Italy to Keep 'Hated' Property Tax

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The Italian government plans to keep a disliked property tax, a move that could hinder the residential property market recovery. 

Market experts expect home sales will increase this year for the first time since 2007, growing by 10 percent from a 30-year low in 2013.

However, home prices are forecast to fall another three to four percent in nominal terms this year, after being 15 percent lower than their 2006 peak in nominal terms, Luca Dondi, director general of think tank Nomisma, told Reuters.

"The Italian real estate market is still on the mend and the new tax system will reduce the profitability of buying a house to rent it," Mario Breglia, president of real estate think tank Scenari Immobiliari, told the news service. 

Even though previous political parties promised to remove the hated property tax, known as IMU, Italy has to continue to tax real estate to fund local governments, Reuters reports. 

Revenues from the IMU tax totaled €24 billion in 2014, with €4 billion coming from primary homes. The new tax, called TASI, should be approved in the next two weeks, and should raise no less than the amount raised in 2012. 

The new tax will affect both primary and secondary homes, providing cash resources to local governments. 

The Italian government plans to let the local authorities decide both the tax rate rates and deductions for poorer families, a move that could bring a net increase of the fiscal burden on housing when compared to the previous tax system, Carlo Stagnaro, chief economist at think tank Bruno Leoni, told Reuters.

"The government has not the resources to do without a levy on housing, so its wiggle room is limited," Mr. Stagnaro said. "The new tax has a much more complicated structure that Italians will have to digest."