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The Budget Law for 2017 continues the strategy of cutting taxes and boosting investments

Rome, 21 October 2016 – The Ministry of Economy and Finance has sent its Draft Budgetary Plan to the European Commission. This is the document that summarises the Government’s economic and financial programme in a format common to all EU member states that share the euro as their currency.
The document reports on the Government’s macroeconomic assessment and priority actions, updates on the progress of the national reform programme – with particular reference to the degree of response to the specific recommendations of the European Commission – and on the budget for 2017, broken down by type of programmes and their financial impact (in terms of percentage of GDP).

Tax cuts.
In addition to a cut in the IRES corporate tax from 27.5% to 24% (already in force as it was introduced in the previous budget law), the effort to cut taxes continues in 2017 with the scrapping of the V.A.T. increase and other levies. This measure accounts for for 0.9% of GDP (€ 15.3 billion). Additionally, the so-called agricultural income tax has been abolished for 3 years. With this measure, farming income and income from land ownership is not included in the IRPEF taxable income of farm workers and agricultural entrepreneurs, as a way to boost the growth of the high-quality farming sector.
Competitiveness.
In order to promote investments that can increase the competitiveness of the productive system, the super-amortization of 140% on the purchase of new capital goods is extended, and hyper-amortization of 250% is introduced for tangible and intangible investments in technology and the digital economy. There are also incentives for investment in research and development. Funding to support investments for small and medium enterprises is renewed, the Indemnity Fund is refinanced, and there are new incentives for start-ups, innovative SMEs, and SMEs in social impact sectors. Tax deductions for productivity bonuses are strengthened as a way to encourage second-level contract agreements that can tie labour cost dynamics to productivity.
Simplification of the tax system and fight against tax evasion
Tax incentives for capital strengthening have been rationalized (they were no longer coherent with current interest rates). The IRI income tax rate for entrepreneurs is set at the same level as the corporate tax rate (24%), partly in order to strengthen the capital structure of SMEs. Additionally, the terms for the voluntary regularization of undeclared assets in Italy and abroad are extended in order to permanently broaden the tax base. Additionally, income and net value of production for partnerships and companies under a cash accounting regime will be determined on a cash basis rather than on an accrual basis to simplify tax rules for SMEs. Finally, new customs rules have been introduced to fight tax evasion.
Public spending review.
Public spending reviews are continuing through the cutting of specific costs, rationalization of the procurement process, and digitalization (particularly by accelerating the digitalization of medical records).
Interventions for building renovations, energy retrofits and for compliance with anti-seismic regulations.
Tax deductions for building renovations – including both energy retrofits and interventions to comply with anti-seismic regulations – have been extended and expanded. Additionally, resources have been earmarked for investments in public works for territorial protection and risk prevention.
Other measures.
The 2017 budget law also includes resources to fight poverty, increase the 14th monthly payment for low-income pensioners, strengthen the public administration in terms of staff and human resources, and spending for the emergencies related to earthquakes and the inflow of refugees.

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