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Italy Weighs VAT Changes, Penalty on Cash as Conte Seeks Revenue

Italy Drafting 2020 Budget in Full Compliance With EU Rules

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Italy’s government, which has ruled out allowing an automatic increase in VAT to kick in, is nonetheless weighing changes in the structure of the tax as it searches for revenue for its next budget, newspapers reported Friday.

The administration led by Giuseppe Conte is determined to use the budget, due to be presented to the European Union next month, to show voters it can deliver reform. The government could cut taxes on consumers’ utility bills, following a model used in Portugal, which saw levies on gas and electricity fall from 23% to 6%, la Repubblica reported.

While Five Star Movement leader Luigi Di Maio, whose party rules in a coalition with the Democratic Party, issued a strong denial on Thursday that the government is weighing any changes to VAT, Italian media reported that rates on purchases of luxury goods could effectively rise to offset tax relief in other areas.

Italy Weighs VAT Changes, Penalty on Cash as Conte Seeks Revenue

Conte’s team is also weighing a number of measures to incentivize electronic payment as part of a battle against chronic tax evasion. Under one scenario, cash payment could be as much as 3% costlier than paying with a credit card, Il Sole 24 Ore reported.

The 2020 budget will be fully compliant with EU rules, as Italy focuses on boosting the country’s credibility within the bloc, one government official said earlier this week.

Conte is looking to turn the page on the previous administration’s repeated revisions, especially of growth forecasts. His last coalition, including Five Star and the rightist League of Matteo Salvini, twice brought Italy to the brink of an EU debt procedure. The government is targeting a deficit of around 2% to 2.1% of output next year, an official said.

This will show the EU that Italy is not taking excessive advantage of the new positive climate between Rome and Brussels, the official said, though Italian media on Friday reported slightly higher deficit figures of 2.2%-2.3%.

Any flexibility on the deficit will be agreed on with Brussels before Finance Minister Roberto Gualtieri gives an update on spending plans -- a report that was originally scheduled for Friday, but is now expected to be pushed back until next week, to give the government more time to work on the numbers.

The cabinet will meet on the update Monday at 6:30 p.m., Ansa news agency reported.

To contact the reporter on this story: Jerrold Colten in Milan at jcolten@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Zoe Schneeweiss

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