MNI SOURCES: Italy Readies Tax, Debt Incentives To Spur Growth

By Silvia Marchetti

     ROME (MNI) - Italy's government is set to announce plans for tax deductions

for corporate investment and state guarantees for small firms' bond issuance, in

pro-growth measures which will lay the foundations of the country's 2020 budget,

sources told MNI.

     The measures are expected to allow firms to claim depreciation of up to

130% on total investments in new machinery and digital innovation, spread across

three to five years, said an official from the co-ruling League party.

     "We're entering into phase two of our accommodative stance: after the

minimum wage and pension reform, our focus is now on helping Italy's industrial

sector increase its competitiveness and profitability", said the official.

     The plans could also include tax credit breaks for investments in research

and state guarantees for small- and medium-sized firms to raise up to E2.5

million for strategic projects from mini-bonds.

     "Italy's industrial backbone is made for over 90% by small firms who have a

hard time raising funding levels and getting money from banks", said another

source with ties to the 5-Stars Movement.

     The government is also expected to approve streamlined procedures for

public infrastructure tenders of up to E5 million, although a League party

spokesperson denied that any illegal buildings and projects already underway

would be granted an amnesty.

     The tax incentives will form the pillar of Italy's next fiscal plan on

which the 2020 budget will be built. The plan must be cleared by the government

by April 10.

     --NO FORECASTS

     According to sources for the first time in Italy's budgetary history this

document, dubbed DEF, will probably not include deficit or other fiscal targets

or macroeconomic projections.

     "We're sticking to our 1% growth target for this year, already cut from

1.5%, so we're being realistic. Despite the gloomy global and European outlook

we are still confident that our economy will pick up in the second quarter of

this year. The tax incentives and the new growth plan have the goal of soothing

markets and reinforcing our pro-growth measures", said the League source.

     The governing coalition, which narrowly avoided an EU excessive debt

procedure at the end of last year, is not overly concerned at this stage with

further curbing its budget shortfall, officials said.

     "With all that is going on, with trade tensions and the European Central

Bank cutting growth forecasts for the whole eurozone, we can't lose time on

decimals but need to concentrate on defining additional tools to support

internal consumption", said the 5-Stars official, referring to positive signs in

industrial turnover and orders data for January.

     The League party is also pushing for a second phase for its promised 15%

flat tax, although this has met with resistance from 5-Stars, which has said it

is too expensive.

     According to a close aide to Deputy Prime Minister Matteo Salvini,

extending the flat tax to families with a total annual income of up to E50,000

would cost roughly E12 billion.

     "We might end up with a compromise at the end, but the flat tax is our

electoral flagship. We supported the 5-Stars' basic income, so they will endorse

this measure which is written in the ruling contract", said the League official.

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

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