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Last Updated: Monday, 2 October 2006, 07:46 GMT 08:46 UK
Italy plans new tax for tourists
Rialto bridge Venice
The tax could help maintain busy tourist destinations like Venice
Italian towns will be allowed to tax tourists up to five euros ($6.30; 3.40) per day in the 2007 budget put forward by Prime Minister Romano Prodi.

Income from the accommodation tax, which would be payable by Italian tourists too, would have to be spent on tourism structures and services.

Cities will be able to apply the tax at certain times of the year, or to exempt places like youth hostels.

Italy expects to earn 30bn euros from foreign tourists this year.

Further tax hikes

"This is not a real tax in the proper sense of the term but a possibility offered to towns and which does not affect residents," deputy prime minister and minister of tourism Francesco Rutelli said.

"City authorities in Rome, Florence and Venice are thinking about introducing this tax while others, like Naples, are not."

Faced with European Union financial commitments that call for a big reduction in Italy's deficit, Prime Minister Prodi's budget calls for billions of euros in spending cuts and tax hikes, particularly for Italy's big earners.

It proposes raising income tax from 41% to 43% for those earning over 75,000 euros a year.

Income tax will fall for Italians earning less than 40,000 euros.

"I believe that this is a budget that will result in a more just society, that will help the weakest more," Mr Prodi said.

Observers say he faces a stiff challenge in getting the budget passed by the Italian parliament by the end of the year.

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