MILAN: Italy's value added sales tax (VAT) is set to rise by one point while tax on low incomes will drop, according to a draft bill aimed at reducing debt and helping protect the poorest in the recession-hit country.
The so-called "Stability Law", adopted by law-makers late on Tuesday after an eight-hour long debate, lays out budgetary measures for 2013 to 2015.
The government, which had previously said it wanted a two-point VAT rise from mid-2013, finally settled on a one-point rise to a maximum of 22 percent.
The bill also aims to give breathing space to people on lower incomes, who have been hit hard by severe austerity measures aimed at tackling the country's vast debt of 1.9 trillion euros ($2.4 billion) and staving off the debt crisis.
The government said it intended "to introduce an important element of equity by revising income tax and helping families on the lowest incomes to consume."
The bill also aims to create new incentives to increase productivity as well as providing safety nets for those who risk finding themselves in financial hot water because of changes to the retirement age and pension reforms.
The government is also carrying out a spending review intended to weed out waste in the public sector, particularly in the health and public administration budgets.
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