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Italy worst hit by tax hikes

Oct 05 2012 14:51
Rome - Italy has experienced the biggest tax hikes in Europe over the past decade, according to a research released on Friday by Deutsche Bank.

The overall tax burden in Italy rose by almost 1% of gross domestic product (GDP) during 2000-2010, whereas it fell by an average of 1.5% in the 27-member European Union, the German bank calculated.

Over the same period, the share of taxation compared to GDP decreased by about 3.5% in Greece, 3% in Germany, just under 2% in Spain, about 1.8% in France and a little over 1% in Britain.

Italy did cut taxes on capital and consumption, but raised them disproportionally on labour, Deutsche Bank found, noting that such policies normally stifle economic growth.

"What is generally recommended is a growth-conducive tax system which minimises the distorting effects of taxation on the growth factors (labour, capital and technological progress)," the study noted.

Italy suffered from low GDP growth throughout the last decade, and has taken a harder hit from the post-2008 global economic crisis than other industrialised nations. Its economy plunged back into recession last year and is expected to come out of it only in 2013.

A technocratic government led by Prime Minister Mario Monti came into office in November to tackle the country's debt and growth problems. One of its major acts was the introduction a levy on real estate, while labour taxes were left untouched.

Monti has repeatedly said that taxes cannot be lowered immediately because of Italy's high levels of debt. But on Thursday he opened the door to longer-term moves in that direction.

He said he could "not rule out setting out a path, even only a first step" towards tax cuts before his government's term ends in April.

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