The Ink Is Almost Dry on Italy’s 15% Flat Tax Rate & Guaranteed Income

The Ink Is Almost Dry on Italy’s 15% Flat Tax Rate

Five Star, League parties near completion of government plan
Leaders to meet president Mattarella on Monday afternoon

By John Follain May 13, 2018, 8:00 PM PDT Updated on May 14, 2018, 2:48 AM PDT

Italy’s populist duo has all but completed a governing plan that includes a flat tax as low as 15 percent, a guaranteed income for the poor and a lower retirement age as they prepare to seek a green light from the president on Monday.

Luigi Di Maio, 31, of the anti-establishment Five Star Movement said he and Matteo Salvini, 45, of the anti-immigrant League have refined the last details of their “Contract for the Government of Change” in a late evening meeting in Milan on Sunday, news agency Ansa reported.

President Sergio Mattarella summoned Di Maio and Salvini for separate talks on Monday, the head of state’s office said in an emailed statement. Mattarella will meet Di Maio at 4.30 p.m., and Salvini at 6 p.m.

Campaign pledges about the spending and tax plans have fueled investor concerns that a populist administration could jeopardize state finances and slow growth in the euro zone’s third-biggest economy -- which is already the most sluggish among countries that share the common currency. Plans to reconsider treaties with Europe also prompted worries that Italy could undermine efforts for EU reform.

The parties’ economic program costs between 65 billion euros ($78 billion) and 100 billion euros, according to an estimate in newspaper Corriere della Sera on Monday, adding that the flat tax is the most expensive measure.

The two leaders continue to keep quiet about whom they will nominate as prime minister. Salvini would like economist Giulio Sapelli, a former board member of energy giant Eni, while Di Maio proposes Giuseppe Conte, a law professor at Florence University, Corriere said.

The government plan will feature the full citizen’s income that Five Star pushed in the run up to elections and scrap an earlier pension reform that had raised the retirement age, Five Star lawmaker Laura Castelli told reporters after officials ended their policy session.

Not Worried

“I’m not worried about the markets,” Castelli said. “When the markets held up on the day after the elections I understood that they are not afraid of Five Star.” Salvini’s center-right alliance led Five Star in the March 4 elections which resulted in a hung parliament, and he has been negotiating with Di Maio for more than two months to form a government.

Policies in the draft so far include a tax set at 15 percent, and at 20 percent for families with a yearly income of more than 80,000 euros, ($96,000) according to a League official who declined to be named discussing a confidential document. A Five Star official said tax rates have yet to be defined. Italy’s current income tax rates range from 23 to 43 percent.

Five Star expects the citizen’s income to cost about 17 billion euros a year, but the head of Italy’s pension agency estimates the price to be as much as 30 billion euros. No funding measures in the draft were disclosed. Italy has the second highest debt burden in Europe after Greece.

Migrants Targeted

The joint program also includes speeding up expulsions of illegal immigrants, the League official said. A central part of the party’s election platform was to seek the curbs, especially on migrants tackling the perilous Mediterranean crossing from North Africa. On foreign policy, the parties seek a review of European Union treaties, and oppose sanctions against Russia, the official added.

The ball will soon be in the court of President Mattarella. The 76-year-old former constitutional court judge, signaled over the weekend that he will play an active role in vetting the program, premier and cabinet ministers.

Depending on populist progress, Mattarella could name a premier-designate this week; he or she would meet party leaders before presenting a list of ministers to the president for approval. The new government would then be sworn in before facing a vote of confidence in both houses of parliament for a vote of confidence.

Officials from both parties say privately that candidates are being sought, and that Di Maio and Salvini have agreed that neither of them will be premier.

— With assistance by Kevin Costelloe, and Lorenzo Totaro


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