Italy Trims Austerity Plans, Removes Tax Hike Proposal On High Earners, To Pursue Tax Cheats Instead

Italy's brief flirt with Austerity, disclosed on August 12, lasted all of 2 weeks. As Reuters reports, following a 7 hour meeting between FinMin Tremonti who has been portrayed by the media as the primary reason why Italy has recently become the target of bond vigilantes, and which in turn was forced to establish some token measures of austerity, and PM Berlusconi, the most provocative measure of the "austerity" packet have been dropped, namely the solidarity tax, which would see new taxes on high earners, as well as austerity imposed on local budgets, and instead will be replaced with new 'tax evasion' avoidance schemes. Surely this massive watering down of Italian austerity will work: just ask Greece how effective the whole crack down on tax avoidance was. At least the Piazza Navona strike cam can be dropped for now... or at least until bond vigilantes strike in Rome again, and the country does the whole austerity charade again. 

From Reuters:

The Italian government will drop a proposed tax on high earners from an austerity package going through parliament and replace it with other measures, Prime Minister Silvio Berlusconi's office said on Monday.


A statement issued after a meeting between Berlusconi and senior ministers from his coalition government made no mention of any increase in Value Added Tax, which had been widely mooted in the media.


The so-called "solidarity tax" on incomes above 90,000 euros will be replaced by new tax measures to combat tax evasion and by reduction in tax breaks for cooperatives, the statement said.


But it was vague on the details.

The bolded sentence says it all.

And some more from Bloomberg:

Prime Minister Silvio Berlusconi’s government has dropped a planned bonus tax on Italians earning more than 90,000 euros a year from a package of austerity measures that aims to balance the budget in 2013.


The levy will be replaced with other measuures that aim to target tax evaders, Berlusconi’s office said in an e-mailed statement. The decision came after Berlusconi and Finance Minister Giulio Tremonti met with Northern League leader Umberto Bossi, a key coalition ally that opposed some of the key aspects of the austerity plan passed by Berlusconi’s Cabinet on Aug. 12.


As a result of today’s agreement, the plan will also be modified to reduce the cuts in transfers to regional and local governments. The note did not give details of how the government would compensate for the lost deficit reduction from today’s changes.

Bottom line: just like our own debt ceiling expansion austerity plan, nobody really has any idea what will be cut... suffice to say, it will be cut. Or some such.