International Company Relocation Opportunities: Italy
Italy is the world’s 8th largest economy. It is well-diversified and primarily formed of SMEs (small to medium enterprises) which consist of 99.9% Italian companies. The country’s FDI has been on the decline and remains volatile among other FDI recipient countries.
Major investment partners are the UK, the U.S.A, Switzerland, Spain, France, Germany, and it is gaining ground with China. The sources of Italy’s external income are primarily tourism, furniture, pharmaceutical export products, industrial machinery, automobiles, automotive components, electrical appliances, wine, food, fashion, and textiles.
Italy is a founding affiliate of the European Union. Its internal market is wealthy. It has strong links with the other EU common markets and contiguity to developing economies in middle-eastern countries and in North Africa. The country has maintained its charm with many investors due to various COEs in IT and Scientific Research.
The parliament is very receptive to investments in stocks of Italian businesses and has maintained the accessibility of online information to possible or potential investors. The efforts of the parliament in implementing promotion policies for new investments to make Italy an attractive country have been destabilized because of its current economic status as well as the growth inconsistency on reforms to its structure to mend and improve a variety of drawbacks, including the inconsistent and extensive legal framework, many hierarchical positions, and random tax structures.
However, the economic system of Italy is beginning to move into a solid recovery after its longest and deepest recession. The present parliament pursues the advancement and improvement of the country’s business climate.
The country hasn’t encountered many investment disputes which involve an American since ten years ago. There are still about five ongoing disputes, which are all pending cases and none yet has been resolved and dissolved.
The Gross Operating Income (GOI) pledged 16 billion euros to privatize state owned enterprises in the years 2016 & 2017. The country is planning to take private ownership of the national rail network minority share, where 30% of Poste Italiane (national postal services) will be sold in 2017. Moreover, the Gross Operating income (GOI) influences investors from abroad to take part in the privatization process. Privatization is simple, transparent, and fair.
The Job Act provides procedures designed to reform several institutions of Italian labor laws intended to reduce barriers to employ new workers, through Article 18 in particular. The statute forces employers to rehire employees found to have been illegally dismissed. Employees will be subject to automatic reinstatement for some cases of unfair disciplinary dismissals.
In 2015, the Gross Operating Income (GOI) presented incentives for companies to hire employees on an indefinite basis, and granted employers a 3 year exemption to SS contributions for every single permanent employee. However, in 2016, the 3 year exemption was shortened to 2 years and the employers’ contribution is now at 40%. In the early 2017, the Job Act played a part in encouraging indefinite contracts, generally through changing temporary employment contracts to open ended ones.
- Italy is ranked as the 60th least corrupt nation out of 176 countries in 2016’s Corruption Index reported by Transparency International.
- Italy is ranked 50th among 190 economies in the ease of doing business in 2017, reported by the World Bank.
- Italy is ranked 29th among 128 countries and economies in 2016’s Global Innovation Index.
Receptiveness to and Limitations on Foreign Investments
Regulations on direct foreign investments: FDIs (Foreign Direct Investments) are accepted in Italy. As confirmed by UNCTAD, they constituted 18.5% of the country’s GDP in 2015. As a member state of the EU, Italy is subject to the laws and treaties of the Union, and is required to offer a state treatment to American investors in the country or in other EU member countries.
However, there are exceptions, and they include: investment pre-requisites for banks residing in another country within the EU, policies on airlines not based in the EU, but conducting local routes, and the granting of state funds for the movie industry for EU member countries. Italy has also imposed limitations on shipping investments.
The antitrust policies of Italy and the European Union permit the Italian government to analyse acquisitions and consolidations for market control. Additionally, the ”Golden Power” statute, launched in 2012 and executed by a 2015 bill, allows Italy to obstruct acquisitions and mergers that involve international films if the local entity involved is considered critical to the country’s economy.
This legislation also grants Italy the power to inhibit acquisitions of international firms conducting businesses in strategic regions, such as in energy, telecommunications, transportation, and national security. This Golden Power statute of the Government of Italy (GOI) has always applied to acquisitions involving a non-entity for a potential investor that extends to other EU members, and whose objective involves national security and defence activities. In such cases, the Italian government has the final word on acquisitions of private enterprises and those in which the state has investments on.
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This statute supersedes the previously implemented Golden Shares that Italy held in previous government-owned entities that underwent partial privatization during the 90’s and early 2000’s. Consequently, the GOI, via the Golden Power statute, still holds a degree of authority over international investments in Telecom Italia, the dominant telecommunications company, despite the government’s lack of direct investments in it.
The Golden Power regulation permits the GOI to sustain control over critical strategic departments in contrast to individual enterprises. The replacement of the previous Golden Share law has empowered the GOI to address allegations of European treaty violations by Golden Shares. The Office of the prime minister currently reviews mergers and applications for acquisitions via an inter-agency body, and formulates recommendations and dossiers for the decisions of the Minister.
Despite numerous controlling operators being privatized fully or partially, the Government of Italy has maintained an operational interest in the following firms directly or via CDP, the government-controlled independent wealth fund: the shipbuilding firm Fincantieri (72.5%), the gasoline and oil company Eni (30%), Snam, the infrastructure entity for natural gas (30.1%), Poste Italiane, the provider of financial and postal services (64.7%), Terna, the provider of electricity transmission (29.85%), ENEL, the electricity provider, and Leonardo-Finmeccanica, the defense corporation (30.32%). And while the GOI holds no investment shares in TI (Telecom Italia, the Golden Power statute has allowed the GOI to analyse potential acquisitions. State laws in these vital commercial sectors may consider these specific companies’ interests.
In December of 2014, the ICE showed based on the latest data that about 6,118 international firms are operational in Italy, while 11,101 local corporations have significant investments that are foreign-owned. Overall, these employers have 954,581 employees with 498.5B Euros overall sales.
Governed by the Bureau of Economic Development, ITA was established to assist the progress of international investments. ITA’s Direct Foreign Investment group assists in launching and enhancing foreign entities in Italy through the promotion of commercial opportunities, by supporting investors via mentoring programs for current investors, as well as encouraging international financiers in creating and expanding their businesses in the country. By the start of 2017, ITA has sustained eighty-one branches in sixty-seven countries in order to entice and facilitate foreign investments.
The public bureau for internal economic and investment development (Invitalia) is governed by Italy’s Minister for Finance and Economy. The firm concentrates on key categories for employment and progress. It emphasizes the need to invest and encourage development in south Italy, which is considered lagging in progress compared to other parts of the state. Invitalia supervises all domestic incentives that promote innovation and establishment of start-ups and new businesses. It sponsors small and big businesses, attracting investors toward creative, high-valued industries with detailed development proposals.
The Economic Development Ministry has a project to entice creative investments. Confindustria is Italy’s leading commercial organization that offers support to preserves existing businesses in Italy.
Restrictions on Foreign Authority and Liberty of Organization and Individual Control
In general, American entrepreneurs operating in an EU member country or in Italy are offered civil treatment by the GOI, which includes some exceptions: investment pre-requisites for banks secured in non-European Union member states, limitations on airlines conducting local routes not based in the European Union, as well as the accessibility of government funding for EU-based movie industries. The shipping industry also has capital limitations imposed by the GOI.
Italy and the European Union’s anti-trust regulations grant Italy’s local law enforcers the license to review acquisitions and consolidations within a specific financial level. The GOI may inhibit investments and consolidations of international companies it they are deemed critical to national security or interest, or if prejudicial actions were applied by the international film’s government against Italian businesses.
Incoming foreign capital undergoes a formal evaluation in the areas of transportation, telecommunications, energy, and national defence / security, via the “Golden Power law where anti-trust concerns may be promoted.
Commercial assistance: Italy’s Union of Chambers and Commerce regulates the online registration website for businesses. International corporations may utilize the online. The registration is comprehensible and final.
A digital signature and validated e-mail address is required prior to registration, a procedure that could take about 5 days to complete. Documents need to be notarized, although the specific procedure to register a business depends on the nature of the business that is being enrolled.
The required minimum investment also changes depending on business type. Entities in general must secure a partita IVA account number from Italy’s Tax Bureau, enlist with Italy’s social security bureau (INPS), verify if they have sufficient insurance and investment coverage with INAIL, which is the country’s employee compensation bureau, and inform the labour Ministry’s regional office. As per the World Bank’s 2017 Doing Business list, approximately 6.5 calendar days and 6 procedures are needed to establish a commercial company in Italy. Based on the nature of the commercial entity being established, additional permits may be necessary.
The government of Italy launched Invitalia, its investment advertisement agency created to boost incoming investments. Additionally, ICE or Italy’s Trade Agency has established a “department of foreign investment” to facilitate the launching of new enterprises from investors eager to do business in the country.
Numerous districts in Italy have also set up one-stop stores and shops to act as contact points for potential financiers as well as offer professional advice on how to fulfil the required authorizations and permits. All investors have access to such services.
Italy’s definition of SMEs is congruent with that of the European Union’s. The GOI offers some SME incentives which are also accessible to qualified foreign-owned enterprises.
Outgoing investments: The Italian government does not limit, encourage, or support outgoing investments.
Treaties on bilateral investment and taxation: There is no BIT or treaty of bilateral investment between the U.S and Italy. The country has not signed any new treaty in the past years, after the EU expropriated exclusive competence for investment treaty negotiations as the representative of all EU nations (which can be detracted in some cases, at the behest of a member state).
Italy has BITs with Algeria, Albania, Argentina, Angola, Azerbaijan, Armenia, Bangladesh, Bahrain, Belarus, Barbados, Bolivia, Belize (signed, legal), Bosnia, Brazil (signed, legal) or Herzegovina, Cape Verde, Cameroon, Chile, Chad, Congo, China, Cote d'Ivoire, Cyprus (signed, legal), Cuba,Ecuador, Dominican Republic, Djibouti, DR Congo (signed, legal), Eritrea, Egypt, Ethiopia, Georgia, Gabon, Ghana (signed, legal), Guinea, Guatemala, Hong Kong, Republic of Iran, India, Jordan, Jamaica, Kazakhstan, Korea, Kenya , DPR about(signed, legal), Kuwait Republic, Libya, Lebanon, Macedonia FYR, Malaysia, , Malawi, Mauritania, Moldova, Mexico, Korea, Mozambique, Nicaragua, Mongolian People’s Republic, Namibia, Nigeria, Pakistan, Oman, Panama, Peru, , Paraguay, Philippines, Russian Federation, Qatar,Saudi Arabia, Serbia (signed, legal), Senegal, South Africa, Sudan (signed, legal), Sri Lanka, Syrian Republic, Tunisian Republic, Tanzania, Turkmenistan (signed, legal), Turkey, Uganda, Uruguay, Venezuela (signed, legal), U.A.E, Uzbekistan, Vietnam, Zambia, Yemen, Zimbabwe (signed, legal).
Bilateral tax agreements: There is a bilateral tax agreement between the U.S and Italy.
Some multinationals from the United States have requested the support of the embassy to deal with the tax enforcement of Italy with regards to the Italian Agency of Revenue that has targeted the largest foreign corporations. The focus of the investigation on Italian tax should be company accounting procedures that other European Union member states considered valid but created uncertainty and inconsistencies, according to the corporations.
The Legal System
The regulatory transparency system: Under the European Union directives, compliance and enforcement of the single market in Italy is required to systematize the regulatory systems among EU member states.
The country is gradually undertaking some portion of excessive regulations to formal rules and other impediments that hindered businesses before. Italy is ranked 50th among 189 economies in the ease of doing business in 2017, reported by the World Bank. The Liberalization Act of 2012 delivered limited business incentives for capitalists under 35 years of age who are planning to open a new business, which includes cutting €1 in registration fees and lessening the requirements on filing of registration.
In 2012, the parliament delivered a more extensive simplification act that eradicated 15 outdated laws to lessen the quantity of bureaucratic procedures and costs needed for those wanting to start a company. The Italian parliament passes an act that provides tax credits for private investment on infrastructures, incubators, and startups.
Regulatory authorities are available at the regional, municipal, and national level. Pertinent regulations could possibly be applicable to foreign investors.
The Gross Operating Income (GOI), individual ministries, and independent regulators have established regulations at the administrative division. Municipal and regional authorities implement regulations at a subnational level.
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For public review, a draft regulation can be made available but it is usually not required. Generally, regulations at the national level were posted in Gazzetta Ufficiale (became valid and official after publication). A pre-execution assessment of regulations can be requested by the parliament.
Regulations will be made public on the website of the parliament as pending statutory laws. A summary of all comments received may be published by regulatory agencies. There was no reform on regulations tackled in 2016. Regulations may be challenged by aggrieved parties in court.
The country is a member state of the European Union, involving areas that are not considered regulatory competencies of the EU. Under EU directives, enforcement of the single market in Italy is required to systematize the regulatory systems among member states of the EU. As an affiliate of the World Trade Organization, Italy constantly denotes regulation cases to the World Trade Organization TBT Committee.
Laws and the Judicial System
The law in Italy is derived from the Napoleonic Code and the Roman law. The judiciary is composed of several court offices and judges who are tasked to work as public servants. The judicial system is centralized and works as part of only one network.
The legal system in Italy is relatively slow. However, it compensates the accuracy of maintaining the same principles of international law which has aimed at regulating contractual and property rights. Italy is consistent and has reference for both bankruptcy and the commercial law. Foreign businesses may select their preferred process of resolving disputes, which includes all legal matters in commercial aspects.
In the early part of 2012, the administration formed "business courts" assigned to each area among 20 locations in Italy to speed the dispute process, corporate issues and disputes on properties. These tribunals’ tasks are to decide on critical matters within 12 months, which is quicker than most civil cases.
The administration also recommended new steps to make the legal process more organized and checked other options to resolve disputes, which includes a revision of offenses and mediation. Italy placed 20th among 24 nations in 2016's The World Justice Project Rule Index, which included countries in North America and Western Europe.
Italy suggested revisions of the justice system in 2014 to lessen accumulated civil cases, with the intention to quicken the resolution of newly opened ones. The revision focused on better options to resolve cases, while maintaining fair judgment.
There was an indication the suggested reforms worked effectively. For instance, Torino's civil court doubled the output in resolving cases by adapting these new practices. Among them, we name asking judges to endorse a case to another judge if they will be on a long vacation, as well as assigning cases only to one judge which led to accountability of each officer in the judicial office.
Some courts complied with these changes. The Italian government gave a go signal and started to enforce the revision of the judicial system process in 2016. The reforms paved way to widen its jurisdiction of courts to resolve business disputes.
As of this moment, courts are available in every area of the country. The reform took effect in the same year aiming to intervene in both foreign and national disputes among professionals over their clients.
The country is also a member of the World Bank's Foreign Center of Dispute Settlement for Investments. Policies in Italy acknowledge and implement foreign court resolutions.
Regulations and Laws on Foreign Businesses
Italy is regulated by the European Union's Foreign Direct Investment laws. Invitalia, managed by the Finance and Economics Ministry, was formed to be a reference for investors who want to establish stability in the country. The office promotes free consultations and other confidential and commercial services to international businessmen.
Laws on competition: The Competition Authority in Italy is tasked to monitor activities relating to competition concerns. The agency may review transactions which limit competition in the country up to the EU community. Italy is subject to mediation by the EU Commission Competition Office.
Compensation and expropriation: The constitution in Italy authorizes the government to acquire private properties for public purposes, which supports necessary programs by the government to boost the country's economy. In addition, an adequate and quick compensation is guaranteed to property owners.
Settlement of Disputes
New York and ICSID conventions: As a state member of the World Bank's Settlement of Business Disputes, Italy has approved and signed the Enforcement and Recognition of the International Arbitral Award Convention. The civil law in Italy (Section 839) discusses the implementation of the foreign arbitration award in the country.
Settlement of Disputes between the investor and the state: Italy has entered as a representative to the Washington Convention of 1965 on Dispute Settlement Between Nationals and States imposed on April 1971.
There were only a few disputes on investments which involved a US citizen in the past decade.
Foreign courts and commercial arbitration: Italy participated in different international agreements related to arbitration:
- The Convention in Geneva in 1927 regarding The Enforcement of International Arbitral Recognition took effect on February 1931;
- The Convention in New York in 1958 regarding The Enforcement and Recognition of International Arbitral Awards took effect in May 1969; lastly,
- The Convention in Europe in 1961 regarding the Foreign Commercial Settlement of Disputes took effect in November 1970.
The Civil Code of Italy contains information on settlement of disputes in the country, which includes recognizing awards on foreign arbitration. Laws are not mandated according to the Model Law. On the contrary, most provisions of the Model Law have also been adopted by laws in Italy.
Both parties may select from different methods in the Resolution of Disputes which include assistance from a lawyer, mediation, and arbitration.
Regulations in bankruptcy: Regulating bankruptcy in Italy is similar to the US version which permits companies and their creditors to come up with a resolution without the need to file bankruptcy. For the past few years, the role of the judicial system in insolvency proceedings was limited to make the process faster and simplified.
The Italian government submitted a proposal in 2015 to revise the law on bankruptcy, which was intended to have an easy access for companies and assist in restructuring debts. In 2016, new regulations were expected to be implemented but there were no updates coming from the government saying it is already in effect. In 2017, Italy placed 25th among 189 countries in regards to the Resolving Bankruptcy Rating.
Incentives for investment: The GOI has modest incentive proposals that encourage the private sector to invest in targeted areas (for example innovative businesses) and cautiously depressed regions, specifically the southern part of Italy. Foreign investors are also eligible to take advantage of these incentives.
They contain little interest loans, grants, tax credits, and deductions. Some incentive plans come with a cost limit, which may avert other eligible companies to receive benefits once they reach the limit. The GOI cost cap is applied on a nonobjective basis, normally based on when the application was filed.
Italy offers an investment incentive to SMEs in new machineries and major apparatus (Law of New Sabatini), and it’s applicable to businesses of all citizenships. This investment enticement gives financing according to a yearly cost limit. Selected sectors are also eligible to investment incentives.
There is no discrimination between domestic and foreign investors when it comes to the tax system. Communal income taxes (IRES) are 27%. Additionally, businesses may be liable to a 3.9% local tax rate for a productive activity (IRAP). According to the World Bank, Italy’s entire tax percentage is 62% of its commercial revenues in 2016, which is the maximum rate within the European Union, though it had a slight downfall from its 64.8% rate in 2015. Starting in March 2015, proprietors may take advantage of an IRAP credit for each of their permanent new employees.
Some U.S. corporations have sought the assistance of the U.S Embassy in handling tax implementation in Italy, and some are showing concern the IRA is targeting big establishments. According to some businesses, tax inspections in Italy may concentrate on business accounting practices considered legal in other countries in the European Union, which creates uncertainty and inconsistencies.
Trade Facilitation, Free Ports, and International Trade Zones
The chief free trade district of Italy is situated in Trieste, in the north-east part of the country. While at the FTZ, customs obligations are delayed up to 180 days until goods arrive at the new EU state. The cargo may undergo changes without any customs limits.
A complete exemption of duties is provided on goods from third world countries. A law to create new FTZs in Naples and Genoa exits, but it’s not yet implemented. The FTZ in Venice operated for some time, but it’s currently reorganized. A “nontaxable zone” in the Caltanissetta Province in Sicily was approved and provided with around €50 Million of structural funding. The plan was supposed to be launched back in 2013 though it did not progress beyond the discussion and planning stage.
The special trade zone founded in 2015 within the region of Emilia-Romagna was hit by an earthquake in May 2012 and by a flood in January 2014. The measure is intended to assist in the restoration of these places by giving tax exemptions that amount to €39,600,000 (in 2015 and 2016) to the SMEs located in these regions.
At the moment, international goods can be transported to Italy without paying duties or taxes, considering materials are used for the assembly or production of products to be traded abroad. The FTZ bill also permits a company, regardless of its nationality, to hire workers of a similar nationality within the country’s social security schemes and labor laws.
Data localization and performance requirements: The Italian government does not require hiring local employees or using forced localization guidelines wherein foreign investors should use local content in technology or goods.
Non-European nationals who are interested in starting businesses in the country should have a legal residency license or partner with a citizen of a nation that has reciprocal arrangements, like an investment treaty.
Visas and work permits can be obtained immediately and do not constrain the movement of investors. Being a Schengen Area member, Italy normally permits short lived visits without a visa (equal to 3 months). Specific visa requirements were specified by the Italian Foreign Affairs Ministry.
Security of Capital Ownership
Real property: Italian court systems enforce real property ownership, and Italy maintains a creditable database of judgement claims and mortgages against property. Italy holds the 24th place globally for efficiency of property registration, based on a World Bank index, where registration of real property takes approximately sixteen days to process, necessitating 4 procedures and costing 4.4% of the property’s value, on average. There are no officially published statistics in Italy. However, it is estimated, that its untitled land constitutes no more than 10 percent of the region.
Italy’s judiciary includes the groundwork for real property ownership, allowing the acquisition of property, on specific circumstances, by any party that has occupied it interminably and peacefully for at least twenty years.
IP rights: AGCOM, Italy’s Communications Authority, launched a new policy in the fight against digital copyright infringement, which consequently removed the country from USTR’s 2014 301 Special Watch List. This policy established a method where rights holders could go online and report violations to AGCOM, thereby restricting the accessibility of foreign and local websites that support unlawful content, and eliminating the need to conduct a tedious litigation process, as was previously mandated. Within three years of enforcement, there have been over two-hundred fifty blocking orders issued by AGCOM. Incidentally, online sites that initiated the removal of infringing content have increased during the same period.
Law enforcers have continuously pursued copyright violations, and in 2015, tax and customs authorities have captured more than fifty-four million counterfeit products, (exclusive of medical items, tobacco, beverages, and food) with an estimated worth of over 332M euros or roughly 354M USD. In general, American citizens enjoy public treatment when applying for or sustaining trademark and patent security in the country.
A citizen, after submitting an application for a patent, is granted a twelve month timeframe to present an analogous application to the Italian state in order to acquire priority rights. Twenty years from the date when the application was filed, patents are granted and become transferable. American authors in Italy may also apply for copyright security in the country for their first copyrighted work in the US.
Since 2014, no substantial intellectual property regulation or statue has been endorsed, and Italy has not been included in USTR’s infamous market record.
The Commercial Industry
Portfolio investments and financial markets: Despite Italy’s amenability towards international portfolio investments, it requires both domestic and foreign business transactions to yield to a single process of disclosure and reporting. Capital flows smoothly across Italy’s commercial marketplaces, and investments are mostly distributed based on market conditions. Italy does not inhibit international investors from participating in the local financial market, and numerous large-scale Italian enterprises that are publicly traded are governed by foreign shareholders.
International financiers can acquire investments in Italian markets and exploit a range of credit tools, but may face challenges in accessing equity capital. The investment market in Italy is comparatively sluggish. Its retail banking institutions and a small number of venture investment sources are typically the only ones providing what little access to venture capital there is in the country.
Portfolio Investments are sufficiently advocated and supported by Italy’s legal system. The country’s central bank, IVASS, and CONSBO (Italy’s investment administrator) manage the Italian financial industry.
Milan’s Stock Exchange, for instance, is regulated by CONSOB, alongside other securities markets, while IVASS oversees insurance corporations. Italy’s Central Bank assists in the indirect management of the ECB (European Central Bank) on Italy’s smaller banks, while fifteen of Italy’s leading banks were directly supervised by the ECB in 2015. Liquidity is more than adequate to access and exit large positions in leading markets, but based on global standards, Italy’s investment market is small, and liquidity may prove insufficient for some rarely marketed investments, such as bonds on OTC markets.
In general, regulations in Italy help supervise the mobility of financial assets to marketplaces. Unless insured by a tariff regulation, royalties and shares remunerated to foreigners can be liable to a tax, unlike the profits of multinational companies operating permanently in Italy, which are not taxed.
Italy and the US entered into a wage tax arrangement in 2009 in order to avoid dual-taxation of the other party’s citizens and businesses, as well as to develop the sharing of information between tariff administrators.
The US and Italy also inaugurated an intergovernmental pact during the first month of 2014 in order to enforce legal provisions of FATCA, a US law that was formally introduced and enforced in Italy on the 8th of July 2015. This agreement between the US and the GOI enables information exchange between tariff administrators to occur automatically based on mutual cooperation that echoes the pact between the 5 EU states (Germany, Spain, The UK, Italy, and France) and the US. This natural flow and trade of information is founded on reciprocity, which involves accounts governed by the US by Italian residents, or those held by United States residents and citizens in Italy.
Italy approved the TIEA with Costa Rica in 2016. In 2013, the GOI enforced the Tobin Tax or FTT (Financial Transactions Tax) that is not implemented on individual transactions but on daily balances instead. It is also applicable to derivatives trading, and fees could range from 0.025 euros to 200 euros.
Across regulated marketplaces, investment trading is charged a 0.1% tariff, while unregulated ones enforce a 0.2% tax. High-density trading is charged a 0.02% trade tax for automatic trading (those developing every 0.5s or faster). The FTT is not applicable to enterprises involving inheritances or aids, “market makers”, derivatives assets to compensate for raw-materials / interest-rate exchanges, small-cap and retirement funds, and commercial tools for businesses with a capital of five-hundred million euros or less.
The Italian government has attempted to suppress extensive tax evasion offenses by making improvements on implementation and modifying public behaviour, which includes utilizing public media and communications technology to create a community that is intolerant of tax evasion. The GOI also enhanced the visibility of financial law enforcement controls on enterprises, such as raiding popular commercial vacation places during peak holiday seasons, and mandated routine inspections and reviews of income records.
In 2014, the Italian parliament participated in the reduction of tax evasion, and signed a series of tax reform laws that became effective in 2015. These laws aim to standardize OECD’s best practices and strengthen the public’s compliance via the reduction of bureaucratic taxpayer procedures and utilizing available technology (automated analysis of tax forms for omissions and inaccuracies before an official audit, e-filing, and pre-accomplished tax forms). These laws produced compliance programs in the form of advance tax agreements (irrevocable tax treatment opinions of negotiations made in advance) and collective compliance for potential investors to create an environment of security and trust for the taxpaying public.
Italy’s Central Bank and the GOI have adhered and respected their obligations to the International Monetary Fund (IMF), particularly to Article VIII. In Italy, international investors are qualified to obtain credit, which is appropriated on market stipulations. Generally speaking, credit in the country is primarily driven by retail banking, although in practice, non-Italians may experience restricted access to credit, as most banks in Italy may be hesitant to offer loans to potential borrowers without a preceding relationship.
Despite the extensive availability of credit instruments, bank credit continues to be limited even after the financial disaster. However, in 2016, credit conditions began to loosen.
The Banking and Finance System
The banking and finance system in Italy remains stable despite a few problems with certain banks. Revenue was affected starting with 2011. Due to the impact of strict supervisory measures Europe implemented, banks were required to increase their capital.
The economy was even more affected when there was a recession that made some banks' investments fair worse in the market. In addition to this, non-performing loans increased drastically making it difficult for non-financial institutions to gain profits. These types of loans have doubled and reached approximately 200 billion euro, as per a report on the first quarter of 2017.
The Bank of Italy forecasted non-performing loans will reach their highest level in the same year. The Italian government is making efforts to monitor the NPLs' acquisition by foreign investors. The government helped some of the banks in Italy by providing financial assistance in the last quarter of 2016. Also, the Italian government gave about 20 billion euros to lessen their financial struggles.
Italy’s Bank is one of the members of the Central Bank of Europe and of the Eurosystem. The Bank of Italy has maintained stringent standards over the years. The banking system in Italy experienced a crisis in 2007 up to 2013 without the government's assistance.
Most financial institutions experienced weak performances as the majority of banks were strict in approving loans. The approval of a higher credit was limited, particularly to those who have smaller businesses. In 2015, banks eventually regained their performance according to data from the same year and from 2016 as well.
Banks in Italy have consolidated after the crisis. However, there are still local banks which did not consider consolidation. The Italian government promoted consolidation to ensure they are able to monitor the financial market with the help of foreign investors.
In the latter part of 2016, the number of banks became fewer, around 640. The banking industry was focused on services, which led to a decrease in revenues. The electronic banking method was introduced but not everyone was using it.
The country's sole stock exchange is the Milan one. There were only 380 companies participating in it and the market capital was about 31% of Gross Domestic Product in January 2017. Additionally, in 2012 the Milan Stock Exchange formed AIM Italia to assist in reporting and filing requirements to promote equity financial assistance to SMEs. The Italian government still depends on bank financial assistance and started creating programs with different options in terms of financing, which include corporate and capital bonds.
Banks in Italy offer investment opportunities which incur further debts. Most investors are not progressive, and they do not want to take risks when it comes to the administration's bonds. Few banks formed divisions of private banking to give way to customers who are willing to check where to invest their money, which includes mutual and equity funds.
Foreign investors were given the privilege of investing in the country with no conditions. Financial institutions who are affiliated with a European member state can do business in the country even if they do not have an office space in Italy.
All investors which have more than 2% shares in an Italian corporation need to notify CONSOB. If the investors plan is to increase their share to more than 10%, they need to obtain the BOI’s authorization. The acquisition of shares would modify the controlling percent of the financial group and they must inform the Bank of Italy at least a month before the transactions is finalized.
Italy's Insurance Authority is also responsible for authorizing and approving any major acquisitions of ownerships, transfers of portfolio, and even mergers of insurance companies. They regulate and have the authority to refuse proposals depending on the criteria they are looking for.
Remittances and Foreign Exchange Policies
Policies on remittances: No restrictions were imposed on remittances. However, transactions of over 1,000 euros must be documented. Generally, the Italian government has a strong and stable legal framework in Anti Money Laundering, and the administration also established ways to diminish risks of financing terrorists.
However, the Italian government still needs improvement in sustaining its strength when it comes to the investigative process, since there were some reports that risks of abuse of authorized individuals and other money laundering activities still exist.
Policies on foreign exchange: The European Union has mandated Italy not to take control of foreign exchange. Transfers of currency were not restricted. Reports were only required in effect.
Financial institutions are obliged to notify them of any transactions exceeding 1,000 euro to prevent ML and financing terrorists. Both local and foreign individuals in the country may open foreign currency accounts. The Italian government revised the limit of payments using cash up to 3,000 euros. This occurred in 2016.
If there are any amounts exceeding this value, it must be done electronically. There was no consistency in imposing the policy. There was an exception on banks, electronic money transactions and several financial industries. These do not include payment-related services.
Government Wealth Funds
A government-owned bank, known as Cassa Depositi e Prestiti introduced an innovative wealth investment in the early part of 2011, recently known as CDP Equity. In 2016, it had a 3.5 billion euro capital fund. A portion of it was invested in 9 portfolio corporations.
Their strategy was to purchase minor shares and act as a non-management participant. It invests only in companies in Italy with the intention to expand them in progressive units. CDP Equity encourages investments from foreign entities.
In 2016, this institution made an agreement with Holding in Qatar, Kuwait Authorities, China Investments, Russian Investment Funds, and a Korean Investment Company. It is one of the members of the Int'l Working Unit of Wealth Funds. They also observe the Santiago Principles.
Government Owned Establishments
The government of Italy has operated and owned several monopolies and companies in some strategic areas. However, at the start of the 1990’s up until the beginning of the 2000’s, the government started to privatize the majority of its state owned establishments.
Despite its privatization efforts, the Italian Government retains 100% possession of its national railroad as well as the road network companies ANAS. The government holds a 99% share on RAI, which is the national television and radio broadcasting network.
Also, the government holds a regulatory interest, directly in government-managed sovereign wealth funds (CDP), 72.5% shares in the shipyard business (Fincantieri), 64.7% shares in the financial and postal service (Poste Italiane), 57.5% shares in Air traffic control (ENAV), 25.5% shares in the electricity supplier ENEL, 30% shares in the gas and oil chief ENI, 30.2% shares in the defense corporation Leonardo-Finmeccanica, 30.1% shares in the gas structure firm SNAM, and 29.85% in the energy transmission supplier TERNA.
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As mentioned above, the Italian government owns a governing interest in sovereign wealth-funds and in the nationwide development bank CDP that capitalizes on projects for the public sector, as well as in public interest companies like Terna’s electricity transmission operation and Snam’s gas distributors. However, businesses are operating within a competitive setting (foreign and domestic) and are progressively responsive to decisions influenced by the market instead of political demands. Also, most government controlled firms are traded publicly, which offers additional clearness and company governance responsibility that includes a reasonable action for non-state minority stockholders.
Government controlled firms are subjected to similar budget restraints and tax treatment as a full time private business. Also, industries with government controlled firms are still available for private competitions.
With regards to employment, Italy’s biggest state-controlled firm Poste Italiane has about 142,000 workers nationwide since December 2016. As a part of the European Union, Italy is protected by the procurement rules of the EU government.
The Italian government was steadfast in privatizing €16 billion government owned resources in the years 2017 and 2016, forecasting €8 billion every year, though the 2106 privatizations didn’t reach this goal. Privatizations come in 2 categories: underutilized real property holdings and government owned companies.
The minority stake of ENAV was sold by the Italian government in 2016. The year’s revenue was way below expectation because of a negative market that affected other privatizations which caused the postponement of privatization plans on a marginal share on the nationwide rail network (FS) until 2017. The government was considering selling an additional 30% of the Poste Italianne by the end of 2017.
The Italian government encourages and seeks international investors to join its privatization campaigns. The privatization is direct, transparent and non-discriminatory. The government sells its shares through the Borsa Italiana (Milan Stock Exchange), and sales of real estate are processed through a public bidding (mostly online). The Agenzia del Demanio (Public Property Agency) supervises real estate auctions. The agency created a central registry which shows individual parcel information for long-term tenancy or for sale.
Business Conduct Responsibility (RBC)
There’s a common understanding of assumptions and guidelines for good business behavior. Execution is usually fair. However the slow action on civil justice could prolong the person’s ability to find effective reparation for opposing business impacts. EU rules and RBC standards are applicable in Italy. If the Italian court fails to protect the right of an individual under the law of the European Union, it’s possible to pursue compensation with the European Justice Court (ECJ).
CONSOB endorsed corporate governance, calculation, and administrative compensation standards protecting shareholders.
The Italian government promotes and supports the OECD’s Multinational Enterprise Guidelines, to which endorsements are addressed by the government to multinational firms that provide a diligent way to voluntary guidelines for companies’ social responsibilities in different areas, like industrial and employment relations, environment, human rights, disclosure of information, competition, taxation, technology, and science.
The NCP for Guidelines, under the Economic Development Ministry, guarantees the business community nationwide is well educated and understands the Guidelines, promotes partnerships between foreign and national institutions, and extends its offices to help provide resolution of disagreements on specific occasions where a company is allegedly deviating with the Guidelines. The Italian NCP on Company Social Responsibility can be viewed online.
The NCP keeps a record of stakeholders and partners included in the CSR. In Italy, nonpartisan NGOs and Trade Unions can operate freely. The three biggest trade union associations are actively monitoring and promoting RBCs. They stand as NCP’s advisory body.
The Italian government promotes a responsible chain of supply and provide operational instructions for businesses to help them in the diligence of the supply chain. Italy is part of EITI. The Foreign Affairs Ministry works globally to encourage other countries to adopt the country’s best practices.
Bribery and corruption have a destructive impact on the overall climate of the financial industry. They hinder market opportunities and increase both the cost and risk of international business operations not only in the United States but in other economies as well.
Corrupt practices discourage foreign investments, manipulate market prices, debilitate the legal system, and suppress economic progress and growth. Successive government administrations in Italy have participated in fighting organized criminal activities and corruption, and how they are perceived by the public are vital obstacles to the country’s economic development, costing an annual sixty-billion Euros in squandered public wealth.
Legal strategies to corruption: The Italian government approved a bill on Anti-Corruption in October of 2012 that promotes government transparency and mandates all public administrative agencies to implement three fundamental anti-corruption strategies: to enforce an anti-corruption system, to delegate a compliance official, and to establish an employee regulation code.
The law stipulated more stringent measures in penalizing and convicting those who commit bribery-related violations, provide whistleblower protection, as well as the pre-requisites that demand for more transparency in government transactions. The legislation also restricts individuals convicted and found guilty of a grave crime from assuming certain government roles, as well as assign an Ambassador for Anti-Corruption to lead ANAC (formerly called CiVIT), the agency tasked to create a nationwide public organizational anti-corruption system and monitor its operation, recommend methods for other agencies to adhere to, and perform investigations and audits in partnership with fiscal authorities.
In March of 2014, former President Renzi appointed Raffaele Cantone, an esteemed prosecutor of national stature known for his valiant anti-mafia commitments, to direct ANAC. The anti-corruption legislation of 2012 was invigorated afterwards following twin laws promulgated in August of 2014 and in June of 2015, which facilitated the development of increased transparency within the government.
It broadened the law’s sphere of implementation to cover certain criminal and corrupt practices and to intensify their limitations and penalties. The legislation acknowledges fraudulent accounting as punishable by law, and expands ANAC’s powers.
Italy’s parliament approved a definitive legislation aimed at improving government contracts in 2016 which further bolstered ANAC’s ability to regulate government transactions and tackle the incompetence contributing to corruption and delays in public government projects (expediting direct profits of smaller industries by public offices and restricting appeals, consequently making it more difficult to modify a business deal once it was started).
Italian policies against money laundering have specifically boosted due diligence processes for individuals conferred with critical government positions, encompassing anyone, from parliamentary heads to executive members of government-owned entities, defined as politically exposed parties, which also includes members of their immediate family.
The legislation is not applicable to constituents of political organizations not holding public positions. On New Year’s Day in 2015, law number 186 was included in Italy’s Penal Code, which subsequently became effective. It criminalizes self-laundering and enhances the authorities’ capacity to convict persons committing money laundering as an independent crime.
Despite the publicity of anti-corruption legislations and trials, they prove only slightly effective in hindering corruption. Italy currently ranks 60th in the Corruption Perceptions Index of Transparency International, which although marked by annual improvements since 2014, makes it the lowest-ranked EU state alongside Greece.
Italy’s recent corruption trials: From 2014 to 2015, several private and public authority figures were charged for corruption offenses in relation to Milan Expo’s government works contract. In 2015, the Mafia Capitale, a huge scandal involving government subcontractors in Rome, was uncovered, exposing not only corruption in the government but also its involvement with organized crime.
Forty-six people were convicted in November of the same year in relation to Mafia Capitale, considered as Italy’s second biggest corruption case in its history, whose scope of corrupt practices impacted services from recycling materials to feeding and sheltering refugees. The following year in January, four people were sentenced in connection with the scandal, with convictions ranging from 1 year and 10 months to 2 years and 4 months.
In December of 2016, Roman Mayor Virginia Raggi’s trusted aide Raffaele Marra was charged with corruption involving his dealings with a local realty developer during his stay as Rome’s Housing Commissioner three years prior. An ANAC investigation of the GOI’s public funding group Consip uncovered in 2016 a discrepancy in contracts involving two leading government facility management agencies FM4 and FM3, which showed how only 2 companies obtained a significant majority of the deal.
The owner of one of the 2 businesses in question, the renowned Alfredo Romeo, Italy’s business giant, was charged in February of 2017 with allegations of bribing Consip officials, Carabinier official Tullio Del Sette and Sports Minister Luca Lotti, who were then subjected to criminal investigation for allegedly making illegal information disclosures during the probe.
No formal charges have been made against the two officials since March of 2017. However, during the same month, Denis Verdini (Senator) was convicted to 9 years imprisonment by a court in Florence for fraudulent bankruptcy practices connected to his governance of the unsuccessful Credito Cooperativo Fiorentino.
Corruption’s Effect on Private Entities
Regardless of size, it is crucial for American businesses to analyse the financial market climate where they plan to invest and operate in, and to secure access to competent compliance measures in order to detect and prevent foreign bribery and corruption. Conversely, American companies conducting business and investing in international marketplaces must familiarize themselves with regulations involving anti-corruption measures enforced by both the US and the foreign state to ensure adherence to them and to seek legal counsel whenever appropriate.
The following are relevant laws and legislative decrees in Italy: 03/16/2006 - No. 146, 06/08/2001- No.231, 04/09/2008 - No. 81, 05/57/2015 – No. 69, 08/11/2014 – No. 114, and 11/06/2012 – No. 190. It is an offense under Italian law to illegally force a private individual to promise or provide money or some other benefit to a government official entrusted with public duties. It is also a violation of any individual to exploit his or her association with a government official for purposes of promising or obtaining monetary or other forms of economic advantages.
Local and foreign entities conducting businesses in Italy should exhibit the initiative to establish sufficient management, organizational, and control systems that help detect and hinder corrupt business practices. Articles six and seven of legislative decree 231/2001 illustrate these structural models of organizations, which corporate companies are also encouraged to implement. Confindustria’s by-laws, Italy’s leading corporate firm, for instance, mandates the expulsion of any member discovered giving protection money or bribing, and facilitates their cooperation with the proper authorities in reporting corruption and extortion.
Economic and financial authorities in Italy are aware of notorious cases that could affect American enterprises (the Milan Expo corruption allegations for instance), even though the United States Embassy has received no reports so far of any grievances or accusations of corrupt practices coming from US entrepreneurs conducting businesses in Italy. Companies who do encounter complex bureaucracy and questionable business dealings reach out to the United States embassy especially those concerning transactions related to public funding, and particularly within the aerospace sector. Non-government organizations involved in investigating corruption, like Transparency International Italy, have not reported any instance of government incompetence in protecting them.
The United States is bound both by its laws and international pacts to observe and support good government, which include executing laws and regulations against corruption in host countries. The FCPA’s establishment propelled the US to become a critical force in expanding and systematizing the fight against corruption on an international level.
Some of the essential elements of this system are: the UN Convention (United Nation’s Convention against Corruption), the OECD Anti-Bribery Convention (OECD’ Convention on Fighting Bribery of Multinational Government Officials in Global Financial Transactions), the European Council of Civil and Criminal Law against Corruption, the OAS Convention (Convention of Inter-America against Corruption), and a burgeoning list of United States’ free trade protocols.
As a signatory and a constituent of the United Nation’s Convention and OECD’s Anti-Bribery Convention, Italy has approved and signed the Council of Europe’s (COE) Convention on Criminal and Civil Law on Corruption. However, the country has not authorized COE’s supplementary anti-corruption regulations yet, but works on combating corruption via foreign agencies like the G20 Anti-Corruption Working Group, the International Business Leaders Forum, the International Chambers of Commerce, and the International Association of Anti-Corruption Authorities. In general, all nations participate in the prohibition of solicitation and bribery of government officials, and Italy promotes its anti-corruption laws via its local networks of Transparency International, United Nations Global Compact, and the Global Organization of Parliamentarians against Corruption.
OECD’s Anti-Bribery Assembly: The OECD’s Convention on Combating Bribery became effective on February of 1999, as duly authorized and signed by the Italian government. Since New Year’s Day in 2017, the convention has a total of forty-one constituents that include the U.S, which vigorously supports leading world economies such as India and China to the conference.
The Convention’s members are mandated to enact anti-corruption laws and prosecute bribery violations involving government officials in relation to foreign financial transactions. The United States’ FCPA helps the US perform its global responsibilities under the Anti-Bribery Convention of the OECD.
United Nations’ Convention: The United Nation’s Anti-Corruption Convention was enacted on the 14th of December 2005, and was signed into law by the Italian government. Currently, the convention has a total of 181 members and pioneered worldwide expansive international anti-corruption protocols.
The Convention obligates members to install measures in criminalizing corruption and expanding its scope to encompass a variety of related offences, ranging from minor types of corrupt practices such as influence trading, embezzlement, and bribery, to more sinister acts of laundering and covering-up of corruption profits. The Convention stipulates multinational financial regulations against corruption designed to function similarly to the OECD’s Anti-Bribery assembly, and postulates provisions for monitoring the private sector as well as requiring the record keeping of audits. Other mandates include asset recovery, global participation, and prevention.
The European council on civil law and criminal law conventions: Numerous countries in Europe are signatories of either the Civil Law Convention, the Criminal Law on Corruption Convention, the COE, or both. An extensive list of local and international financial behaviour, including account offenses, bribery, and money-laundering, are mandated to be criminalized under the Criminal Law Convention, which also incorporates stipulations on witness protection and the accountability of legal parties.
The Convention on Civil Law, on the other hand, includes protocols for providing reparations in relation to corrupt practices, contract validation, and whistleblower protection. In 1999, the COE created GRECO (Group of States against Corruption) to oversee member compliance with anti-corruption policies.
At present, GRECO has forty-nine member states, comprising of the US and forty-eight European nations. Italy is a constituent of both the Civil Law and Criminal Law Convention. The latter has fifty signatory parties since January of 2017, while the former has forty-two.
American businesses should be familiar with local regulations against corrupt practices. The United States’ Commerce Department might be unable to assist with legal matters pertaining to local policies. However, the Foreign Commercial Service is capable of helping them navigate the host nation’s legal framework and obtain an index of local judiciary representatives.
Financiers and exporters must know that bribing government officials is generally prohibited in all countries, and should forbid their officers from committing bribery, an offense which together with various other manifestations of corruption, is criminalized by most governments due to them being signatories to these aforementioned international assemblies.
Under Italy’s law, corruption must be punished in accordance to the guidelines stipulated by Italy’s criminal law and set forth and determined by a sentencing judge, who oversees consistency of ruling with the current legislation. Corruption violations that took place within the last few years involved bribery of tax administrators and maliciously misappropriating public funds. However, Italy’s tax laws do not consider bribes as a deductible corporate cost.
A yearly publication of Transparency International’s Corruption Perceptions Index, or CPI, reports a measured public perception of corrupt government activities in over 176 nations and territories worldwide. In a 2016 report, Transparency International ranks Italy at 60th alongside Saudi Arabia, Cuba, Montenegro, and Sao Tome and Principe.
A consensus was reached in terms of Italy’s massive corruption that obstructs the country’s economic progress and attractiveness to foreign investors, despite the notoriety of government attempts to combat corruption that went on for years. A yearly Global Corruption Report, or GCR, is published by Transparency International, which offers a systematic analysis of global corruption levels, including a comprehensive review of a central theme, a synopsis of recent investigations on anti-corruption prevention and instruments, as well as a succession of country reportage depicting large-scale incidents of corruption around the world.
Security and political status in Italy: Crimes related to politics are not a concern to investors in the country. However, corruption, specifically when organized crimes are concerned, is a challenge in the southern area.
Labor laws and their practices: Italy experienced the lowest rate of unemployment, at 13% in the last quarter of 2014. This was the result of a recession during that period. Italy came out of the recession in 2015, and the unemployment rate somewhat dropped at 12% during the last few months of 2016.
The unemployment rate for youth doubled, exceeding 43% in 2014. Though there were reports that unemployment for youth declined at 40%, it still remains at almost the same level among European Union members.
There was an estimate of 2 million Italian youth which were not in school, training, or employed in 2015. The official data for unemployment does not include those who were let go and received financial assistance from the government while unemployed.
In addition, several Italians were not included in these statistics since they were no longer motivated and simply opted to stop searching for jobs. The labor force in Italy has one of the lowest rates in the EU, specifically for women, the elderly, and the youth.
The low rate of labor contributed to economic stability, estimated to be 12% of its GDP. The government is doing their part to ensure the youth population is employed by promoting certain programs like vocational courses.
The participation of the labor force showed improvement in 2016, when about 400,000 individuals from the working class started to work again. According to the data, in the last month of 2016, Italy re-established the active participation of the labor force. It was evident that Italians were hopeful and optimistic in searching and getting a new job.
In terms of productivity, the labor force of Italy is below the average of the European Union member states. Most employers cited they were having challenges in looking for qualified applicants for highly skilled positions, which was a concern in the labor community.
The majority of Italians who have graduated from reputable universities are searching for opportunities within EU member states like Germany, Switzerland, and the UK. No exact data was available to identify the number of Italians who opted to work overseas, since they are not obliged to report it to the GOI. Skilled workers are in demand in the northern part of the country, but unfortunately there is a shortage of them.
Legally, corporations may hire non-EU individuals after the recruitment process done by the government office has confirmed there is no unemployed qualified Italian ready to take the post. Most foreign companies find it inconvenient to comply to. The language is also one of the struggles that hinder foreign individuals from taking positions in Italy. Work permits are limited annually, but there is an exception from quota when the employment involves a lateral transfer within the same company.
From 2014 to 2016, Prime Minister Renzi enforced the Jobs Act, showing an effort to modernize the labor market by creating a structure to reform the previous strategic approach of the government. It was submitted in 2014 and was imposed after a year.
The policy was trying to lessen issues concerning the competency of employees. This law was in favor of employers in ensuring that companies have the legal right to reinstate employees depending on their performance. It was also stipulated that employers are not encouraged to hire employees with an indefinite contract.
Contractual employees are considered permanent, since employers will still renew their contracts in due time. This is part of Article 18.
The Italian government encouraged employers in 2015 to hire individuals with an indefinite contract. Companies have a 3 year privilege of paying social security contributions to each employee who has a permanent post. However, this was changed to 2 years and employers were made to pay 40% of contribution in 2016.
In the early 2017, the Job Act played a part in encouraging indefinite contracts, generally through the modification of temporary employment contracts to open ended employment ones. In 2016, the total number of newly hired workers under open-ended contracts dropped to 37.6% (from 1.26 million in 2015 to 756,206 in 2016), as a result of hiring incentive reductions according to the Italian Institute of Social Security.
The conversion of apprenticeship agreements to open ended employment contracts dropped by 31.5% in 2015 and decreased even more, to 460,110, in 2016. According to the 2016 INPS report, new employment contracts have dropped by 7.4% from 2015.
Employers have been using temporary employment contracts despite the encouragement of labor reforms (the Job Act) to employers to use indefinite or open ended ones. Approximately 3.7 million contracts under temporary employment were signed in 2016, increasing by 0.8% from 2015, and by 11% from 2014, while others were using job vouchers.
Vouchers can be bought by employers as payments for seasonal, piecemeal and occasional work even without an employment contract. In 2013, the job voucher was made an instrument to introduce the formal economy/labor markets to farm workers and temporary jobs in other sectors under 2012’s Monti labor reform. However, the use of job vouchers has been maximized by employers.
About 133 million vouchers were bought by employers at €10 per voucher in 2016, increasing by 23.9% from 2015. There was no job security, trainings, and benefits given to the 1.7 million employees in 2015 due to them being critical of Unions, where the receivers of vouchers were noted.
General employment in the country elevated to 242,000 from 2015-2016. According to the official statistics of Gross Operating Income (GOI), employment has increased among 50 year olds and above. Regardless of the country’s recent development, the EU Commission and the GOI are still anticipating the unemployment rate to stay double figures until 2020 due to employers’ demands to increase working hours and enhance the productivity of existing workers instead of hiring additional ones.
Indefinite term contracts signed prior to March 2015 are regulated by the June 2012 labor system, which permits companies to carry out dismissals and redundancies with payments in a lump sums. The right to receive monetary compensation and the reinstatement of a dismissed employee can be ordered by a judge, according to the 1970’s Article 18 of the Italian workers’ statute.
Dismissed employees who were terminated without adequate grounds are entitled to take action before a Labor Court in order to challenge it, with the common threat of adverse ruling and sustained legal proceedings to reach an agreement with the employers by providing extra severance packages.
All contracts of employment signed after March 2015 are regulated under the rules and reforms outlined in the Job Act, providing contracts incumbency protection. Employees may be dismissed due to economic reasons and only within the first thirty six months of service. Under the Job Act, an appeal must be made within sixty days after dismissal and with a limited scope of reinstatements.
It is mandatory for employers to provide a severance payment to dismissed employees, a TFR equivalent to 7.4% of the worker’s annual gross salary for every single year of service, notwithstanding the causes of employment termination.
The Italian parliament issued several legislative measures to reform the labor law enacted by the administration in 2015, including maternity benefits, universal unemployment and a simplified text of the revised labor agreement (from 42 templates down to 6). The Gross Operating Income’s (GOI) unemployment check (ASDI) is an income support allowance or assistance provided to workers that have been laid off. The assistance is available for only 6 months.
The Gross Operating Income is also providing job placement and worker retraining programs and bodies managed by regions, and the application and activation of the policies system at a national level is being measured. Social safety net programs have a substantial impact on Italian residents in undertaking and fighting poverty.
In 2017, the GOI was expected to implement the remaining legislative measures of the Job Act, including the national minimum wage in Italy, since the country does not have an official minimum salary. However, some economic sectors have minimum wages determined by unions. In 2016, the agency for Placement and Job Training was established to coordinate with regions in Italy that still have some remaining labor policies to implement.
Strategically, there is no waiving of current labor laws to retain investments and attract new investors. Hiring incentives and other benefits included in the 2015-2016 funds or budgets were offered to all qualified businesses operating in the country.
The regional disparities in employment in the country have not changed, and the dispersion of the regional unemployment rate has increased, particularly in the southern part of Italy (for instance, 25% in Calabria), being higher than in central and northern Italy (for instance, 4% in Bolzano bordering Austria).
Migration within the country remains ordinary despite these disparities, though equal wages were set in Italy through industry wide collective bargaining. Migrants from North Africa and Eastern Europe usually filled up the shortages of semi-skilled or unskilled workers in the northern part of Italy.
The country is an ILO member state. Employment contract terms are occasionally settled by the CLA in distinct occupations. Most unions in the country are united in an alliance formed of 4 main national trade union confederations: the UGL (General Union of Labor), the UIL (Italian Union of Labor), the CISL (Italian Confederation of Workers’ Unions), and the CGIL (General Italian Confederation of Labor.
The CGIL, CISL, and UIL are members of the ICFTU, while the UGL is connected with the WCL. National collective agreements between employers and unions have been used to implement EU-level initiatives, which are centralized to all employers in any industry or sector regardless of location.
The bargaining framework is prevalent in Italy, primarily at industry and national levels. Industry level negotiations are limited. The constitution of Italy permits unions to reach a collective arrangement enforceable on all employees. There is no estimated coverage of the national collective agreement.
However, in 2014, union officials estimated and projected a collective arrangement coverage of 80%, while there is less coverage for industry wide agreements and smaller coverage for agreements on a company level.
Collective arrangements are valid up to 3 years. However, annual renewals of collective arrangements are recently implemented. The collective arrangement creates minimum employment standards, where some employees under a collective agreement are given special treatments depending on the employer’s discretion.
The civil justice system processes all labor disputes contingent to specific procedures. The Ministry of Labor is required to administer conciliation through a specific dispute resolution agreed on by unions and by attempting to realize dispute settlement between parties before taking the case to the civil justice system.
The Italian government ministry is in charge of cases of suggested mass layoffs and closings. The ministry may organize a tripartite conciliation between the company, union representatives, and the ministry, attempting to mutually accept an agreement against layoffs and closing.
There were no protests noted during the final year or period of volatility whereas investors revisit their risk tolerance. The constitution of Italy acknowledges worker’s rights to protest or strike. Generally, short term strikes are exercised and regulated. Moreover, current employees and former employees are common participants in protests, demonstrating disapproval or objections to suggested mass layoffs and closings.
However, investments were not threatened by these demonstrations. Transport strikes are very common in Italy, and recurrent strikes may limit the mobility of citizens.
OPIC/Investment insurance program: There is no available OPIC program in Italy. SACE is an affiliate of MIGA, a part of the World Bank Group.