Tax hikes hit too hard

Professionals take to the streets in protest

Editorial Staff
October 19, 2006

Tens of thousands of well-to-do Italians converged on Rome recently to protest against the centre-left government’s tough 2007 budget. Organisers said the demonstrators, many of them lawyers, notaries, accountants, consultants, engineers, architects, pharmacists and doctors, numbered almost 50,000 and came from all across Italy. The protesters were prevented from reaching the Senate by hundreds of policemen. Professionals are up in arms over budget tax hikes, which they say penalise the middle classes, as well as plans to increase self-employed workers’ pension contributions and almost double the taxes on their pension schemes.


They are also furious at a deregulation decree drawn up by Economic Development Minister Pierluigi Bersani, which aims to open up protected professions to competition. The protest—the first major one against Premier Romano Prodi’s unpopular budget—was championed by former Foreign Minister Gianfranco Fini, who called the budget ‘just one big tax sting.’ The deficit-cutting, 34.7-billion-euro budget will extend the highest income tax rate of 43 percent to all those earning 75,000 euro or more yearly, instead of the current 100,000 euro and upwards. Those earning 55,000 to 75,000 euro will also see their taxes raised from 39 to 41 percent. The opposition, and even some members of the government, protest that these reforms penalise the middle classes while leaving the rich untouched.


But Prodi and Economy Minister Tommaso Padoa-Schioppa insist that only the country’s top earners will be worse off. They say that only 1.6 percent of Italians make more than 75,000 euro a year, going by official income tax declarations, and hence cannot be considered middle class. They affirm that those earning up to 40,000—some 90 percent of Italians—will see their tax burden reduced.


But the State Audit Court also objected earlier this week that the budget relied too heavily on tax hikes. It said more than 65 percent of the budget’s revenue-raising measures were made up of higher taxes and possibly even 80 percent if cash-strapped local governments decided to compensate for state funding cuts by increasing their taxes.

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