Italy 1% VAT increase proposal

Updated 18 September 2011

5 December 2011 Update Click here to read about second proposed VAT rise of 2% from 21% to 23%.

The Italian VAT rate has increased by 1% to 21%. A law decree dated 11 August 2011, number 138, has been approved by both houses of the Italian parliament. The implementation date was Saturday 17 September 2011.

In June 2011, the Italian cabinet had submitted a plan for a VAT increase of 1%, taking the standard rate from 20% to 21% in 2014.

Click here to read about Italian VAT compliance

This rise in VAT came as part of a range of first austerity measures designed to reassure nervous bond markets. The aim was to balance the state budget by 2014. The plans had been prepared following warnings of an Italian sovereign debt downgrade by the major credit agencies. However, the rise was dropped during August as the measures were watered down

Financial markets and European Central Bank force Italian VAT rise back on austerity agenda

Following continued market doubts over the summer about the ability of Italy to meet on going debt repayments given its flat GDP growth, the government issued a second round of austerity measures on Friday 12 August. This excluded mention of a VAT increase. However, the 1% VAT hike was reintroduced following pressure from the EU and European Central Bank for Italy to give a clear plan for the reduction of its deficit.

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