On Saturday, President Giorgio Napolitano signed the emergency decree introducing sweeping measures to cut the fiscal deficit by some €45.5 billion and balance the budget in 2013, a year ahead of its previous schedule.
It was a “missed opportunity”, according to the chief economist of the Paris-based Organisation for Economic Co-operation and Development, Pier Carlo Padoan.
He said the plan was positive in the pledge to bring forward the balanced budget but it lacked measures to boost growth and tackle tax evasion. Employers’ lobby Confindustria estimates Italy’s tax evasion totals €120bn.
CGIL union leader Susanna Camusso told la Repubblica the package “hits only those who already pay their taxes”.
The austerity plan sets a “solidarity tax” on those earning more than €90,000 per year, to be levied for three years.
Economists, unionists and business leaders agreed that a tax on wealth rather than on labour income would be better because it would have targeted tax evaders who do not declare their real income but often own large assets.
Ferrari chairman Luca Cordero di Montezemolo told Corriere della Sera newspaper the solidarity tax was “a scandal”.
“It’s one thing to ask for a solidarity contribution from me or (prime minister Silvio) Berlusconi, but it’s different to hit an executive supporting his family,” he said.
Former European commissioner Mario Monti said the package lacked fairness, weighed too heavily on the middle classes and did too little to help growth.
In an interview with business daily Il Sole 24 Ore Confindustria head Emma Marcegaglia said the new tax regime could force managers to seek employment abroad, adding to Italy’s haemorrhage of talented workers.
“We are reaching an absolutely disproportionate tax rate on so-called high incomes,” Marcegalia said.
She also called the so-called Robin Hood Tax, which is due to hit companies in the energy sector with more than €10 million in revenues and €1m in taxable income, a “folly”.
Marcegaglia called for an increase in value-added tax and a reform of the system allowing early retirement on the basis of years of pension contributions.
Pension spending in Italy is about two percentage points above the eurozone average.
The austerity decree must be passed by parliament within 60 days, during which it will almost certainly be amended.
Debate will begin in the senate on August 22.
Some €4bn of the €20bn of savings slated for 2012 and €12bn of the €25.5bn set for 2013 are to come through tax and welfare measures still to be drawn up.
French economist Jean-Paul Fitoussi told Rome daily Il Messaggero that market pressure had forced Italy to take steps which were of no real value and would damage its weak growth.
“Italy is like the protagonist of a Greek tragedy: forced to do things that will be useless and damaging in the long run, but necessary for survival in the short run.”