Italy Senate Approves Budget, Paving Way for Elections -- Update

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.

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 the 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 must take place within 70 days. A vote in early March is widely expected.

The EUR20-billion ($23.7 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 and Facebook.

The ruling Democratic Party, which is now slipping badly in the polls, is eager to go into elections with an economy that continues to grow. Italy is expected to have grown by 1.5% in 2017, its fastest pace since 2011.

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 that is 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.

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

Another key measure will force companies to pay a 3% tax from 2019 on specific web services in Italy, which is aimed at extracting more taxes from internet behemoths such as Amazon, Apple and Google. Those companies have avoided much of Italy's tax charges by claiming they don't have a stable presence in Italy, 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 08:12 ET (13:12 GMT)