MNI INTERVIEW: Italy's League Aims to Extend Flat Tax - Borghi

By Silvia Marchetti

     ROME(MNI) - Italy's right wing League party, which may get a run at power

if the country's governing coalition breaks, would include promises for a flat

tax for both employees and firms and regional fiscal autonomy in a

deficit-funded programme in the event of early elections, its chief economist

and the president of the lower house of parliament's budget committee told MNI.

     The last government, in which the League served as coalition partners to

the populist 5-Star Movement until it collapsed in August, established a 15%

flat tax for the self-employed earning less than EUR65,000 a year, but this time

the rate would be extended to "all tax payers", both individual and corporate,

as part of a major simplification of the taxation system which would eliminate

deductions and rebates, Claudio Borghi said in an interview.

     "This first flat tax was a successful move that simplifies taxation and

improves the lives of many workers by reducing their accountability burden. We

want to finish what we started, extend it to everyone and complete the tax

overhaul", said Borghi.

     --BIGGER DEFICIT

     While specifics of the proposed tax would be discussed at an upcoming party

Congress, they would be funded by a rise in Italy's fiscal deficit, he said.

     "That's the main reason why we fell apart with 5-Star: we wanted to cut

taxes by slightly raising the deficit target but they opposed it," Borghi said,

in an interview which took place as tension between 5-Star and its new coalition

partner, the centre-left Democrats, threatens to prompt early elections three

years ahead of time.

     The League, with around 30% in polls, looks set to emerge as the winner of

any election, probably at the head of a right-leaning coalition.

     Borghi said the League also plans to push through stricter justice rules,

cut red tape for infrastructure investment and boost fiscal autonomy, allowing

regions to withhold up to 90% of the taxes that now flow into central state

coffers.

     Borghi has previously argued for Italy to leave the euro, but has softened

his stance. He continues to call for changes to Europe's Stability and Growth

Pact, in particular the rule limiting budget deficits to 3% of gross domestic

product, and calls proposed changes to the eurozone bailout fund, the European

Stability Mechanism, a "disaster" which must be stopped. Italian opposition to

the ESM reform, also shared by many members of 5-Star, has threatened to sink

the reform, which is key to remodelling the eurozone's financial architecture.

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

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