Istalia

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New budget law: a liberal and pro-business vision

The measure provides for streamlining public spending, business incentives and new strategic investments. PNL pushes again on the income tax reform but UOD is still immovable: PRL tries to negotiate

January 5650

ROMULA - The Council of Ministers has presented the new Budget Law to Parliament, outlining a maneuver consistent with the reform framework already illustrated since the early days of the Giunio Government. The approach is clearly inspired by a liberal and pro-business vision, attentive to the balance of public accounts but also oriented to new strategic investments.

The maneuver lies in a massive rationalization of public spending, made possible by a series of technical cost-benefit analyses launched in recent months on a large scale. These assessments, in particular, aim to identify areas of waste and inefficiency within the welfare system, public administration and state services, with the declared objective of freeing up resources for active policies and strategic investments.

The approach to public spending has been revised to take into account the ongoing structural reforms. In fact, a progressive reduction in direct social spending is expected, offset by the strengthening of the role of private actors and a public-private partnership model that should make the provision of health, education and welfare services more efficient.

Another fundamental pillar of the new budget law is the package of pro-business tax measures, designed to boost the competitiveness of the Istalian production system, in particular by promoting investment, employment and corporate capitalization. Among the main innovations is the reduction of taxation on undistributed profits, provided that they are reinvested in strategic activities such as innovation, production expansion, training or the creation of capital reserves. Furthermore, the sums set aside for depreciation, guarantees and structural investments will be fully or partially deductible, incentivizing companies to strengthen their financial bases.

For small and medium-sized enterprises, the law provides for the introduction of a proportional or reduced flat tax, applicable only if the company respects certain parameters for reinvestment of profits and increase in employment. The measure, presented as highly meritocratic, aims to favor those dynamic companies that bet on growth and stable employment.

Moreover, an ambitious plan for the reform of tax obligations has been announced, which will lead to the creation of a “General Digital Office for Businesses”, through which it will be possible to manage all relationships with the tax authorities. The aim is to streamline bureaucracy, reduce administrative times and costs and offer more efficient tools to businesses to fulfill their obligations.

Finally, the government has ordered the abolition of a series of residual excise duties, a legacy of the war period, still in force since the Great Patriotic War of Liberation and never formally repealed. A measure that, as the opposition points out, comes strategically between the holidays of Hallownight and "Coronia" (as the "Coronation of the Lord" festivity is known in Istalia), arousing the suspicion of an operation with a propagandistic flavor. The executive, however, claims the will to definitively close with a legacy that is now anachronistic, ensuring that the missing resources will be largely compensated by the increase in tax revenue expected thanks to the activation of the productive fabric and the emergence of the underground economy, favored by the reforms already underway.

According to the government, these measures will strengthen the entire productive fabric, especially in its most dynamic and innovative components, and will help create an economic environment more favorable to free initiative, growth and employment.

On the expansionary policy side, the budget law significantly increases the funds allocated to some sectors considered strategic. In particular, a strengthening of the National Fund for Education and Research is noted, which will continue to represent the main instrument for the improvement of quality and internationalization of the Istalian university system and research.

AISA (the Istalian space agency) will also receive new funding with the aim of supporting very ambitious missions and research projects and strengthening the national space sector. The various funds dedicated to industry, crafts and agriculture will also receive new funding, each calibrated to the specific needs of their respective sectors. The budget law provides for a general strengthening of these funds, with a specific focus on new businesses, and in particular on young start-ups, which will be able to benefit from significant tax breaks and procedural simplifications for the first five years of activity, in order to incentivize entrepreneurship and support the growth of the national production fabric.

Functional to the confirmed labor reform, on which the three partners of the executive had not yet agreed at the time of the government agreement, and for this reason it had been put on the back burner and not mentioned at the time of the announcement of the Giunio Government's programs, the budget will law provides for the reduction of social security contributions for new hires in the categories considered priority (young people under 35) with a possible extension also to people residing in areas with high unemployment and a tax credit for companies that invest in certified professional training for employees.

While the measures for businesses were welcomed by the production world, the failure to include the income tax reform has caused quite a bit of discontent. In particular, the National Liberal Party, from which the Minister of Finance Franco Del Nibbio comes, had made itself the spokesperson for the proposal of a sharp reduction in tax brackets, supported by PRL and actively promoted also by Democracy & Freedom, which, we remember you, externally supports the Giunio government.

However, the Hosian Democratic Union vetoed it even before the elections, once again blocking the new attepted effort by the Finance Minister of revising the highly progressive structure of the current income tax, considering it consistent with its principles inspired by the Hosian social doctrine. Various voices within the UOD have never made a secret of even supporting the idea of a super tax on large estates, as a tool for redistributing wealth in the name of solidarity.

In this phase, the Liberal Republican Party, junior partner of the executive, has attempted to mediate between the different positions, opening a technical-political table with the other majority parties to identify a compromise formula that allows for the simplification of the tax system without affecting progressivity. Sources close to Prime Minister Valeriano Giunio describe Del Nibbio, a loyal follower of the Minister Secretary of State, as determined but pragmatic and ready to refine the proposal in view of the next tax reform law.

The opposition has reacted harshly to the budget law presented by the Giunio government. The New Communist Party has denounced an unbalanced maneuver, designed to strengthen capital at the expense of the welfare state, criticizing in particular the reduction of public spending and the strengthening of the role of private individuals in the provision of essential services.

The Democratic Socialist Party has accused it of disguised cuts and of abandonment of the principles of equity, while the leadership has
pointed the finger at the decision to cut some historic excise taxes under the Hollowtide period, calling it a populist and propagandistic move. According to the PSD secretary, Fabrio Moccia, it is an electoral gift that hides deception: citizens will pay the price later on for a state that is less present and less capable of protecting the weakest.