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Italian parliament approves mini-budget requested by Brussels

Italian parliament approves mini-budget requested by Brussels

ROME (Reuters) – Italy’s government won a vote of confidence in parliament on a mini-budget on Thursday, agreeing to 3.4 billion euros ($3.8 billion) in deficit-cutting measures to appease the European Commission.

Italian Prime Minister Paolo Gentiloni attends the G7 summit in Taormina, Sicily, Italy, May 26, 2017.REUTERS/Dylan Martinez

The package includes increased taxes on tobacco and gambling, a renewed crackdown on tax evasion and efforts to raise taxes on internet companies.

The committee had threatened disciplinary action against Prime Minister Paolo Gentiloni’s center-left government if it did not adopt previously promised deficit-cutting plans.

The Senate, the upper house, passed the bill by a vote of 144 to 104. The House of Commons has already given the green light to the bill.

Thanks to the new measures, the budget deficit is targeted at 2.1 percent of gross domestic product this year, compared with 2.4 percent in 2016.

Italy, which has the highest public debt in the euro zone after Greece, initially pledged to cut its deficit to 1.8% of GDP and angered Brussels when it approved a budget in December that raised the deficit target to 2.3%.

The 2.1 percent target was seen as a compromise, with Italy saying it needed the extra leeway to help it pay for rebuilding after an earthquake in the center of the country and pay for an influx of migrants from Africa.

Much of the extra savings approved on Thursday came from changes to VAT payment rules, which the government said would reduce tax evasion.

From now on, all public bodies will pay VAT directly to the Ministry of Finance when purchasing goods and services, rather than to suppliers.

The bill also introduced a two-voucher system to pay workers, months after the government bowed to pressure from unions to scrap a similar scheme.

Companies with up to five employees (except construction companies) will be able to pay wages in vouchers worth 9 euros each. A company can pay up to €5,000 in vouchers per year, up to a maximum of €2,500 per employee.

To reconcile ongoing tax disputes with internet companies, the mini-budget offers them the opportunity to fix their tax bills early.

Taxes on slot machines will also be raised, and the bill mandates that more than 100,000 slot machines must be scrapped by early 2018 – about 35% of the current total.

Short-term rentals arranged through the online marketplace AirBnB will now be taxed at 21%.

Reporting by Crispian Balmer; Editing by Janet Lawrence

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