By Giuseppe Fonte
ROME (Reuters) - Italy's government has decided to backtrack on a contested tax on plastic in its 2020 budget in the face of protests from producers in a region where the ruling parties face a key local election in January.
However, seeking to maintain a focus on the environment, it announced a steep cut in sales tax on biodegradable tampons. Both changes will be introduced in amendments to the budget which must be approved in parliament by the end of the year.
The levy on production of single-use plastic was presented as an environmentally-friendly measure and originally aimed to raise 1.1 billion euros ($1.21 billion) next year.
The plan got a hostile reception in the northern Emilia Romagna region which holds an election on Jan 26, where the incumbent governor from the ruling Democratic Party (PD) faces a tough challenge from the right-wing League.
A defeat in the traditionally left-leaning Emilia Romagna would risk destabilising Italy's ruling coalition of the PD and the anti-establishment 5-Star Movement, already split on issues such as euro zone reform, immigration and the justice system.
Plastic packaging is a major source of income and employment in Emilia Romagna, one of Italy's most industrialised regions.
The government will drastically scale down the plastic tax, with a new revenue target of just 330 million euros, PD senator Dario Stefano said on Friday.
"The levy will not be applied to syringes, medical devices and packaging of medicinal products, it's really a good result," Stefano told Reuters.
The government says it can make up for the shortfall because an early-retirement scheme introduced this year is proving less costly than anticipated.
It sought to maintain a commitment to green policies, as well as appealing to the female vote, by cutting the tax on eco-friendly tampons.
"Value-added tax on compostable and biodegradable tampons will be reduced to 5% from 22%," Economy Minister Roberto Gualtieri said on Twitter late on Thursday.
Leftist women lawmakers had led a campaign to slash the so-called #tampontax, recently a popular Italian Twitter hashtag.
"This is a sign of civilization, with a green vision," said 5-Star's deputy Economy Minister Laura Castelli.
Critics say biodegradable tampons remain expensive and not easily available.
(Editing by Gavin Jones and Gareth Jones)