Italy taps porn industry to help curb deficit

ROME - Italy's cash-strapped government has decided to hike taxes on one of the country's few vibrant industries, pornography, to help rein in the burgeoning budget deficit, government sources told Reuters.

The "porno-tax", which imposes an additional levy of 25 per cent on all income from pornography, is contained in a package of amendments to the 2006 budget to presented in the Chamber of Deputies today or tomorrow, the sources said.

Under the amendment, subscribers to hard core television channels must also pay additional value-added tax of 10 per cent. Altogether, the tougher tax-treatment of porn should bring the government some 300 million euros (NZ$506 million) next year.

A recent study by the Eurispes institute estimated revenues for pornography and related industries in 2004 at some 1.1 billion euros, up 100 million euros from the previous year and up 27 per cent since 1991.

That is equal to about one-third of the revenues for a company like Italy's Mediaset, one of Europe's largest broadcasters, or about the same as the Giorgio Armani luxury goods group makes.

Italians spent an estimated 247 million euros on pay-TV porn in 2004, up 63 million euros from the previous year, as more satellite operators offered clients subscription packages.

The centre-piece of the budget amendments package, which has been seen by Reuters, is a new tax amnesty, despite numerous assurances from the economy minister that there would be no recourse to this often-used and much-criticised deficit plug.

The latest amnesty, by which tax dodgers can settle disputes with the authorities by paying a small proportion of what they owe, is available to companies and self-employed workers for allegedly unpaid taxes in the 2003-2004 fiscal year.

It is flanked by a more forward-looking tax measure aimed at reducing tax evasion, by which companies and self-employed workers can agree in advance to pay a limited sum for the next three years rather than make regular tax returns each year.

The tax amnesty and the forward-looking "tax agreement" aim to garner a total of 3 billion euros.

Government officials said this would not be an additional deficit cut but would substitute "less certain" revenue raising and spending cuts previously pencilled into the budget.

The draft budget, which was presented in September, aims to cut the 2006 deficit by some 16.5 billion euros to 3.8 per cent of GDP from a targeted 4.3 per cent in 2005. The package must be approved by parliament by the end of the year.

- REUTERS