By Giuseppe Fonte

ROME, (Reuters) – The Italian government stated Tuesday it would present a bill to set the groundwork for a wide-ranging tax reform promised by Europe. It is a move that will end political tensions between Prime Minister Mario Draghi and his coalition.

According to Reuters, the bill is intended to increase employment for young people and women. It will also combat evasion, simplify the system and remove many “micro-taxes”, which are of little value to state coffers.

But the timeline can be long. The draft stipulates that it should be executed within the 18-month period after it has been approved by Parliament.

In Rome’s Recovery and Ressilience Plan (PNRR), initially the bill had been promised at July end.

The bill’s accompanying government document states that “the tax reform” is one of its key elements.

A proposal from the Treasury to increase the taxable value for real estate was at the heart of disagreement in government. It is frequently far lower than real market prices.

The European Commission has recommended this change to Italy.

However, it was feared by lawmakers of the right-wing League as well Silvio Berlusconi’s conservative Forza Italia, which are key coalition parties. They feared that this would lead to increased housing taxes for many taxpayers.

In order to overcome opposition, the draft says that no changes will be made by the government to current taxable realty values prior 2026.

The League appeared still unsatisfied Tuesday. Sources claim that their ministers were not present at the cabinet meeting, which was called for approval of the bill.

The draft states that Italy plans to tax financial investments at the same rate as corporate income taxes in the medium-term.

Except for government bonds and financial investments, the tax rate on these types of investments is higher than that on corporate income (Ires).

According to the latest government budget targets, 1.2% of total national output is available for extra spending. This amounts to more than 22 million euros (£25.52 billion).

According to a source, the government will use a large portion of this amount for tax reductions in fiscal reform.

($1 = 0.8622 euros)