letta said the government would hammer out a solution to IMU before the summer recess starting August 15. Echoing the IMF, the chief economist and Deputy Secretary General of the Organisation for Economic Cooperation and Development (OECD), Pier Carlo Padoan, said Friday the government should keep IMU. He suggested that property taxes are the least likely to dampen economic growth compared with payroll and other labour taxes that should be cut to boost Italy's recession-plagued economy. Several ministers close to Letta, including Economy Minister Fabrizio Saccomanni, said the government would be hard-pressed to find alternative sources of revenue to plug the gap left by IMU and it was "sensible" to heed the IMF's call. But the PdL's deputy Senate speaker, Maurizio Gasparri, retorted: "We will not submit to violence from these incompetent managers of global finances, who are leading the West headlong towards disaster". Another PdL MP, Elvira Savino, said the government should simply ignore the IMF and OECD. "The Italian government cannot be supine in the face of advice from international bodies, otherwise it would lose credibility and authority," she said. Some observers think the issue may eventually be fudged. The squabbling partners, they say, could patch up their differences by agreeing to get rid of IMU in name only and later reintroduce a much-watered-down version. Berlusconi, for the moment, is angrily denying this suggestion. Despite the IMU row, the government went ahead with its reform programme Friday by launching a bill to scrap Italy's superfluous and expensive provinces. After a recent hard-won exemption from EU budget restraints for job creation, the government now means to press on with economic reforms to revive growth by helping businesses and cutting record unemployment. Letta has set an 18-month deadline for key institutional reforms including a new electoral law to make it more likely a clear winner emerges than from the current malfunctioning system, disowned as a 'Pig's Sty' by its very creator in 2006.

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