Italy's powerful industrial employers' federation Confindustria weighed into a heated tax row on Wednesday, urging the government to lower taxes as a matter of national urgency.
In an open letter published by Corriere della Sera daily, Confindustria chief Luca Cordero di Montezemolo said: "The term emergency is not misplaced given that countries which are our direct competitors are quickly and decisively moving towards substantial tax cuts".
He said that corporate tax reductions should be included in the 2008 budget to boost the competitiveness of Italian firms and lift Italian economic growth.
Montezemolo went on to argue that Italians were paying more in taxes than other Europeans but receiving poorer quality services despite high public spending.
The 60-year-old businessman, who is the chairman of Fiat and Ferrari, said that bringing down Italy's "excessive" tax rates would also help reduce chronic levels of evasion.
He was careful to condemn "sly" tax cheats, describing evasion as an "ignoble practice" which "shifted an intolerable burden onto honest firms and citizens".
Montezemolo also attacked Italy's political class and bloated public administration.
"Privileges and unproductive activities, especially at a local level, are eating up resources which should be invested in the future," he said.
He pointed out that 180,000 Italians lived off politics while "colossal sums" were spent on "consultants of every type".
He called on the government to introduce reforms which would reduce the size of the political class and its costs and eliminate wasteful spending.
The opposition, which has repeatedly accused Premier Romano Prodi's centre-left government of overtaxing Italians, applauded Montezemolo.
Former premier Silvio Berlusconi's Forza Italia party said that "Montezemolo has given the thumbs down to this government... which is strangling families and businesses with record level taxes".
The Northern League, a Berlusconi ally which is organising a tax protest, said that "Montezemolo has made it clear why an immediate tax revolt is necessary".
The opposition has criticised extensive tax hikes in the 2007 budget and current plans to lift the tax rate on capital gains and bond yields from 12.5% to 20%.
According to the tax office, Italians currently shoulder one of the highest tax burdens in Europe. The agency said recently that Italy's official fiscal burden of 41-42% of GDP was far below the "real" figure, which was above 50%.
Meanwhile, a report out Wednesday said that revenue from local taxes had increased 111% over the period 1995-2006, rising from 37.7 billion euros to 96 billion.
GOVT MULLS CUT IN BUSINESS TAXES.
The government responded to the swelling criticism on Wednesday, saying that a 5-6% reduction in business taxes was possible and could be written into the next budget.
Economy Minister Tommaso Padoa-Schioppa assured Italians earlier this week that the next budget would not contain any fresh tax hikes, saying it would represent a "fiscal truce". He also agreed that honest taxpayers were overtaxed.
But he did not say that income tax rates would come down.
Instead, he said the government would pursue its course of reducing Italy's high public debt and deficit levels through spending cuts and the fight against tax evasion.
Figures released by the tax office earlier this week showed the taxman had recovered 3.139 billion in evaded taxes over the first seven months of the year - an increase of 56.4% over the same period last year.
Tax dodging remains rampant in Italy. More than 270 billion euros of taxes go unpaid each year - the equivalent of almost 20% of GDP, the tax office says.
Of the country's 40 million taxpayers, 95% claim to earn less than 40,000. A quarter declare an annual income of less than 6,000 euros.
The figures contrast with consumer spending indicators, which show disposable income at significantly higher levels.
