Five Star Set to Back League's Deficit-Funded Flat Tax Plan
(Bloomberg) -- The two sides of Italy's fractious coalition are set to back a plan proposed by the rightist League party to fund a so-called flat-tax using a higher deficit.
The anti-establishment Five Star Movement, which initially opposed the idea, has given its blessing to the plan, according to a person familiar with the situation. That followed a threat from the leader of its coalition partner, Matteo Salvini of the League, to break up the government.
Salvini told lawmakers in a closed-door meeting Wednesday he's ready to see the government fall if Five Star obstructs measures that are League priorities, according to party officials who asked not to be named.
Five Star chief Luigi Di Maio suffered a blistering defeat in last week's European Union vote, seeing support for his party halved compared with its victory in last year's national election, where it emerged as Italy's top party. Salvini's League came out on top in the European vote, giving it enhanced clout to get its policies approved.
Prime Minister Giuseppe Conte said Friday that the government isn't yet working on a flat-tax project, Ansa news agency reported.
Raising deficits could exacerbate tensions with the European Commission, which this week said it's ready to take the first step in a disciplinary process that would put Italy at risk of financial penalties. The government is due to reply to the EU by the end of the day Friday.
Finance Minister Giovanni Tria said Thursday the government doesn't need a budget adjustment this year to address the concerns expressed by the EU.
To contact the reporters on this story: Chiara Albanese in Rome at calbanese10@bloomberg.net;Lorenzo Totaro in Rome at ltotaro@bloomberg.net
To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Jerrold Colten, Ben Sills
©2019 Bloomberg L.P.
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