MNI EXCLUSIVE:Italy To Drop Property Tax Overhaul Amid Tension

By Silvia Marchetti

     ROME(MNI) - Italy could drop an overhaul of property taxes from a planned

reform of taxation to avoid fuelling tensions within the increasingly shaky

governing coalition, sources told MNI.

     The small Italia Viva party, led by former premier Matteo Renzi, whose

opposition to a planned judicial reform has already led to speculation the

coalition might fall, is also opposed to the proposed revision of the country's

land registry, used to calculate property values for tax purposes, which has

been unchanged since the 1940s. A source with links to the centre-left

Democratic Party said that in order to placate Renzi the land registry measure

might be left out of a planned tax shake-up, which would also cut income tax and

reduce the number of tax bands.

     "We do not exclude that in the near future the land registry could be

updated ... but this would need to be done with extreme care," said the source,

who follows fiscal matters.

     The International Monetary Fund recently urged Italy to update its land

registry taxation scheme to current property market prices, and the Democrats

had wanted a reform including a reassessment of parameters used to calculate the

values of properties from residential homes to warehouses, and to simplify the

system. The total value of Italy's housing stock amounts to EUR6 trillion,

government data shows, and the Democrats argue that the current arrangement

leads to anomalies, sometimes taxing valuable historic houses in city centres

less than properties in out-of-the-way suburbs or rural locations.

     --PUT ON HOLD

     Italia Viva says the property shakeup would push up taxes and be unpopular

with voters. A second Democrat official argued that for the sake of the

coalition's survival the land registry update could be put on hold even if the

issue must still be addressed later in the legislature.

     "It is not good timing, but perhaps in the near future, it could be

discussed and linked to the wider fiscal reform," said the source.

     The Democrats' main coalition partner, the populist 5-Star Movement, has

yet to express a clear position on the proposed reform of the land registry, but

some sources close to 5-Star said they feared it would trigger a rise in

property taxes.

     Different Italian governments have attempted land registry reforms over the

past five years, but always ended up shunting the plans to the backburner. In

October of last year the government was forced to scrap a property reform from

its draft budgetary plan but its plans for a tax system shakeup have put the

issue back on the table. Renzi opposed a similar plan when he was prime minister

in 2015.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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