Given the economic strengths and weaknesses of Italy, I will now demonstrate ease of entering the Italian market and how international trade policies help or hinder the process. Italy has a friendly trade climate which is friendly to foreign direct investments (FDI). Further, due to its affiliation with the EU, Italys trade, and business climate has improved tremendously as it is bound by EU treatise and legislations. Further, in the 990s the countrys FDI policy and company laws underwent a change which provides greater in order to provide greater flexibility and transparency in doing business in Italy. Further, the structure of commercial companies were also changed and simplified in order to enhance the process of setting up business. The Italian government adheres to the EU tariff schedules and EU trade barriers. Imported goods can also be brought in the free-trade zone which facilitates in payment of no taxes or duties, if those are for manufacturing products meant for export. Italy has applied a value added tax (VAT) ranging from 4% to 9% on all imports (Datamonitor). The countrys corporate tax in 2008 was 27.5%. In addition there is a local tax (IRAP) imposed at a rate of 3.9% which makes the effective corporate tax to be 3.4% (Datamonitor). Further, there is a tax on capital gain at the rate of 2.5% from shareholding and non-qualifying shareholding of 20%. The capital gains tax rate for companies is 27.5% (Datamonitor). This shows that the tax structure is complex, increasing the cost of operation in the country and foreign companies will not be very com
fortable working in the country. Further, Italys foreign credit rating has been declining indicating the governments inability to handle the debt burden (Political Risk Service).
From the point of view of market in the country, Italys per capita income provides an indication towards the peoples income strength. The average per capita for 2003-07 has been $3057 which is an increase from the average of 997-02 (Political Risk Service). The economy has been growing unbalanced economically. Report shows that the disparity increased by 2% from 980s to 990s (Datamonitor). Further, the level of income of the population is not very high with majority of the Italian population i.e. 42.8%, belonging to the lowest income group (Datamonitor). 3.2% of the population is under poverty line (Datamonitor). Further, the disparity is seen more with the income concentration in top 20% of the population. When the countrys earning data is compared to other EU nations, the average monthly earnings of individuals are less than that of other EU nations (Datamonitor). The income inequality in the economy is high with household income being low. This data indicates that the economys potential as a market for income groups is low. The people have low income reducing their purchasing power. But the Italian household consumption expanded by .4% (Datamonitor) which is due to the increase in disposable income. This indicates that even though the average income is low, the disposable income has been increasing to increase the consumption rate which indicates a market which has increasing demand.