Gradual VAT cut on the way

Gradual VAT cut on the way

The Finance Ministry is planning to gradually return value-added tax rates to lower levels as of 2021, expecting to boost consumption while increasing tax compliance.

Sources say the ministry’s plan provides for the decline of the top VAT rate in stages from 24% to 20%, and the middle rate from 13% to 10% by the end of the government’s four-year term in mid-2023. The government is already calculating a rate of 10% for services related to tourism, including food service, which would make the country more competitive.

Since April 2005, when the top VAT rate rose from 18% to 19%, there have been dozens of adjustments and commodity shifts from the lower to the higher rates and vice-versa.

The VAT cut was in the government’s original plans, which aimed at a reduction by two percentage points, i.e. from 24% to 22% and from 13% to 11%. It is now examining the further reduction to 20% and 10% respectively if conditions allow it.

A senior ministry official said the VAT rate cut will come with the expansion of the use of online payments through regulatory decisions and incentives to taxpayers. That means almost the entire economy will have to use card terminals (PoS), while measures that have frozen due to the health crisis will reemerge, such as incentives like the lotteries.

Ministry officials add that online bookkeeping and online invoices will reduce VAT revenue losses significantly. In Italy, over the first six months that online bookkeeping was implement, authorities monitored corporate invoices and prevented the unfair VAT rebate of 2 billion euros in total.

With the activation of the new system, the Independent Authority for Public Revenue will be able to keep a watchful electronic eye over corporate invoices, as it will be able to monitor, crosscheck and verify the data presented on the companies’ e-books. The automatic auditing system will also immediately unlock the rebates in income tax and VAT that consistent enterprises are entitled to.

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