Italy 2% VAT rise postponed till 2013

11 October 2012 update to this story.

The Italian government has now proposed that the Italian 2013 VAT rise will now only be 1%. Click here to read more.

 

6 July 2012

The planned increase in Italian VAT from 21% to 23% has been delayed until July 2013. There will also be a rise in the reduced VAT rate, currently 10%.

The rise was originally announced in December 2011, and scheduled for September 2012. It followed a 1% Italian VAT increase in September 2011 to 21%. Since then there has been widespread concern in Italy and across Europe that such austerity tax rises are driving down growth prospects and so undermining any chance of a recovery. VAT revenues have actually declined since the 1% VAT rise as demand has dropped - Italian consumer confidence hit its lowest level ever in June according to the national statistics office, ISTAT. The Italian Premier, Mario Monti, has stated on a number of occasions in recent months that Italy should instead look to cuts in expenditure to help reduce the government deficit.

Today, the Italian government agreed to postpone the 2% hike until next year, and to make it only temporary, as follows:

Current Italian VAT rate: standard rate 21%, reduced rate 10%
July 2013: standard rate 23%, reduced rate 12%
January 2014: standard rate 22%, reduced rate 11%

This change will be published in the Italian Gazette on 7th July. You can read more about Italian VAT compliance here. The delay in raising VAT will cost an estimated Euro 6 billion in revenues, and much of this loss will come from cuts to healthcare and the civil service.

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