by 0. 7 percentage points, exceeding 40 per cent for the first time ; interest payments remain stable at 5 per cent of gdp. the ratio of tax and social security receipts to gdp diminishes by 0. 3 percentage points, to 43 per cent. the change in the ratio of fiscal revenue to gdp reflects, on the one hand, the reliefs introduced in 2008 ( regarding municipal property tax and personal income tax on primary residences, overtime work and productivity bonuses ) and the full phasing in of those established by the budget for 2007 ( in particular, the relief regarding the regional tax on productive activities levied on labour costs ) and, on the other, the increase in revenue deriving from the measures contained in the june decree law ( 112 / 2008 ). according to the official estimates, structural net borrowing, calculated net of the effects of one - off measures and cyclically adjusted, will increase by 0. 6 percentage points of gdp compared with 2007, to 2. 3 per cent. the debt is expected to amount to 103. 9 per cent of gdp, virtually the same as at the end of 2007. in the first five months of the year the general government borrowing requirement amounted to €38. 5 billion, €7. 1 billion less than in the corresponding period of 2007. the improvement reflected the significant growth in revenue, to which some extraordinary factors contributed. tax revenue recorded in the state budget grew by 6. 2 per cent ( €8. 2 billion ) in the first five months of 2008 compared with the year - earlier period. excluding the effects of the abolition of the payment on account by tax collection agents, decided last year, the increase can be estimated at 3 per cent. receipts from withholding tax on payrolls and pensions increased by 9 per cent ( €4. 6 billion ), reflecting some contract renewals and the associated back pay as well as the high elasticity of revenue to the growth in the tax base. the increase in vat receipts was particularly small ( 1. 5 per cent ) ; it was probably affected by the complete utilization in 2008 of the changes in the deductibility of vat on expenses connected with company cars, resulting from the 2006 decision of the european court of justice. social security contributions are rising fast, partly owing to the full effects of the rules governing severance pay accrued by employees who have not adhered to supplementary pension schemes. the available data on self - assessed tax payments in june indicate a reduction in

medium to long term. the abolition of the ban on the cumulation of pensions and earnings moves in the direction of increasing the rate of employment of persons aged 60 and over, which in italy is still relatively low. it is necessary to proceed with the removal of the obstacles and disincentives that keep a large proportion of the less young population out of the workplace. the new rules on supplementary pensions have led to large increases in the workers joining second pillar schemes. it is right to give the new legislative framework time to settle, but adjustments can be considered in this sector as well in the light of the experience matured in recent months. careful consideration should be given to the possibility of guaranteeing, within specified limits, the reversibility of the choice of allocating severance pay to pension funds. to promote competition between funds, complete mobility of employer contributions could be introduced. measures designed to increase the efficiency of the life annuities ’ market should also be considered. information on the state pension matured by each worker should be improved, as should that on the costs and characteristics of supplementary pension schemes. municipalities, provinces and regions are also required to make a substantial contribution to correcting the budget balance. any considered judgement must await the reform of the domestic stability pact and the bill on federalism, which the government intends to put before parliament before the end of september. the manner of implementing fiscal federalism will be vital to ensuring the action to contain spending is sustainable and to increase the system ’ s efficiency and effectiveness. a simplification of the levels of government aimed at exploiting economies of scale and avoiding useless overlaps could help. decentralization makes it possible to tailor the supply of services to the needs of local communities and at the same time enables the electorate to judge with greater immediacy the quality of public action. to deliver these benefits, decentralization must be based on a system of clear and consistent responsibilities. the fiscal autonomy of local governments, the adequacy and transparency of equalization flows and strict restrictions on borrowing are the key elements of this system. fiscal autonomy must establish a direct link at the margin between expenditure and taxation. to this end it is advisable that local authorities have sufficient room for manoeuvre on tax rates and bases. the municipal property tax relief granted affects a tax which, owing to the characteristics of property wealth, is the cornerstone of local taxation in many countries. if permanent, the blocking of increases in decentralized taxes