November 4, 2019 / 3:13 PM / a month ago

Factbox: Key tax and spending measures in Italy's 2020 budget

ROME (Reuters) - After weeks of internal haggling, the Italian government on Monday presented its 2020 budget to parliament, where it must be approved by the end of the year.

The ruling parties, the anti-establishment 5-Star Movement and the center-left Democratic Party (PD), have targeted the headline deficit to remain at 2.2% of gross domestic product in 2020 for a third consecutive year.

The structural deficit, which strips out the effects of economic growth fluctuations, is targeted to rise by 0.1 percentage points of GDP, reversing a commitment made by Italy to the European Commission in July to reduce it by 0.6 points.

The budget scraps an increase in sales tax worth 23 billion euros ($25.65 billion) which was due to kick in from January, and contains 8 billion euros of tax cuts and higher spending aimed at stimulating the euro zone’s third-largest economy.

This is offset by tax hikes and cuts elsewhere in the budget in order to avoid dispute with the European Commission, leaving the fiscal stance neutral.

Following are some of the budget’s main measures:

EXPANSIONARY MEASURES

* Lower income tax for middle-earners which will cost state coffers 3 billion euros in 2020.

* Incentives to encourage the use of credit and debit cards to tackle tax evasion, worth 3 billion euros.

* Fiscal incentives to help companies raise capital, restoring a measure scrapped one year ago. The measures is aimed at encouraging firms to issue shares rather that resort to debt.

* Lower property taxes on factories and warehouses.

HOW TO FINANCE THEM

* Measures to fight tax evasion aimed at raising 3 billion euros. The package includes higher prison sentences, sanctions for retailers who do not accept credit cards and a lower threshold above which it is illegal to use cash

* 2.7-billion euros of cuts to central government spending on goods and services.

* A reduction in the amount of loan losses that banks can deduct from their taxable income, aimed at raising 1.6 billion euros.

* New taxes on single-use plastic and sugary drinks to raise 1.3 billion euros.

* A new “web-tax” on digital companies aimed to raise 708 million euros per year.

* Tax increase on high-emission company cars.

* Higher excise duties on fuel for lorries and cigarette papers.

* Tougher tax rules for toll road operators to yield 341 million in 2020 and 170 from 2021.

Reporting by Giuseppe Fonte and Gavin Jones; Editing by Alison Williams

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