Italian tax changes may undermine car sales growth

October 10, 2016

A reduction in tax incentives for businesses which invest in new company cars could damage the strong recovery in Italy’s car market, the country’s motor industry has warned. Sales are up more than 17% for the year to the end of September, but there are fears they could slow in 2017 following a cut in support for capital investment. Under the superammortamento scheme, companies are allowed to limit their tax bill by claiming a set amount over the allowed depreciation rate in any single year. Before the changes, companies could claim €140 in tax relief on every €100 in depreciation, but this could be reduced to €120. Massimo Nordio, president of Italy’s motor trade association UNRAE, said tax incentives were important to generate demand for newer, cleaner vehicles and added: 'The announced cut reduces the quantity of vehicle sales we expect over Q4 2016 and it will have negative consequences in 2017. The fiscal stimulus has been successful in renewing the parc and the decision to cut it should be revised.' Despite his concerns, 2016 registrations are still expected to be up by around 17% year-on-year at nearly 1.9 million, as the economy recovers strongly and buyers return to the car market in both the corporate and private sectors. Growth in demand is equally strong in both the new and used car markets, so that residual values remain strong despite the increasing volume of cars returning to market.

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