Italy: Amendments to the National Budget Law

Italy: Amendments to the National Budget Law

(Oct. 6, 2016) On September 9, 2016, new legislation amending the national budget entered into effect in Italy. (Law No. 163 of August 4, 2016, Amending Law No. 196 of December 31, 2009, Concerning the Content of the Budget Law, Implementing Article 15 of Law No. 243 of December 24, 2012 (Law No. 163), GAZETTA UFFICIALE (G.U.), No. 198 (Aug. 25, 2016), NORMATTIVA (in Italian).)  The new law seeks to strenghten parliamentary control over public finances and to establish limits on the involvement of government agencies in the financial sector.

Parliamentary Scrutiny of Public Finances 

Law No. 163 includes provisions on the parliamentary scrutiny of the spending cycle and and of financial planning and budgetary instruments. In particular, the Law amends the 2009 Law on Public Accounting and Finance.  (Law No. 196 of 2009, G.U. No. 303 (Dec. 31, 2009), NORMATTIVA (in Italian).)   The new Law reasserts the overall purpose of the existing legislation, which is to allow for parliamentary control over public finances by both the Chamber of Deputies and the Senate of the Republic.  (Law No. 163, art. 1(1).)

Under the existing and the new legislation, both chambers of Parliament are authorized to have access to the information in databases maintained by public agencies and to any other source of information managed by public entities that is relevant to the control of public finances.  (Law No. 196, art. 6(1), & Law No. 163, art. 1(1).)

An amendment to Law No. 196 of 2009 provides that the draft budgetary plan for the coming year that the Italian government must submit to the Italian Parliament before October 15 each year must also be submitted to the European Commission and the Eurogroup. (Law No. 163, art. 1(5).) “The Eurogroup is an informal body where the ministers of the euro area member states discuss matters relating to their shared responsibilities related to the euro.” (Eurogroup, Council of the European Union website (last visited Sept. 9, 2016).)

By May 31, September 30, and November 30 of each year, the Department of General Accounting of the state, which is subordinate to the Ministry of Economy and Finance, must publish a report on the consolidated cash account maintained by the central government. (Law No. 163, art. 1(8)(a).)

Coverage of Authorized Spending in Laws

According to Law No. 163, each law that approves new expenses or expenses higher than those already authorized must expressly indicate, for each year and for each action established therein, the authorized spending, which will be considered the maximum spending limit. (Id. art. 3(1)(a).)  The Law also includes provisions aimed at maintaining strict control of government expenses by the National Treasury office.  (Id. art. 3(1)(b).)

Design of the Annual Budget Law 

Under the new legislation, the first stage for the design of the national annual budget law is based on the current financial framework, including the adjustments as established by the applicable legislation. (Id. art. 2(3)(b).)  The budget legislation is to set the maximum level of recourse to financial markets that the central public authorities must abide by. (Id.)

Per the new legislation, the national draft budget law must contain measures to reinforce law enforcement to prevent tax evasion and promote compliance with tax and social security obligations. (Id. art. 2(3)(c).)  Additionally, the draft budget law must set the maximum amount available for the renewal of public employment contracts and the salaries and conditions of employment for public sector employees.  (Id. art. 2(3)(e).) Finally, the draft budget law must encompass provisions necessary to guarantee the cooperation of local authorities with the national public finance objectives.  (Id. art. 2(3)(g).)

The new legislation also appropriates funds for the adaptation and modernization of the system supporting the state’s bookkeeping. (Id. art. 16(1)(b).)

Financial Dealings of Government Agencies with the Banking and Postal Systems

Under Law No. 163, only an enacted law or a measure taken by the Ministry of the Economy and Finance may authorize the opening of accounts by government agencies in the banking and postal systems. (Id. art. 10(1).)  In addition to accrued interest, the amounts deposited by government agencies in accounts in the banking and postal systems without the required authorizations  must be returned to the national budget for reallocation to government ministries other than those that made the unauthorized deposits.  (Id. art. 10(1).)  In such cases, financial penalties are applied to the responsible employees.  (Id. art. 10(1).)  Government agencies must provide periodic information about the opening of these accounts to the Ministry of Economy and Finance’s Department of General Accounting of the State.  (Id. art. 10(2).)

Committee for Fair and Sustainable Welfare Indicators

 The Law provides that the President of the Council of Ministers must create, within 30 days of the enforcement of the Law, a Committee for Fair and Sustainable Welfare Indicators under the National Statistics Institute (ISTAT, in Italian), to be presided over by the Minister of Economy and Finance and comprising also the President of ISTAT, the President of the Italian Central Bank, and two experts with recognized scientific experience. (Id. art. 14(1).)  The Committee must select and approve the “fair and sustainable” welfare indicators after consultation with the competent parliamentary committees.  (Id. art. 14(2).)  Participation in the Committee is pro bono and may not involve any compensation or reimbursement of expenses.  (Id. art. 14(3).)

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