According to our assessments and based on the Bank of Italy’s quarterly econometric model, the expansionary impact of this measure will be limited. This assessment is consistent with the Government’s estimates contained in the Update. The impact could prove even more limited, or nil, if the decision not to increase VAT was already incorporated in households’ expectations.
At the same time, the plan is to expand the number of those eligible for the ‘simplified’ taxation system in place for small firms, professionals and tradespeople. The Government has announced that it intends to introduce a new poverty reduction mechanism in 2019 (‘citizenship income’) and to alter the requirements for pension eligibility, making them less stringent.