Italy Senate Approves EUR20 Billion 2018 Budget Law -- Update

By Giovanni Legorano Features Dow Jones Newswires

Italy's Senate gave its final approval to the 2018 budget, dispatching the chamber's last major piece of legislation and paving the way for the dissolution of parliament as soon as next week.

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With an eye to elections next year, lawmakers approved a budget that largely avoids painful measures and seeks to extend an economic expansion that is the strongest the country has seen since 2011.

Italy's lower house gave its green light to the law Friday. Now that Italian lawmakers have given their full approval to the budget, Italian President Sergio Mattarella is expected to dissolve parliament and call new elections, which then must take place within 70 days. A vote in early March is widely expected.

The EUR20 billion ($23.73 billion) budget is focused on revenue-raising measures aimed at averting a series of automatic increases in value-added taxes that would kick in next year to keep Italy's deficit under control. It also establishes a tax aimed at collecting more levies from companies such as Amazon.com Inc. (AMZN) and Facebook Inc. (FB).

The ruling Democratic Party, which is slipping in the polls, is keen to go into elections with an economy that continues to grow. Italy is expected to have grown by 1.5% in 2017.

The budget includes incentives for companies that spend on machinery or other capital improvements. It also introduces measures to address Italy's growing poverty levels, a problem fueling support for populist parties. More than 4.7 million Italians live in absolute poverty, nearly double the number a decade ago, according to Italian statistical agency Istat.

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The budget includes a three-year reduction in social-security contributions for companies that hire young people on long-term contracts, a measure that looks to bring down Italy's 35% youth unemployment rate.

Another measure will force companies to pay from 2019 a 3% tax on specific web services in Italy, which is aimed at extracting more taxes from internet behemoths such as Amazon, Apple Inc. (AAPL) and Alphabet Inc.'s Google. Those companies avoid many Italian taxes by claiming they don't have a stable presence in the country, a strategy that has stirred anger among policy makers across Europe.

Write to Giovanni Legorano at giovanni.legorano@wsj.com

(END) Dow Jones Newswires

December 23, 2017 07:17 ET (12:17 GMT)