Friday, August 30, 2013

Berlusconi’s party celebrates the abrogation of Imu (forgetting about the new “Service Tax”)

So, Berlusconi was sentenced to prison for tax fraud. Parliament has to vote concerning the possible loss of his senatorial title. The very survival of his party The People of Freedom is clearly linked to what will happen to the leader. Hence, we might expect both Berlusconi and his party to be on the edge of despair. Right?
Wrong. They are, in fact, celebrating a “victory” regarding the government’s decision to abolish a property tax, the “Imu”, introduced in 2011 by Monti’s technocrats.
This is a “victory” for Berlusconi because he actually based his whole electoral campaign on the absurd promise to cancel, and even to pay back, the Imu tax.  His party has been pressuring the government for months, threatening to withdraw their support, if they did not abolish the Imu. PM Enrico Letta finally gave in.

And we saw plenty of tweets, statements,  and any other sort of announcements celebrating the success of The People of Freedom’s pledge. Angelino Alfano, party’s secretary, tweeted: “Now the word “Imu” will disappear from dictionaries”.
What Berlusconi and his minions seem to have casually left out is the fact that the Imu is far from disappearing. What actually happened is that the government replaced Imu with a “Service Tax”. Imu was a property tax; the Service Tax, which will become law in 2014, is instead a tax levied by local authorities on the use of local services, as the name itself explains. The Democratic Party called it a “federal tax”, as the national government will not take blame if its revenue is not spent efficiently. Since this a tax not on property but on services, also tenants paying rent will be liable to pay for it.
But anyway, the fact that the actual word “Imu” will disappear is enough to claim victory for The People of Freedom.  And while they rejoice thinking of the votes they might win back, the government still has no idea about how to tackle the huge revenue gap (approximately €4bn) they are left with.

As the Financial Times accurately put it: “Il Cavaliere, as ever, has played clever politics. But while he may claim victory against rivals, Italy is once again the loser”.